A BIG Idea: A Minimum Income Guarantee

An Interview with Karl Widerquist

Karl Widerquist is a lecturer in politics in the School of Sociology, Politics and International Relations at the University of Reading in the United Kingdom. He serves on the coordinating committee of the U.S. Basic Income Guarantee Network (USBIG).

Multinational Monitor: What is a basic income guarantee?

Karl Widerquist: The basic idea is simple: Income in a market economy doesn’t have to start at zero. A basic income guarantee would put an unconditional floor under everyone’s cash income so that no one has to fear economic destitution for any reason. That said, many different policies can achieve that goal, and they have been given many different names: guaranteed income, minimum income, citizens income, state bonus, national dividend, social dividend and at least two dozen more. Some of the names reflect differences in policy, some are synonyms.

When we put together the USBIG Network in 1999 and 2000, we decided to go with the name Basic Income Guarantee (BIG) as an inclusive name for several different approaches. The two main types of policies that can achieve the goal of putting a floor under everyone’s income are the Basic Income (BI) and the Negative Income Tax (NIT). BI gives the same small regular income to every citizen whether they need it or not. The NIT gives it only to people who need it; that is, people with low income. But both policies can achieve the same after-tax income for everyone.

MM: What are the origins of the BIG concept?

Widerquist: Some people trace the idea back as far as ancient Greece. The idea started appearing gradually in different times and places in the modern era. Thomas Paine mentioned something like it in his pamphlet “Agrarian Justice” in the 1790s. Bertrand Russell articulated the idea in 1915. Economists started talking about the idea in the 1940s.

The idea gathered a great deal of attention in the United States in the 1960s and 1970s, when people began to think of it in very diverse ways: as the scientific solution to poverty, as a streamlined yet more effective alternative to the welfare state or as a way to empower the least advantaged people. At one point, it seemed like the inevitable next step in social policy. People as diverse as Martin Luther King and Richard Nixon endorsed it. Groups as diverse as chambers of commerce and grassroots welfare rights campaigners endorsed it. But the diversity of its appeal was matched by the diversity of its opposition. A watered-down version of it called “the Family Assistance Plan” passed narrowly in the House of Representatives in 1972, but was defeated in the Senate by a coalition of people who thought it went too far and people who didn’t think it went far enough.

Interest in the idea dropped off in the United States in the late 1970s, but then interest began to grow in Europe. The academic debate on BIG has continued to grow ever since and it has translated into popular movements in places as diverse as Ireland, Namibia, Finland, Brazil, South Africa, Belgium, Germany and Italy.

MM: Is it a concept designed for rich or poor countries?

Widerquist: The idea works in both rich and poor countries. Rich countries can afford a much larger BIG, but people in poor countries can benefit enormously from a very small BIG. Many of the poorest countries in the world are also among the most unequal, and so they can easily afford a small BIG. My guess is that the first country to introduce a BIG will be a lesser developed nation — perhaps Brazil or Namibia. If it works there, it will probably eventually make its way to wealthier countries.

MM: How does it compare in terms of benefits and disadvantages to the idea of providing individuals, at birth or adulthood, with a lump sum endowment?

Widerquist: The idea of a one-time grant early in life is usually called a “Stakeholder Grant.” While BI and NIT are types of BIG, the Stakeholder Grant is not a BIG; it’s a near alternative. Thomas Paine actually proposed something more like a Stakeholder Grant.

Most people who support BIG are motivated by economic security. For example, I want a policy to make sure that nobody has to live on the street; nobody has to look for food in garbage cans as so many people in the United States do today. Most people who support Stakeholder Grants are motivated by economic opportunity. They want people who reach adulthood to have the chance to invest in business or education, or even in travel or something else that is enriching. This is a good goal, but I think economic security is more pressing. Someone might save their Stakeholder Grant in case they get into a crisis. They might invest it wisely, but as we should know by now, even the best investments are risky. No matter how prudent people are, some of them who receive a stake will end up destitute someday.

