How Cryptocurrency Can Help In Paying Universal Basic Income (#GotBitcoin?)
The utopian idea of universal basic income — which has been with humanity for at least half a millenia — can become real with digital currency. How Cryptocurrency Can Help In Paying Universal Basic Income (#GotBitcoin?)
Due to the crisis caused by COVID-19, millions of people have lost all or part of their income. To support them, governments have been giving out money to victims. Is it possible to make this practice permanent? And if so, why will we need state digital currencies?
The COVID-19 pandemic has forced the United States, Canada, Japan, Russia and many other countries to print large budget reserves and to start helping people with direct cash payments. Such measures have, again, led the world to talk about the idea of an unconditional or universal basic income, otherwise known as UBI, an idea that Thomas Moore put forward in his novel Utopia in 1516. Its essence is that every citizen has the right to regularly receive a certain amount from the government without fulfilling any conditions and can spend this money at their discretion.
The introduction of UBI experiments began long before the coronavirus pandemic. One example is in Alaska, where a similar system, dubbed the “Permanent Fund Dividend,” has been operating since 1982. Once a year, every resident of the state receives a certain part of the profit from the local oil industry. In 2019, it was $1,606 dollars, and in the most “profitable” year of 2015, it was $2,072. Another example is in Namibia where about 1,000 residents of two villages received 100 Namibian dollars each month during 2008 to 2009. Also in Finland, a UBI system was tested from 2016 to 2017 in which 2,000 nonworking citizens received 560 euros each month.
Today, 71% of Europeans support the idea of UBI. Pope Francis has encouraged such payments. Andrew Yang, a former 2020 U.S. presidential candidate, made UBI the focus of his campaign and created the Humanity Forward fund. Recently, the organization received $5 million from Twitter founder Jack Dorsey to give out money in the form of 20,000 microgrants of $250 each.
However, many point to the imperfections of the UBI system and believe that in the world of traditional finance, it can bring more problems than benefits. That said, things might be different if you look at the situation from a different perspective. The development of crypto technologies opens up new opportunities for introducing UBI, changing relations between the state and society and creating a more just world.
What Is Wrong With The Idea Of UBI?
One of the main arguments from opponents of UBI is that if the state distributes money to all citizens, people will work less, which will negatively affect the economy. It may also lead to an increase in the consumption of alcohol and other harmful substances, especially among the poorest segments of the population. However, experiments that have been performed refute these stereotypes.
Researchers found that in Namibia, UBI recipients began to eat better, their children were more likely to attend schools and crime rates decreased. In developed countries — for example, Finland — UBI recipients are more satisfied with their lives, more positively perceive their economic situations and, at the same time, do not try to avoid employment. Moreover, the reduction of anxiety about making money for food leads to the development of creative skills, which helps to find new areas of activity.
In addition to stereotypes, there are other obstacles to the introduction of UBI. To realize a fair distribution of funds in the world of traditional finance, we need a complex and expensive system of interaction between all participants, which must take into account many factors — from inflation and possible corruption to the characteristics of migration flows. As a result, for a country with a population of 300 million people located in five different time zones, the cost of paying a UBI in the amount of $1,000 would be from $10 to $130 for each $1,000 paid.
Today, however, there is a technical solution that can help the state build an effective payment system for UBI with minimal costs: cryptocurrency. It’s not about Bitcoin (BTC), Ether (ETH) or other digital assets, but about state cryptocurrencies whose issuing will be controlled by the central bank as well as the issue of paper money, the development of which is already underway — if not the use of it.
How Crypto Technologies Will Help
Unlike the public cryptocurrency blockchain, where one of the conflicting features is the anonymity of asset owners, the treasury blockchain is absolutely transparent to the state. The distribution of UBI occurs inside a closed peer-to-peer information system, the participants of which will be:
The State: It carries out centralized cryptocurrency issuance, direct transfer of UBI payments to electronic wallets of citizens, control of cash flows within the system, and blocking of suspicious transactions, including the purchase of certain goods and services.
Citizens: They Spend The Money Received.
Organizations: UBI payments are accepted for payment from citizens, then they use the accumulated cryptocurrency to pay taxes and/or convert to other currencies, which they then use for any traditional payments.
The blockchain will allow for the instant and reliable exchange of data necessary for calculating the value of a UBI payment, as well as to control its timely payment to each person. In order to avoid fraud and attempts to obtain a payment several times, user identification in the system can occur, for example, by entering insurance data and confirming identity (full-time or remote) or by using biometrics.
Thanks to the absolute transparency and automation of processes due to smart contracts, the technologies behind cryptocurrency can solve the main problems that today interfere with the technical implementation of the database technology.
Here Are Some Examples:
1. Inflation. When calculating the value of UBI payments, it is important to constantly monitor the change in the purchasing power of money, taking into account the actual consumer basket. Today, data for calculating the consumer price index is manually collected; that is, workers go shopping and write out prices. It is slow and expensive.
Solution: Using a centralized cryptocurrency will make the collection of information almost instantaneous, increase the objectivity of the data and eliminate errors in the calculations. Blockchain also allows you to change the position of goods and services for monitoring based on actual consumption by the population.
2. Different Living Standards. The same goods and services may have different prices and different densities in the consumer basket. When using “ordinary” fiat money for UBI payments, the issue will be resolved using simple averaging, which can lead to significant distortions of the overall picture. This problem is especially typical for nations with a large territory and a significant difference between urbanized and agricultural/fishing areas.
Solution: UBI, listed in cryptocurrency, allows not only to take into account changes in the cost of goods but also to create a “basket of subcurrencies.” The cost of goods in each region can be considered separately and then reduced to a common denominator through conversion rather than averaging. As a result, people will be able to buy an identical amount of goods and services, regardless of the real standard of living in a particular region.
3. Corruption. In regions with a weak law enforcement system, the payment of UBI in traditional currency can lead to an increase in corruption.
Solution: All transactions will be recorded on the blockchain, and it will be possible to track the entire path of the cryptocurrency from the moment of issue. Such transparency of payments leaves no room for corruption.
4. Immigration. With the current level of globalization, people often move to countries with more developed economies. If UBI is paid to all citizens, even those who do not reside in the territory of the donor state, this provokes even greater inequality: Those who leave are twice winners. On the other hand, if UBI is not paid to visitors who are legally working in the territory of the donor state, the welfare gap between them and the citizens of the country widens. In both cases, UBI can provoke an increase in social tension and affect migration flows.
Solution: Cryptotechnologies make it possible to make UBI payments selectively — taking into account the main geolocation of the tax resident. For example, only to those who contribute to the creation of value added in the territory of the state or who have other legal grounds for receiving funds. For example, in the case of minors, pensioners, etc.
5. Costs. Within the framework of the traditional financial system, administering direct, regular, simultaneous settlements with millions of people is difficult and expensive. This requires the payment of many staff and the cost of operating an information technology banking infrastructure. It is also necessary to take into account additional costs during IT development and operation of systems: They must have an excess supply of productivity, which is necessary at peak load times.
Solution: Blockchain technology automates all processes related to accounting, routing, cash charging, etc. The total transaction cost — from the issuer to the electronic wallet — in the case of the state blockchain, becomes much cheaper than in the traditional fiat payment infrastructure. Custom wallets can be created through public application program interfaces, which will make them free for both the state and the public. In this case, the state will retain only the certification function of this software.
6. Relevance of Statistics. Today, businesses are forced to prepare many reports for various departments, which then turn into summary data for industries, regions and the country as a whole. Such a process requires a lot of labor, time and money, but its effectiveness is extremely low, as the final statistics are sent to the treasury a few months later when they could be, already irrelevant or at least outdated.