Even if opportunity is your goal, I wouldn’t assume that Stakeholder Grants will actually do more for it. First, consider an analogy. If you want a trapeze artist to do bigger and better tricks, should you get her better trapeze equipment, or should you get her a safety net? Second, consider child poverty. If you grow up in extreme poverty, you will suffer in many ways throughout the rest of your life. In most cases, no amount of money that you could receive at age 21 can make up for that disadvantage. Fighting child poverty inherently promotes lifetime opportunity.

MM: How does it compare to the U.S. Earned Income Tax Credit?

Widerquist: The Earned Income Tax Credit (EITC) is actually an outgrowth of the NIT movement of the 1960s and 1970s. It is a “negative tax” in the sense that the government pays you instead of you paying the government, but it doesn’t create an income floor as the “negative income tax” was designed to do. Congress wasn’t ready for such a big change, but they were ready for some form of negative tax. So, they added conditionality. The EITC is only received by low-wage workers. It helps people, and it has become very popular. But it doesn’t help the people who need it most. Homeless people, single parents and children in single-parent families often get nothing from the EITC. However, if we could find a way to expand the EITC to help people such as these, it is a great basis on which to start.

MM: Are there examples of BIG policies being enacted? How have they turned out?

Widerquist: Yes, there are a few small BIG-like things around the world and one big example in Alaska. Brazil recently voted to combine several of its anti-poverty programs into a program called the Bolsa Familia, which is supposed to be the first step in phasing in a BIG. A private NGO is currently conducting a BIG pilot project in Namibia with great success.

The Alaska Permanent Fund (APF) is a small BIG or “partial BIG” that has been in place for 25 years. The “basic” in basic income guarantee is meant to indicate that it is enough to cover your basic needs. The APF isn’t that large, but it is one of the most popular government programs in the United States today. They had a referendum proposing to get rid of it a few years ago, and people voted something like 85 percent in favor of keeping it. Few government programs have that kind of support.

The APF is another outgrowth of the NIT movement in the United States in the 1970s. Jay Hammond was governor when the Trans-Alaska Oil Pipeline was proposed. He had learned about BIG during the NIT debate, and he saw the opportunity to connect the two. Usually when businesses want to take publicly owned natural resources and make them into private property, they just pay off the right politicians and they get the resources free or at a nominal fee. But Hammond decided that this oil belonged to all the people of Alaska, and if the corporations wanted to buy it, they had to pay into a fund that would pay a yearly dividend to every citizen in Alaska.

The APF dividend varies year-to-year depending on the fund’s returns. It’s usually somewhere between $1,000 and $2,000. Last year the dividend was a record high of $3,200. Of course, $3,200 isn’t enough to meet anybody’s basic needs, but it can make a huge difference for people at the margins. Suppose you’re a single parent with four children living on an Indian reservation somewhere in Alaska. Last year’s APF Dividend was worth $16,000 to you and your family. You can’t live on that all year, but imagine the difference it makes.

You might worry that people who get a check from resource revenues might be more accepting of resource exploitation. But other factors, I believe, more than counteract any such effect. Remember that today companies are taking control of natural resources all over the planet and paying no compensation at all to the rest of humanity. If you want people to do less of something, taxation is a very good way to start. If you tax resource extraction, you not only discourage people from doing too much of it, you also establish the precedent that natural resources belong to everyone — not just to the first corporation to get permission from the government. That precedent would be enormously valuable to the environmental movement.

MM: In rough terms, what levels of BIG payments do you propose for a rich country like the United States? For poor countries? Is the aim to provide a subsistence-level income from the BIG payment alone?

Widerquist: If Congress put me in charge of administering a program, I would start with a small subsistence-level BIG — just enough to keep everyone off the streets. I would look at the side effects, and try to see if we could afford to increase it. I’d keep increasing it until the side effects became too costly. I would take a similar approach if the Brazilian Congress or the South African Parliament asked me to find the right level. Brazil could not afford as large a BIG as the United States can, but I’m sure they could afford enough to keep everyone off the streets.