Solution: With cryptotechnologies, statistics will become instant, accurate and reliable. When a person pays with UBI funds from a cryptocurrency wallet, the information reflected in the cash receipt is sent to the state settlement centers in real time. Accurate data on the dynamics of sales in the assortment context will make it possible to form informed plans for the production of goods and a price policy, and to make timely adjustments in the field of remuneration and social security.
State cryptocurrencies can become an effective tool for the economic interaction of the state and citizens on the basis of other, more equitable relations. Three years ago, in a speech to Harvard graduates, Mark Zuckerberg called for the use of UBI to give people the opportunity to try new things, make mistakes and look for their callings. And today, when there are so many restrictions in the world, we have technologies that can give each person more freedom and security. This must be used, making UBI an ideal tool to empower the individual and help create a better world.
Cities Experiment With Remedy For Poverty: Cash, No Strings Attached
Guaranteed income comes without work requirements; some worry about work disincentive, high cost.
Last year, Stockton, Calif., embarked on a civic experiment. For 18 months the city would send $500 a month to 125 randomly selected households in low-income neighborhoods. Researchers would compare the effect on participants’ health and economic situation to that of residents who didn’t get payments.
The $3.8 million experiment is the brainchild of Stockton’s 30-year-old mayor, Michael Tubbs, made possible by the Economic Security Project—a group co-founded by Facebook co-founder Chris Hughes that funds guaranteed-income projects—and other donors.
Stockton is at the forefront of a rethinking of the American safety net among some academics and public officials, particularly as the coronavirus pandemic has revealed the financial fragility of many households. They say the best way to combat poverty is to give cash to poor households, trusting them to make their own best decisions.
The idea is related to universal basic income, popularized by former Democratic presidential candidate Andrew Yang. Whereas UBI involves regular payments to everyone regardless of income, Stockton’s experiment targets poor neighborhoods.
If implemented nationwide, guaranteed income along the Stockton model would represent a significant expansion of the safety net and one that isn’t conditional on working or looking for work. Food stamps, welfare, Medicaid, the earned-income tax credit and unemployment compensation all include some form of work requirement.
Stockton’s payments have helped people affected by the recession cover their bills, said Mr. Tubbs. More than half of the funds have been spent on food and utilities, according to preliminary findings. One recipient, 64-year-old Magdalena Taitano said she used the money to pay for medicine and the electric bill and to buy a car after her old one was totaled in a crash.
“What we found is that you can trust people to make good decisions,” Mr. Tubbs said.
The program was originally set to end in July but new donations extended it until January.
Critics point to several potential drawbacks.
First, if only people below a certain income receive the transfers, and aren’t required to work, they may hesitate to take a job, or a higher-paying one, since they would then forgo the payment. The result could be less work and less economic dynamism.
“Giving money to people, no strings attached, changes behavior,” said Douglas Besharov, a professor of public policy at the University of Maryland. “We create incentives we don’t like or want.”
Studies of universal cash transfers in Alaska and among the Eastern Band of Cherokees in North Carolina found no negative effect on work. A study of lottery prizes—which are analogous to unconditional cash transfers—found that winners of relatively small amounts didn’t change how much they worked but winners of larger amounts did.
That disincentive could be mitigated by phasing out payments more slowly as other income rises, said Jesse Rothstein, an economist at the University of California, Berkeley.
“There’s not really a way to design that phaseout without creating some disincentive of people to work,” he said. “If it’s well-designed, you wouldn’t get a big effect.”
Second, a national guaranteed income would carry a steep price tag. Giving $10,000 a year to individuals earning less than $20,000 or married households earning less than $40,000 with a long phaseout period would cost roughly $1.2 trillion, or nearly 5.9% of annual economic output, according to University of Maryland economist Melissa Kearney and Magne Mogstad, an economist at the University of Chicago.
That is more than the federal government spent on Social Security in 2019. It would have to be funded either through an increase in the budget deficit, when the national debt is already headed over 100% of gross domestic product; much higher taxes; or sharp cuts to spending.
“Given how expensive it would be and given the political realities, it’s unlikely we would just be doing this on top of [existing] government safety-net programs,” said Ms. Kearney. “Then the question is, OK, which safety-net programs would you replace?”
It is hard to imagine Congress enacting guaranteed income anytime soon. But its approval of one-time payments of up to $1,200 for most Americans in March for coronavirus relief suggests openness to unconditional assistance, at least in some circumstances.
This Covid[-19] economy has just yanked the rug out from our communities across the country in a way we’ve never experienced before
— Saint Paul, Minn., Mayor Melvin Carter
“There hasn’t been a lot of hand-wringing about whether people might use the $1,200 checks to buy cigarettes or something like that,” said Ed Dolan, an economist at the Niskanen Center.
It is unclear whether Stockton’s initiative has affected people’s willingness to work. But since it is intended to be temporary, it might change behavior less than a permanent program.
Inspired by Stockton’s experiment, roughly two dozen mayors from cities as large as Los Angeles and as small as Holyoke, Mass., have signed on to a newly formed coalition advocating for a nationwide guaranteed income.
“This Covid[-19] economy has just yanked the rug out from our communities across the country in a way we’ve never experienced before,” said Melvin Carter, mayor of Saint Paul, Minn., and a member of the group.
Mr. Carter said his city is working with donors to set up its own experiment similar to the one in Stockton.
Other initiatives have sprung up in recent years. Santa Clara County in California gives $1,000 a month for a year to young people leaving foster care. Hudson, N.Y., is launching a pilot program—partly funded by a nonprofit founded by Mr. Yang—to give $500 a month to randomly selected residents for five years.
For now, most of the experiments are relatively small, temporary and reliant on philanthropy. But “each of these experiments gives you a few more data points,” Mr. Dolan said.
Rising Star Mayor Who Championed Guaranteed Income Loses Hometown Race
Michael Tubbs pushed an ambitious agenda for Stockton, California. Four years later, a blog campaign against him fanned criticism of his national profile.
Stockton Mayor Michael Tubbs came into elected office on a high in 2016, winning 70% of the vote. Since becoming mayor, he put himself and his economically distressed hometown on the national map through his advocacy for progressive programs, including one of the first guaranteed income experiments in the U.S.
The subject of documentaries and Daily Show appearances, particularly as cash assistance programs gained momentum during Covid, Tubbs had been a rising political star.
But this November, Tubbs’ star fell in Stockton: The 30-year-old mayor conceded the race to his Republican challenger, Kevin Lincoln, who was leading by 12 percentage points (though the tally isn’t final yet).
What changed? Some residents resented his national profile, viewing him as more committed to his own reputation than to giving attention to the city. Others objected to his progressive policies, choosing instead the candidate who was supported by the local police union and ran on a campaign to reduce homelessness and make government more efficient.
But Tubbs and his supporters also point to another factor that has become an increasingly common suspect in national and local races alike: A targeted misinformation campaign, in this case led by a local blog called the 209 Times.
The blog has published damaging and often misleading or false articles about the mayor, including misstating the impact of a scholarship program he spearheaded and inflating the amount of funding the city had received to address homelessness.
“I think when you spend four years unchecked with no real counter, just blatantly making things up every single day, there’s an impact,” said Tubbs of 209 Times’ influence. “I wish I had a crystal ball to foresee that, but I was too busy doing the work.”
Motecuzoma Patrick Sanchez, one of the founders and a writer for the blog, rejects the idea that any of his stories were fabricated. But he gladly takes responsibility for eroding the community’s trust in Tubbs.
He dubbed the unofficial anti-Tubbs campaign “Operation Icarus,” after the Greek myth about the boy who flew too close to the sun. “The more he buys into his own sense of political celebrity, the more he’s neglecting the fundamentals of why he was elected,” said Sanchez. “All we have to do is show the community what he’s doing and what he is not doing.” (Sanchez ran for mayor in the primary but lost to Lincoln.)
Since its launch in 2017, the 209 Times has amassed nearly 100,000 followers on Facebook and 119,000 followers on Instagram. Its website gets about 100,000 hits a month. In a city of 300,000, that’s a substantial reach. The Los Angeles Times reported that the blog’s influence grew in Stockton in the vacuum left by the city’s local paper, The Record, which has been depleted by layoffs and budget cuts.
“A lot of people are susceptible to this information without a strong local newspaper,” said Daniel Lopez, a spokesperson for Tubbs. “In replacement of that, people have been getting their news online through comments, through shares.” And what sticks, he says, are the negative stories that drum up controversy.
Not all of voters’ misgivings about the mayor were fanned by the site’s biases. While Tubbs made it his goal to reach out to “people that feel they’re disenfranchised by the system,” some residents of the city’s wealthier North side feel that they’re being ignored, said Kurt Rivera, a News reporter for ABC10 Sacramento who grew up in the city and moved back as an adult to cover it.
Eviction protections passed unanimously through city council relieved renters but alienated landlords. An unfounded fear that affordable housing would replace a golf course on the North side of town inspired homeowners to band against Tubbs. And advocacy for some criminal justice reforms have splintered the electorate.
Nationally, Tubbs has drawn a much warmer shade of attention. He grew up in Stockton, and, after graduating from Stanford University and spending a stint interning at the White House, returned in 2012 to run successfully for city council. Winning the mayoral seat in 2016 at 26 years old was a historic victory, making Tubbs the city’s youngest and first Black mayor.
Once in office in January 2017, Tubbs formed the Reinvent Stockton Foundation and launched a series of progressive programs, most famously the first major guaranteed income pilot in the U.S. Funded by private donations, the Stockton Economic Empowerment Demonstration has provided $500 a month to 125 residents for nearly two years.
It’s set to end in January, but Tubbs has been leading a national effort to bring similar experiments to other cities — and next year, places like Pittsburgh, Compton and San Francisco plan to start their own pilots.
The Reinvent Stocktown Foundation also runs the Stockton Scholars program, which gives scholarships to college-bound high schoolers. The program received a boost with a $20 million donation from Snapchat founder Evan Spiegel’s philanthropic fund.
In all, between private donors and government grants, Tubbs has brought in more than $100 million to the city over his four-year term.
Tubbs’ story and accomplishments inspired an HBO documentary, “Stockton On My Mind”; as part of its promotion this summer he appeared on national television shows and did interviews with celebrities like Killer Mike. He endorsed Michael Bloomberg’s 2020 bid to become the Democratic candidate for President, and appeared at campaign events on the former New York mayor’s behalf.
(In 2018, Tubbs also graduated from a Harvard mayoral training program sponsored by Michael Bloomberg, founder and majority owner of Bloomberg LP, the parent of Bloomberg CityLab. The next year, Bloomberg’s philanthropic foundation donated $500,000 to a Stockton education reform group.)
All those national commitments may have distracted Tubbs from the issues on the ground, critics say — an attack that’s similarly been lobbed at other charismatic mayors with higher ambitions, like Cory Booker, Pete Buttigieg and Eric Garcetti.
“When people see him in San Francisco or in Washington or in New York they feel that he’s neglecting his own people here,” said ABC10’s Rivera.
“This guy thinks he’s a big shot nationally,” said Sanchez. “While he’s out on TV talking about macroeconomics, the community is struggling with rampant violent crime, with a homeless crisis that has increased 200%.”
Experts note that because of Stockton’s governance structure, the city manager rather than its mayor actually controls a lot of its operations and policymaking. The role of the mayor is as an ambassador, a fundraiser and a go-between with other government entities and representatives.
Still, there are problems that continue to plague Stockton and have only been made worse by the pandemic. Homicides dropped 40% in 2018, but as of October, the rate was up 40% from last year, mirroring the trajectory of many cities affected by the economic distress of the pandemic. Total rates for violent and property crimes, meanwhile, have dropped nearly 20% this year.
The city had been recovering from the unemployment spike it experienced after the 2008 recession, but the coronavirus has left 11.4% of the population jobless. Stockton’s rate of homelessness has tripled between 2017 and 2019, and its poverty rate is about 20%.
As to the impact of global and national media appearances, Lopez and other supporters say they served to elevate Stockton as much as Tubbs.
For years, the city was known as the largest to declare municipal bankruptcy in the U.S., or the one with the most foreclosures, or simply the most “miserable.” With Tubbs in charge, Stockton’s star rose, too: No longer neglected, it had become a small city to watch.
Funders with deep pockets may be less wary to take a chance on Stockton, Tubbs told Bloomberg Businessweek. Steadying the city’s financial health was also a priority: Stockton will end the year with a $13.1 million budget surplus.
For the community groups Tubbs worked with — like the 125 SEED participants who received monthly cash payments, and the students who got the first round of college scholarships — his rising profile was a reflection of the life-changing effect his tenure had.
“I personally am astounded, for lack of a better word. I am perplexed, it doesn’t make sense to me,” said Janae Aptaker, the director of the Stockton Scholars Program & Strategy, of Tubbs’ loss. “As somebody who works at the foundation I understand the depth of the work that we’re doing. It’s driven by the needs of the community and some of our most needy folks in the community. It is kind of heartbreaking.”
“It’s a sad commentary on information, misinformation, education and the need for an informed citizenry.”
Coverage by the 209 Times of the Stockton Scholars program is one example of how the blog has misrepresented Tubbs’ record.
The blog claimed that the initiative has only given out $44,000 in scholarships to kids, using as its proof a 990 form from 2018, when the program was in its pre-launch phase and only giving out mini-grants.
As of this year, the foundation has spent $750,000 on scholarships of up to $1,000, for 879 students who are eligible to keep receiving grants for four years, according to the foundation. Another 1,420 students are eligible this year, and the foundation plans to support a total of at least 10 graduating classes.
But the articles have led school administrators and counselors to doubt the program, said Aptaker; she’s heard of students who were “unsure if they should apply because they’re not sure it’s real.”
Stories like this spread fast. “It also begs the question: What was so scary, what was so threatening, what was so bad about giving kids scholarships? Or putting the city in a healthy fiscal position?” said Tubbs. “It’s a sad commentary on information, misinformation, education and the need for an informed citizenry that’s given accurate information to make choices.”
Another misleading narrative pushed by the 209 Times is that the city of Stockton had been given $60 million to address homelessness in the city, without results to match. The city has only been given $6.5 million to address homelessness, according to the mayor’s office. (Sanchez says the $60 million figure was cumulative and included money allocated at the county level.)
“The idea that Stockton alone would receive $60 million is outrageous,” Lopez wrote in a statement. “But nevertheless, 209 Times readers, influenced by their fake news, regularly ask where the money went.”
Most recently, articles alleged Tubbs was in on a plan to build a new shelter for unhoused people from within the county and across the state at the San Joaquin County Fairgrounds. Putting emergency services at the fairgrounds had been discussed as part of a homeless task force brainstorming session.
But, Tubbs, City Manager Harry Black, and representatives from multiple state agencies said there was no “secret plan” to create such a regional homeless shelter. The Record ran a story saying as much, but it was too late, Lopez said. Readers believed it.