Deep down I’m a cosmopolitan and I would like to see the more developed nations work together with lesser developed nations to ensure a high uniform BIG, but I’ll take what I can get to start out with, which is likely to be a small BIG in one country.

MM: Should BIG payments be means tested? Does this consideration vary between rich and poor countries?

Widerquist: That question gets to the issue of whether we should have an NIT or a BI. Some supporters prefer one or the other. I’m largely neutral in this debate. Both programs are capable of achieving the same after-tax distribution of income. That’s what I care about most. I see no technical reasons to favor one or the other, but I see very important political reasons to favor the universal BI approach. The Alaska Permanent Fund (APF) sends a check each year to every man, woman and child in the state, whether they need it or not. Most of them don’t need it, but they get it as part of their share in the ownership of Alaska’s natural resources. The best thing about the APF is that people who need it get it, but the thing that makes it so popular is that everyone gets it. Opponents of progress are very good at demonizing recipients. We need programs that don’t single out poor people as getting something special. Imagine if Alaska tried to redirect the APF just to the poor. The money in the fund could do a lot more for Alaska’s poor than it does now, but the program’s 85 percent support would disappear immediately.

MM: From experience and modeling, what impact would BIG policies have on poverty — taking into account that the answer necessarily depends on the details, including size of payment — in rich and poor countries? Are there particular gender components to such impacts?

Widerquist: I saw a presentation the other day by Paul Segal, an economist from Oxford University. He estimated that you could cut world poverty in half with a resource dividend. This is based on the very modest dollar-a-day world poverty standard. But the impact on people whose incomes are that low would be enormous. Charles Clark, of St. Johns University, estimated the taxes necessary to support a BIG large enough to eliminate poverty in the United States, using the official U.S. poverty line. He found that a flat income tax of 38 percent was enough not only to support a BIG large enough to eliminate poverty but also to continue to support everything else the U.S. government is currently doing.

BIG would have an important effect to reduce gender inequities in the welfare system. Most people do not realize how sexist our current income security programs are. Ann Alstott of Yale did a great study showing that many more elderly women live in poverty than elderly men because Social Security favors people who earn income directly over the people who are (or were) their spouses and the people who cared for their children. These biases sound small, but Alstott shows they are enough to account for a big gender difference in poverty among the elderly. Recipients of Unemployment Insurance are mostly men, and it is very generous. Recipients of TANF [formerly welfare] are mostly women, and it is very ungenerous. BIG would replace both programs with a uniform payment for everyone regardless of gender.

MM: From experience and modeling, what impact would BIG policies have on economic growth, and economic performance more generally?

Widerquist: BIG does not necessarily have to have any negative impact on growth. Suppose you create a BIG by taxes that discourage the over-exploitation of resources. You tax polluters, land owners, miners and drillers. You redistribute that money equally to everyone. You haven’t actually taken any money out of the economy. You’ve made the things we don’t like people doing relatively more expensive, but by leaving that money in the economy, you have made everything else relatively less expensive. So, you get a redirection of economic activity but not necessarily any decline in the growth of economic activity.

People worry about the impact on the labor market when we stop forcing people to work. Personally, I think if you have to force people to take jobs, those jobs can’t be very good. It’s easy for people with good jobs to pretend that people who don’t want to scrub toilets and wash dishes for minimum wage are just bad people. But the truth is we make some pretty bad job offers to people and then tell them they are bad if they don’t want them. If you want people to work, don’t force them by threat of starving. Pay good wages and they will work.

The U.S. and Canadian governments conducted five NIT experiments in the 1960s and 1970s. They found modest impacts on labor market participation. They found that people who happened to lose their job while receiving an NIT would take more time to find their next one, but they found no evidence that people just dropped out of the labor market. They also found that whether or not people received an NIT was less important to their labor market participation than the overall health of the economy. If good jobs were available, people took them. They also found enormous benefits in child health, school attendance and other issues that we care about.

MM: How does society make a judgment that a relatively high level of payment for BIG is worth it? What mechanisms do you favor to raise funds for BIG policies?