Sanchez also used the 209 Times to take issue with things like Tubbs spending city money to refurbish City Hall and buy a high-tech video camera, and his use of his own foundation to raise funds for the city. The blog fanned criticism of the city’s Advance Peace program, in which violent offenders are given mentorship and stipends to address poverty as a root cause of crime, saying it disrespected the families of victims.
The controversy over turning a golf course into housing — which ended in Tubbs saving the green and city resources by leasing it out to a private developer — and a debate over whether to cut district funding for school police were particular flashpoints, said Lange Luntao, the executive director of the Reinvent Stockton Foundation.
“Those two issues in my mind really exposed the fact that places like Stockton, while they are in the state of California, are still deeply conservative places,” said Luntao, who has also been unseated from his position on the school board. They were also “proxies for racism,” he said.
Tubbs says he’s experienced “racialized” undertones from his opposition since his city council days, as he spoke his mind and refused to be “docile” as a young Black man. “We actually did things, we actually moved things, we actually changed things,” he said. “And there’s a price that comes with that.”
Tubbs’ opponent is also a candidate of color, a Black and Latino man ten years Tubbs’ senior who, like Tubbs, grew up in Stockton. It is primarily his politics and his age that provide a contrast. Although the race is technically nonpartisan, Lincoln is a Republican who ran on a platform of addressing homelessness, increasing public safety and expanding civic engagement.
The pastor, former businessman and ex-Marine has said he does not support sanctuary city policies, has the endorsement of the police and firefighters’ unions, and in May, advocated for Stockton businesses to open up from Covid lockdowns, saying the state had “crushed the curve.”
“I believe that Mayor Tubbs came in with a huge mandate that I feel he may have squandered,” said Lincoln. Tubbs raised $662,842 for his campaign, much of it from outside the city. But Lincoln ran a successful local media blitz, raising a little over $299,000 and papering the city with flyers.
The foundation Tubbs started, Reinvent Stockton, is privately funded and run, and will live on no matter the mayor. But while Lincoln says that he hopes to continue to support some programs launched under Tubbs, like the Stockton Scholars fund, others will “have to die on the vine.”
Lincoln is not affiliated with the 209 Times, and was actually an early target of the site during Sanchez’s short-lived mayoral run. When the blog invited Lincoln to participate in a debate in January, he released a Youtube video explaining his decision not to attend. “I do not condone any person or media outlet using tactics that divide,” he said at the time, although he’s tempered his criticism in interviews after the primary.
Sanchez is quick to say he is not a “traditional” journalist but rather a “guerilla” one. “We have to do a lot of translating, we connect the dots,” he said. “I designed something that’s brought things like politics and other issues to the masses in a community that was rife with apathy.”
Stockton ranks 99th of the largest 100 cities for college attainment, with only around 18% of residents age 25 and up attaining a bachelor’s degree or higher.
“In general, We’ve seen that when a social media outfit like this gets set up in a civically under-educated community, it can lead to confusion and doubt,” said Reinvent Stockton’s Luntao.
As Stockton’s new leader, Lincoln may soon find himself the subject of the local kingslayer’s scrutiny.
“If he starts getting out of line, we’re willing to hold him accountable the same way,” said Sanchez.
2021 Will Be The Year Of Guaranteed Income Experiments
At least 11 U.S. cities are piloting UBI programs to give some of their residents direct cash payments, no strings attached.
Giving people direct, recurring cash payments, no questions asked, is a simple idea — and an old one. Different formulations of a guaranteed income have been promoted by civil rights leaders, conservative thinkers, labor experts, Silicon Valley types, U.S. presidential candidates and even the Pope. Now, it’s U.S. cities that are putting the concept in action.
Fueled by a growing group of city leaders, philanthropists and nonprofit organizations, 2021 will see an explosion of guaranteed income pilot programs in U.S. cities. At least 11 direct-cash experiments will be in effect this year, from Pittsburgh to Compton.
Another 20 mayors have said they may launch such pilots in the future, with several cities taking initial legislative steps to implement them.
“We are at a moment right now where city leaders, residents policymakers, and activists are all looking for big ideas to begin to chip away at some glaring structural problems in our systems and institutions,” said Brooks Rainwater, senior executive and director of the National League of Cities’ Center for City Solutions.
“This new wave of pilots is different because of the groundswell of support for guaranteed income we are seeing in cities across America.”
These programs are often called UBI, for Universal Basic Income, but with each distributing monthly payments to just some households, they aren’t yet truly universal, and there’s disagreement over whether they should be. Instead, they’re “unconditional,” a contrast to many existing government programs that tie benefits to work requirements, or set parameters on how recipients can use the money. Still, the idea isn’t to replace the existing safety net, but build upon it.
The current wave of city programs was catalyzed in the U.S. with a two-year pilot in Stockton, California, that began in February 2019. Originally slated to sunset in the summer of 2020, philanthropic support allowed the program to continue for six more months during the Covid-19 pandemic.
After gaining a national profile for helping to initiate the program, former Stockton Mayor Michael Tubbs was voted out of office this November — but not before launching a coalition of local leaders called Mayors for a Guaranteed Income, which he will continue to lead in 2021.
“We need a social safety net that goes beyond conditional benefits tied to employment, works for everyone and begins to address the call for racial and economic justice through a guaranteed income,” Tubbs said in a statement.
In the short term, the goal of the nearly 30 mayors in the coalition is to run guaranteed income experiments. The ultimate aim of the mayors coalition is to pass a federal guaranteed income program.
Every city that joins is eligible for $500,000 in pilot funding; they’ve partnered with the University of Pennsylvania School of Social Policy & Practice to produce research reports, and will share best practices throughout.
The effort has gained high-profile philanthropic supporters, including Twitter CEO Jack Dorsey, who donated $3 million to the group in July and another $15 million in December.
The results will be supplemented by other experiments in global cities, past and present. The largest such program is in Maricá, Brazil, where tens of thousands of residents below the poverty line are currently receiving monthly payments.
Although the U.S. programs announced thus far can serve only hundreds of residents per city, advocates say their immediacy, simplicity and emphasis on radical trust are an antidote to the biases and bureaucracies that hinder other welfare programs.
“Cash is the currency of urgency,” said Mayor Shawyn Patterson-Howard of Mount Vernon, New York, at a conference convened by the National League of Cities in November. “People need money right now.”
Recent stimulus payments from the federal government have helped some Americans see the benefit of direct disbursements and may have chipped away at public resistance: A poll commissioned by the Economic Security Project found that 76% of respondents supported “regular payments that continue until the economic crisis is over,” and a Gallup poll found widespread support for additional stimulus.
Proponents hope these local efforts will normalize and popularize guaranteed income in the U.S. for potential future federal action.
As we enter a second year of a pandemic that’s left more than 10 million Americans unemployed and 26 million hungry, most of these programs are geared at low-income residents. But they also expand ideas about what a guaranteed income might look like, with some tailored to more specific groups such as families with children or Black mothers, and more specific goals such as maternal health and racial justice.
In December, Compton in Los Angeles County launched what could become the largest guaranteed income pilot in the U.S.
The majority-Latino city with a poverty rate double the national average is run by Mayor Aja Brown, who was elected in 2012 as the youngest mayor in the city’s history — a distinction she shares with former Stockton Mayor Tubbs.
Called the Compton Pledge, Brown’s guaranteed income project has already started disbursing payments to 30 low-income families. Rolling enrollment will continue through March until nearly 800 families are participating.
Households will get up to $1,000 a month for two years, with payments calculated based on the family’s size. Recipients are randomly selected from a pool of the city’s low-income residents, and the project emphasizes that formerly incarcerated and undocumented people are eligible, even as they slip through the cracks of traditional welfare programs.
The coalition of partners supporting the project is made up of “strong women of color who are not seeing this particular policy as an emergency measure in the wake of Covid-19, but also as the beginning of how we can reimagine community investment, where government invests its money, and who we consider essential,” said Nika Soon-Shiong, the co-director of the Compton Pledge and the executive director of the Fund for Guaranteed Income.
Along with studying how people access the money and then how they spend it, the program has designed a basic income web portal for communications and payments, which other cities could use for future projects.
Compton’s program, like Stockton’s, is geared broadly at residents with lower incomes. Another program in Hudson, New York, will follow a similar model, with $500 monthly payments to 25 low-income residents for an even longer duration: five years.
But many of the other new programs are geared at even more specific populations.
Pursing Racial Justice
“If we offer our families a little bit of breathing room, will they be able to dream about something a little bigger?” That’s the question posed by the Magnolia Mothers Trust, a program launched in Jackson, Mississippi, to provide Black low-income mothers with $1,000 a month.
After a year-long pilot starting in December 2018 with 20 women, some takeaways emerged: Three-quarters of the participants were able to give their families three meals a day, and collectively, they paid off $10,000 in debt.
The women said they worried less, and were more hopeful about their futures. In 2020, the program started its second round, expanding to include at least 110 different mothers in Jackson.
Jackson is one of a number of cities narrowing its guaranteed income program to focus on racial justice, using the funds to address structural inequities. San Francisco’s mayor, London Breed, partnered with local birth equity initiative Expecting Justice to launch a targeted basic income program geared at the earliest phases of motherhood:
“The Abundant Birth Project” will support 150 Black and Pacific Islanders with $1,000 a month throughout their pregnancies and six months after, in an effort to reduce the disproportionate toll of maternal and infant mortality among those communities of color.
Unlike other programs for pregnant women that focus on providing particular services like transportation or medical care, this one empowers women to spend it on whatever comes up each month. Eventually, the hope is to supplement San Francisco mothers’ income for two years postpartum.
“Structural racism, which has left Black and Pacific Islander communities particularly exposed to Covid-19, also threatens the lives of Black and PI mothers and babies,” said Zea Malawa, who works on maternal and adolescent health at San Francisco’s Department of Public Health, in a statement.
“Providing direct, unconditional cash aid is a restorative step that not only demonstrates trust in women to make the right choices for themselves and their families, but could also decrease the underlying stress of financial insecurity that may be contributing to the high rates of premature birth in these communities.”
In Columbia, South Carolina, a pilot will focus instead on Black fathers to “address the fracturing of families.” The program, called the Columbia Life Improvement Monetary Boost, or CLIMB, will provide $500 a month for two years to 100 men chosen at random in partnership with the Midlands Fatherhood Coalition, an organization that works with South Carolina dads.
“Cash is the currency of urgency. People need money right now.”
Pittsburgh’s program has a more complex design, tailored to research on its own city: In 2019, a race and gender equity study revealed that Pittsburgh has some of the highest rates of poverty, unemployment and adverse health outcomes for Black women among U.S. cities.
Based on those findings, and the threat of the Covid-19 pandemic, the mayor’s Gender Equity Commission made several recommendations, among them building out a universal basic income pilot program.
Mayor Bill Peduto took heed, first announcing that he was joining the Mayors for Guaranteed Income group, and then unveiling a pilot program, the Assured Cash Experiment of Pittsburgh, slated to begin in 2021.
Some 200 families that earn less than 50% of the city’s area median income will receive a monthly $500 stipend over two years.
Half of the spots will be reserved for Black women-led households. So far the program is propped up by philanthropic and corporate dollars, but Peduto’s office is reviewing the law to see if the city can match funds for it as well, in hopes of scaling it up.
“From the beginning we thought that the city should have skin in the game, as a show of good faith to show that we’re a part of this program and believe in it. It needs to be piloted to be able to show people what the benefits can be, and then we have to be able to utilize the data in order to create benchmarks,” said Peduto.
“There are a multitude of indicators that we can look at but you’re never going to be able to prove it or see it if you can’t test it.”
Addressing Family Needs
Several other programs are focusing on families with kids. Mayor Melvin Carter launched the “People’s Prosperity Pilot” in St. Paul, Minnesota, to reach 150 families chosen randomly from those who signed up for another city initiative, which gives every newborn a college savings account seeded with $50. These families will get $500 a month for 18 months.
Carter says he’s seen the limitations of existing aid for families firsthand: As a child, his daughter had allergies to milk and peanuts, but because of the strict rules around how Women, Infants and Children benefits can be spent, his family wasn’t able to use the funds to purchase unique essentials like soy milk or almond butter. Already, more than 100 participants have signed up, Carter said.
Richmond, Virginia’s “Richmond Resilience Initiative,” launched by Mayor Levar Stoney this year, had an initial goal of reaching 18 low-income working families with kids who don’t qualify for other forms of government benefits; after Dorsey’s donation, the program has been expanded to reach 55.
Oakland hasn’t yet released details about its planned cash transfer program, but Mayor Libby Schaaf has said it, too, will target families with children upon its launch next year. And as Providence, Rhode Island, Mayor Jorge Elorza plans his city’s pilot, he says he’s been reflecting on the way money struggles “tear families apart.”
Paying For It
Particularly at a time of dire financial challenges for cities, most programs are benefiting from at least some private funding: Stockton’s pilot was entirely philanthropy-funded, though that didn’t insulate it from critiques by skeptical constituents, Tubbs said.
Other mayors have bolstered philanthropic investment with public dollars. Richmond partnered with the local Robins Foundation. Patterson-Howard says that since Mount Vernon’s project would double as a housing stability program, she’s looking to use federal Department of Housing and Urban Development funds and money from the CARES Act Covid relief legislation passed by Congress.
While the pilot is still in design mode, she hopes to target 75 to 100 families, and has already begun talks with the county, faith-based organizations, Black and brown sororities and fraternities and local businesses. For corporations that pledged to support the Black community in 2020, Patterson-Howard says this is a “sexy” opportunity to put those words into action.
Carter started St. Paul’s program with CARES Act dollars, combined with private fundraising. “One individual called me and asked how he could give $90,000 anonymously and when the check came, it was for twice that amount,” said Carter. Business leaders see the value in this kind of project, he said: “They need a stable workforce, who can feed their children and participate in their economy, as well.”
Not everyone is so gung ho. Critics of basic income come from the right and the left, the wealthy and the poor. Some argue that the money will be spent on drugs — in Stockton, on average, most of the $500 researchers tracked was spent on food and essentials each month — or that it will deter people from looking for work, an outcome deflated by a Finland experiment but hard to definitively disprove.
Others are turned off by the original idea of universal basic income that rich people could be included, or frustrated that they were not one of the randomly selected recipients in more targeted experiments.
The narrower scope of the new wave of pilots also has its own drawbacks: By tailoring eligibility to families with children or other specific groups of people, the pilots replicate some of the constraints of the national welfare system.
Means-tested benefits already miss out on a lot of people, either intentionally or accidentally. On the flip side, some people who do get federal benefits like disability or housing may fear that signing up for guaranteed income would make them ineligible.
Dispelling these doubts and building a case for why cash works has been a persistent focus for the mayors who are leading these projects. To many city leaders, the most enduring effect of these experiments may be to erase notions of “deservedness” from the welfare conversation entirely.
“We don’t tell banks how to use their money when we bail them out, we don’t tell companies how to use their money when we bail them out,” said Patterson-Howard. Essential workers deserve to spend their money on their own terms, too, she said.
“This space is full of racist tropes about what ‘those people’ will do if you give them money,” added Carter. “None of them are based in fact, statistics or real data. We have the opportunity to disprove some of those.”