Widerquist: As I mentioned, the United States can support everything else our government is doing and a BIG large enough to eliminate poverty with a flat income tax of only 38 percent. The income tax would not be my first choice for raising funds. I’d prefer natural resource taxes, but I’m more concerned with establishing BIG than any particular kind of financing.

I think it’s worth it, because it is wrong for anyone or any group of people to force other people to want for food, shelter and clothing. Our ancestors lived for millions of years as hunter-gatherers in free and open environments where no person had the power to say, “Do this for me or I won’t let you have access to the resources you need to build shelter and produce food.” We are so much wealthier now. We have so much more to go around. But now we say to the poor, “We own the environment; you have to do what we say before you can have any access to the resources you need to survive.” It’s self-serving and it’s wrong. We need to show more respect for the poor.

MM: Given the size of the financial commitment, is there inherently some trade off between adopting BIG policies, and investing in health, education, clean water, etc.? Or, stated differently, why should a country spend significant sums on BIG payments rather than investing in health, education, clean water, etc.?

Widerquist: There are trade offs between any two policies. You can’t spend the same dollar on health, education and support for the poor. But how many dollars do you have? What else are you spending them on? Today, the United States spends about twice as much on healthcare as other industrialized nations, but we have no better health outcomes. Most of that extra money is going to overhead costs such as billing and insurance company profits. Healthcare systems in other countries have completely eliminated those costs. Doing the same here would free up 6 percent of GDP to go for other projects, such as clean water and education. As I’ve said, a 38 percent flat income tax could support a BIG large enough to eliminate poverty plus everything else the U.S. government is currently doing — that includes the largest military in the world, which stations tens of thousands of troops in places like Germany, Korea and Japan, where they’re clearly not needed or wanted. You could support a lot of clean water projects with the money you could save just by paring down the U.S. military.

MM: An obvious criticism of BIG is that it provides payments to people without any test of “deservingness.” How do you respond to that critique?

Widerquist: Let’s take a look at some of the people who have made our policy in America: George Bush, Ted Kennedy, Dick Cheney and Bill Clinton. What do these people really know about “deservingness?” Many people in Congress are millionaires. It’s easy for them to say poor people are bad and undeserving. But do they really know? Who are we to judge whether somebody deserves access to the resources they need for food, shelter and clothing? Who are we to put any conditions at all on that access? It’s easy for those of us who have great jobs to say that people only deserve things if they work. But does that hold for every job no matter how low the pay and how poor the working conditions?

Without some universal support, we put poor people into a position in which they have to take a job whether that employer deserves their labor or not. The wages might be too low; the job conditions might be unacceptable. We can let our millionaire leaders decide what the poor should accept and force them to take it, but maybe they’ll get it wrong. Instead, we need to respect the poor and stay within the limits of our knowledge. I’ve studied philosophy and economics for many years now, and I don’t feel confident that I can tell any person she is undeserving of the resources she needs to survive. I’m skeptical of anyone who thinks they can.

MM: Are there legitimate concerns that regular cash transfers will be spent in socially undesirable ways, for example on alcohol?

Widerquist: I think we should tax alcohol and drugs to discourage their use, and that we should use those taxes to support substance abuse counseling and rehabilitation. But I don’t think the problem of substance abuse is particular to poor people. I don’t want to judge a Wall Street broker’s spending, and I don’t want to judge a poor person’s spending either. We need to show the same respect for the poor as we do for the rich.

MM: What is the level of political interest in BIG? In which countries is there interest in taking up or experimenting with the idea?

Widerquist: Right now BIG is out of mainstream politics in the United States, but it has been a big issue in the past, and with the hugely popular example in Alaska, I’m sure it will come back to mainstream national politics someday. There are major movements for it in Brazil, South Africa and several European countries. Perhaps the most important thing going on right now in this movement is the Namibian BIG pilot project. They’ve given a BIG to 1,000 people in a small rural town, and they’ve found great results: a huge decrease in low-birth-weight babies and in symptoms of malnutrition. That’s what BIG is about, and I hope it leads to a nationwide BIG program in Namibia.