Can A ‘Guaranteed Income’ For Black Entrepreneurs Narrow The Wealth Gap?
To tackle barriers to capital for Black businesses, an Oakland project is trying a new strategy: Monthly cash payments, no strings attached.
As dozens of cities roll out or contemplate “guaranteed income” pilot projects to give residents money with no strings attached, a program in Oakland, California, is testing a similar model to help small businesses.
Runway, which calls itself a “financial innovation firm,” originally helped Black women entrepreneurs mainly through small loans. But in 2020, Runway began gifting its business-owner clients — which it calls its “family” — with a monthly $1,000 stipend, no strings attached.
The Rapid Emergency Fund project is a pilot, which Runway is billing as a “universal basic income” experiment for Black business owners, to see if this kind of supplemental income could be curative for the racial wealth gap. It started in March when all non-essential businesses were ordered to close to stop the spread of Covid-19.
The experiment is the brainchild of Jessica Norwood who before co-founding Runway, studied the problem of why Black businesses fail as a research fellow for several organizations including the Nathan Cummings Foundation and the Center for Economic Democracy.
She arrived at the often-cited reason that financial institutions don’t finance and capitalize Black entrepreneurs like they do white ones. But digging deeper, she found that many African Americans also don’t have a family-and-friends network to rely on for backup even if they do get financing.
A 2016 Bank of America study found that more than a third of business owners received a financial gift from friends and family to help launch their companies. Because of the racial wealth gap — the median net worth of white families is an estimated $171,000 compared to the $17,150 median net worth of Black families — there’s just not a lot of disposable money laying around among Black parents, aunties and loved ones for them to help out kindred Black entrepreneurs when they need it. So Runway became the family Black entrepreneurs needed.
The firm launched in 2018, by providing low-interest loans of between $2,500 to $20,000 to a small group of Black entrepreneurs in Oakland, as part of its Runway Friends & Family Loan Program. To qualify, the awardees didn’t need an unblemished credit score or tall history of triumphant businesses.
They only needed to be “capital ready” — meaning having a strong business plan and having completed a local business training program. The current crop of loanees were nominated through Runway’s technical support partner, the Uptima Entrepreneur Cooperative. Once awarded the loan, its clients were only responsible for making interest payments of 4% for the first two years.
In the spring of 2020, Runway’s rapid emergency fund began giving these loan recipients direct cash infusions of $2,000 upfront, and then a $1,000 monthly stipend through October to keep them afloat, also providing them with free business and marketing consultancy services.
After the first year of the experiment, some results are already clear: Not one of the 30 businesses in the Runway consortium had to close up shop due the pandemic shutdowns. Considering the dry run a success, Runway began a second round of guaranteed income funding to its clients in November.
Candace Cox, who runs the Oakland-based artisanal jewelry and home decor store called Candid Art, thought it might be time to hang it up when cities and states first started ordering businesses to close last year. She had run out of fabric so she couldn’t even make face masks. The emergency stipend allowed her to purchase the bulk fabric she needed to change her fate.
“I was already in my head like, ‘I have to find a job or do DoorDash,’ but with the [Runway funding] I was able to pivot quickly,” said Cox.
The funding has been especially helpful given that many Black businesses were reportedly left out of the federal pandemic relief funding from earlier this year. There is incomplete data on the demographics of loan recipients from the Paycheck Protection Program, because the Small Business Administration did not require race data on its loan applications, according to the Center for Public Integrity.
However, of the 10% of loans where race was reported, 78% went to white business owners compared with 3% for Black owners, according to the report. Far more PPP loans went to businesses in majority-white congressional districts in the first round of funding compared with loans made to businesses in majority-nonwhite districts — though there was more parity by the second round of funding.
Runway sees its loan and guaranteed income work as part of a mission to build “emergent financial practices and infrastructure that close the racial wealth gap for good.”
While Norwood describes the cash payments as a sort of “universal basic income,” it differs from other such projects because the money is coming from a private organization and donors, not the government.
To fund their own project, Norwood and her fellow co-founders — all women of color — approached investors and donors who’ve been inquiring in the past few years about what they could do to help with anti-racist work and addressing the racial wealth gap problem. Several banks and financial institutions, including Berkshire Bank and the Self Help Federal Credit Union in Oakland, have also signed on as investors in Runway.
“This is a unique model where we try to put the entrepreneurs first and they all in fact see themselves as a cohort, helping to grow each others’ businesses,” said Norwood. “They know underneath all of this is a common set of values and that is what keeps them working as a community.”
Runway is currently developing a new cohort of Black businesses to finance in Boston. Norwood said she’s also fielding demand from many other cities, but cautioned that they weren’t looking to do a rapid expansion, mindful of the “violence of rapid capitalism” that she says has actually destroyed many Black communities.
“The history of capitalism has been predatory and violent for Black people, so we want to make sure that doesn’t happen with us,” said Norwood. “Capital needs to move, but it has to be the right kind of capital with the right kind of money. It can’t be episodic and it has to be deeply, deeply generous.”
Can A Guaranteed Income Help End Poverty?
A Q&A with former Stockton, California mayor Michael Tubbs on why giving Americans cash is an idea whose time has come.
Romesh Ratnesar: As the mayor of Stockton, California, you became a prominent advocate of guaranteed income — the idea that the best way to expand economic opportunity is to give people money, no strings attached, and allow them to spend it as they see fit.
Last week, a study of the guaranteed income program you launched, the Stockton Economic Empowerment Demonstration (SEED), found that among the 125 people who received the $500 monthly direct payments, the rate of full-time employment increased by 12 percentage points in one year. Receiving this stipend appeared to encourage work, rather than the opposite. Did that surprise you?
Michael D. Tubbs, founder, Mayors for a Guaranteed Income: Based on my own lived experience with poverty, I know that the issue is not that people don’t want to work, or that people are going to work less. So many people are trapped in dead-end jobs, which is compounded by poverty and economic scarcity.
People can’t afford to take a day off to interview for a better job, or pay for an outfit for the interview, or to fix their car so they have reliable transportation to get to the interview. So these findings weren’t a surprise at all.
And I hope they put to bed the notion that if we provide people with an economic floor, then they will forget to be industrious, forget to contribute or forget to be productive. In fact, the counter is true. We lose so much productivity and so much potential in this country because of economic scarcity.
RR: We now have the results of the first year of the SEED program, which preceded the pandemic. How has this crisis changed the conversation about guaranteed income and the need to rethink the social safety net?
MT: It’s highlighted the fact that a guaranteed income is not just part of pandemic response, it’s also part of pandemic preparedness. We live in a time of pandemics; it’s a question not of if but when. Covid-19 has been the most drastic example, but we’ve also had the energy crisis in Texas, we’ve had wildfires, hurricanes, all of which cause massive economic disruption.
The guaranteed income findings show that even before Covid, the $500 people received helped them build up a degree of economic resilience. When the pandemic happened, those that had guaranteed income were able to weather the shocks better than those who didn’t have it. And we see that reflected in the conversation right now in the halls of Congress, the need to provide cash relief to the American people.
We’ve had bipartisan support for sending out one-time money to the American people three times already. It’s sad that it takes a pandemic to get that level of empathy — particularly because so many folks were living in an economic pandemic before Covid-19.
RR: As you mentioned, there’s growing openness among leaders of both parties to provide more Americans some form of guaranteed income – whether through the stimulus checks or an expanded child tax credit, like the one proposed by Senator Mitt Romney, which would last beyond the duration of this crisis. What should Congress learn from the Stockton example?
MT: They should learn that you can trust the American people. You can trust that investing directly in the American people will yield dividends. You can trust that the American people are deserving of the dignity that comes with economic security. The best way to build back better is to give people the tools and resources to do so.
As for the specific proposals, I think the child tax credit is a step in the right direction, in terms of understanding the work of caregivers and the work of parenting — as someone with a 17-month-old, I can tell you, parenting is the hardest job I’ve ever had, and that includes being mayor.
But I think that people who don’t have children also deserve some form of recurring monthly checks. One reason we need a guaranteed income is because there are a lot of Americans who are choosing not to have children because of their economic situation, because they can’t pay for it, because they’re trapped in dead-end jobs, or because there’s so much student-loan debt.
RR: One of the criticisms of guaranteed income schemes is that we don’t have enough evidence that they work, because the sample size has been too small. The SEED program in Stockton only involved 125 people. Can we really generalize based on such a limited data set?
MT: This isn’t about the data; it’s really a question of political will. If data alone drove decision-making, we wouldn’t have the governor of Texas telling people not to wear masks. We’d have smarter policies on the climate; we’d have smarter gun policies.
All the data in the world is not enough to push political will on some issues. But the data is important. We designed a study with a sample size that is large enough to generalize — that was the point of the pilot. And to answer people who say this just happened in Stockton with 125 people, there are a bunch of pilots now happening all over the country.
Compton is doing guaranteed income for 800 residents. St. Paul is doing guaranteed income for 125 residents. Yolo County, California, is doing a basic income demonstration. So is Gary, Indiana. So there will be enough data. There’s also international data going back decades that speak to the same fundamental truths about the efficacy of a guaranteed income.
RR: How should the government pay for these programs?
MT: We gave $2 trillion dollars in tax cuts four years ago. If you reverse those tax cuts, that’s enough to pay for a guaranteed income for every household making $100,000 or less for a year. So that’s one way. We can legalize cannabis and use that tax revenue.
We can create a data tax or data dividend and allow everyone to own some of the wealth they generate through their online actions. We could defund the Space Force and other unseemly bloated military expenditures and use that to fund a guaranteed income. The issue is not whether we can afford to pay for it. The question is whether there’s a will to pay for it.
RR: You were elected mayor in 2016 at the age of 26, becoming the youngest big-city mayor in the country. You then launched this highly ambitious project to give people a guaranteed income, which hardly had a massive constituency behind it. Why did you decide to do that?
MT: For me, leadership is about the verb versus the noun, meaning leaders have to do something. And for me, having lived experiences with poverty and knowing so many people who are economically insecure, I felt a mandate to do something that was different. It would make no difference who was mayor if we weren’t solving the tough challenges and even being provocative about how we did so. It was also driven by my faith.
I’m a self-described church boy who grew up hearing that the righteous care about justice for the poor and that we’re judged, at least in my faith tradition, by how we treat the least of these. Being mayor was great, but I didn’t become mayor to be mayor. I became mayor to do things. I wanted to change lives, to change policies, change the conversation. I’m also a data person. I like to know what works, and I like to do it. And now we know, guaranteed income works. So let’s do it.
RR: You lost re-election last November. A lot of factors affected that outcome, but is there anything you would have done differently in terms of how you talked about the guaranteed income program and sold it to the citizens of Stockton? Could you have done more to convince people this was something they should support?
MT: I think the context in which we did this guaranteed income experiment bears mentioning. We were the first mayor-led guaranteed income demonstration in the history of this country. There was no template. It was new, and there wasn’t a pandemic to point to. Activation energy is always more difficult. Plus, disinformation is real. There’s a reason why we have an economy that works for the few and not the many.
There’s a reason why, 300 years after Thomas Paine and 60-plus years after Dr. King, who both called for a guaranteed income, that we’re just now having that conversation very seriously in this country. It’s not because Michael Tubbs can’t message. It’s because we’re going against a status quo that has a lot of interest in keeping things as they are.
And I was the first Black mayor of the city. It doesn’t mean that there weren’t other Black people in the 200 years of Stockton’s history that could have been mayor — it means there’s also some institutional bias and racism at work.
RR: Since leaving office, you’ve been focused on trying to build a national network, Mayors for a Guaranteed Income. What role can cities and mayors play in moving the needle on this issue?
MT: Mayors are the moral authorities and the real leaders in our democracy. They’re at ground zero for every major challenge. They have an understanding of what their constituents need. And mayors aren’t ideological. We’re very pragmatic. We’re very much about what works and how come we’re not doing it already. I formed Mayors for a Guaranteed Income because I knew that it would take some time to get the federal government to act.
But if we could get the mayors who represent the cities that these members of Congress and senators need to win their elections, then we would see more traction. And in seven months, we have 42 mayors who have signed on who are interested in the policy and want to test it. I can’t think of any other policy in this country right now where 42 cities have said, “We’re really going to try to do this.” And I think it’s incredibly exciting.
RR: What can these mayors say to the business community to build support for guaranteed income programs? What’s in it for employers?
MT: If you’re an employer, you do better when everyone does better — when consumers have more ability to spend, when people are healthier, when communities are safer. Guaranteed income is a massive investment in R&D, in the future prosperity of your company, your customers and your employees. The data says that you’ll have folks who are better able to contribute and be productive at work, so productivity increases.
And the pool of candidates to choose from increases. A guaranteed income allows people to have the agency to make decisions about how they spend their time, who they work for and to invest in training and upskilling if that’s what they need. And it also makes people healthier, less stressed, less anxious, better people and better employees, which is an overall win for all of us.
RR: What’s the bottom line? What is it going to take to make guaranteed income a reality for the Americans who can most benefit?
MT: Well, it’s going to take a majority of votes in the House of Representatives and a majority of votes from the Senate. It’s all political will. We know it works. The data in Stockton shows it works. The data from Mexico, Brazil, Kenya, Canada all shows that it works. The real question is, What else do our lawmakers need besides data to enact the policy? I think that’s where we’re at.
L.A. Set To Be Largest City To Offer Guaranteed Income For Poor
Los Angeles Mayor Eric Garcetti is proposing a guaranteed income program for poor residents, making it the largest U.S. city to test such a policy.
Garcetti will ask the City Council on Tuesday to set aside $24 million in next year’s budget to send $1,000 monthly payments to 2,000 low-income families in America’s second-largest city, the mayor said in an interview. Funds from council districts and other sources could bring the total to $35 million.
Candidates for the one-year program would be selected from the city’s 15 districts, based on each area’s share of those living below federal poverty guidelines. Garcetti is targeting households with at least one minor, and suffering some hardship relating to the Covid-19 pandemic.
While the movement is nationwide, the magnitude of Los Angeles’s poverty, where one in five of Los Angeles’s nearly 4 million residents are barely able to make ends meet, puts a national spotlight on the program.
“How many decades are we going to keep fighting a war on poverty with the same old results,” Garcetti said. “This is one of the cheapest insertions of resources to permanently change people’s lives.”
The idea of the government providing poor residents with some basic level of income has been floated by a number of prominent people over the years, including civil rights leader Martin Luther King Jr., libertarian economist Milton Friedman and Republican President Richard Nixon.
Businessman Andrew Yang made the idea a centerpiece of his unsuccessful bid last year to be the Democratic presidential nominee, and he’s continuing to advocate for the policy in his campaign for mayor of New York City.
Los Angeles would join a handful of other cities experimenting with a guaranteed income program. They include Stockton, California, Saint Paul, Minnesota, and Chelsea, Massachusetts. In many cases, the programs are funded by philanthropic organizations.
The coronavirus has accelerated plans for the program. In the past year, the Mayor’s Fund for Los Angeles, a non-profit affiliated with Garcetti’s office, has given out $36.8 million to 104,200 residents through a prepaid debit card called the Angeleno Card.
The city will be the recipient of more than $1.3 billion in federal stimulus funds from the recently passed American Rescue Plan, which could be used to fund the payouts. Los Angeles had a budget of roughly $10.5 billion in the current fiscal year.
“There’s no question the pandemic is proof that this works,” Garcetti said. “Small investments have big payoffs.”
Garcetti, a Democrat in his second term, is co-chair of Mayors for a Guaranteed Income, which has been advocating for the policy at the federal level and funding local programs. The group, which has 43 elected officials as members, was founded last year by then-Stockton-mayor Michael Tubbs.
It has received $18 million in seed money from Twitter Inc. co-founder Jack Dorsey as well as $200,000 from Bloomberg Philanthropies, the charitable arm of Michael Bloomberg, founder and majority owner of Bloomberg News’s parent company.
California cities have been taking a lead with these programs. Compton, just south of Los Angeles, fully rolled out its program last week, with 800 families getting between $300 and $600 a month. Oakland and San Francisco also recently outlined details of their projects.
In San Francisco, grants and some revenue from hotel taxes will fund monthly payments of $1,000 to about 130 artists for six months beginning next month. Organizers said the pilot is the first to solely target artists. Oakland will tap private donations this summer to fund its guaranteed income program, providing $500 monthly to about 600 poor families.
Still, a majority of Americans oppose the federal government providing a guaranteed basic income, according to a survey last year by the Pew Research Center. Support for the policy is much higher among Democrats, younger people, Blacks and Hispanics. Nearly 80% of Republicans and Republican-leaning independents oppose the idea of the federal government providing a basic income of $1,000 a month proposed by Yang.
Stockton, about 80 miles east of San Francisco, distributed $500 a month for two years to 125 families. Research from the first year found that recipients obtained full-time employment at more than twice the rate of non-recipients, according to a release from Mayors for a Guaranteed Income. They were also less anxious and depressed, compared with a control group.
Beneficiaries of the Los Angeles program, which Garcetti is calling Basic Income Guaranteed: L.A. Economic Assistance Pilot, or Big:Leap, will be asked to participate in studies to evaluate the impact of the payments on their lives. The mayor said he was targeting $3.5 million in additional funding to study the results.
Ultimately the costs of such programs will be too big for cities to finance alone, he said. But with data proving it works, Garcetti said states and the federal government could be inspired to fund them.
“Everybody said: ‘You give people money, they’re going to buy even bigger TVs,” Garcetti said. “Stockton showed that’s just not true. Low-income Americans know what to do with additional resources to build health and wealth, but too many of them are caught in the cycle of poverty.”
Los Angeles Takes An Oprah Approach To Guaranteed Incomes
The city’s program looks more like “You Get a Car” than a transformative attack on local poverty.
Los Angeles understands publicity and trendiness. Its leading industries depend on grabbing attention and conjuring desire. Its culture celebrates storytelling.
So it’s fitting that in his recent State of the City address, Los Angeles Mayor Eric Garcetti announced plans to give 2,000 local households $1,000 a month for a year. He boasted of his role as a founding member of Mayors for a Guaranteed Income and touted his program as “the largest Guaranteed Basic Income pilot of any city in America.” The $24 million plan will also be the first paid for with taxes — funds from the federal American Rescue Plan — rather than private donations.
The idea is alluring in its apparent simplicity: The solution to poverty is reliable cash. Let’s give everyone a regular check.
“Everyone deserves an income floor through a guaranteed income, which is a monthly, cash payment given directly to individuals” without strings or work requirements, declares Mayors for a Guaranteed Income. The advocacy group has established a center at the University of Pennsylvania School of Social Policy and Practice to conduct and track research on the idea.
Guaranteed-income programs have become the must-have policy accessory of the season. There are pilots in the works in Newark, Atlanta, Pittsburgh, New Orleans and St. Paul, among others. In December, Twitter CEO Jack Dorsey gave Mayors for a Guaranteed Income $15 million to fund such efforts. Having one in your city marks you as progressive, upbeat and visionary.
Like all glamorous visions, however, the general concept of a guaranteed income hides many details and difficulties — from where the money is supposed to come from to what the long-term effects might be. There’s a huge difference between the golden dream of money for everyone and the reality of small pilot programs.
That doesn’t mean pilot programs are useless. There are three possible reasons to run one. The first and most obvious is to help poor families. “This is one of the cheapest insertions of resources to permanently change people’s lives,” Garcetti told Bloomberg News.
The second is to learn more about details that could make a difference in a full-scale policy. How does a guaranteed payment change people’s behavior? Would a child allowance be better? How large should the payments be? Should they come as larger lump-sum amounts, say, quarterly or smaller, more frequent sums? How does cash compare to in-kind payments such as food stamps? A well-designed pilot can serve as a social science experiment, aimed at answering such important questions.
Or it can simply be a publicity stunt, serving to attract attention and garner good will for both the idea and its proponents. So far, that’s what L.A.’s appears to be.
In context, Garcetti’s plan looks more like Oprah’s “You Get a Car” moment than a transformative attack on local poverty. Los Angeles has about 1.4 million households, and about 18 percent of its residents are poor. 1 That means about a quarter million poor households. The plan, which will be limited to families with minor children, covers less than 1% of them—for a single year.
A lucky few get a short-term windfall.
Catalyzed by the federal government’s cash programs of Covid relief, the L.A. program follows an attention-getting two-year experiment in Stockton, in California’s Central Valley. There, 100 residents received $500 a month for two years with no strings. Another 25 “served as a politically purposive, or storytelling cohort,” who got the payments and talked to the press. A control group of 200 received nominal compensation for participating in the research but no regular payments.
Not surprisingly, the dependable money reduced participants’ income fluctuations and their stress. Compared with the control group, they were more likely to have full-time jobs after a year, possibly because the guaranteed income gave them the freedom to take time from part-time gigs to hunt for work. And, no, they didn’t spend the extra money on frivolities.
In his Bloomberg News interview, Garcetti touted those results, which garnered headlines at the time and made former Stockton Mayor Michael D. Tubbs a political celebrity. “Everybody said: ‘You give people money, they’re going to buy even bigger TVs,” he said. “Stockton showed that’s just not true. Low-income Americans know what to do with additional resources to build health and wealth, but too many of them are caught in the cycle of poverty.”
But the Stockton results didn’t surprise social scientists who’ve kept up with decades of research on what happens when people get unrestricted cash, whether through government programs, inheritances, lotteries or other sources.
“There’s often this idea that everyone is going to quit their jobs, and everyone is going to use drugs and alcohol and cigarettes,” says economic sociologist Stephen Nuñez, the lead researcher on guaranteed income policy at the Jain Family Institute. “That’s just not true, and you don’t need more studies to show that.”
New York City Experiment Will Give Cash Payments To Homeless Young Adults
The project joins a growing list of local experiments in no-strings-attached payments to residents.
New York will become the latest U.S. city to start a pilot giving out monthly cash payments to residents, joining a growing number of others this year that are trying out guaranteed income experiments. But the city’s program is particularly small and focused, giving monthly payments of $1,250 to up to just 40 unhoused people between 18 and 24.
The “Trust Youth Initiative” is targeted at a population with distinct policy needs, and designed with their input, in an attempt to test whether cash improves their housing outcomes.
Counts of homelessness among young people in the U.S. vary dramatically, from 36,000 people under the age of 25, according to a 2018 Department of Housing and Urban Development count, to 3.5 million youths according to a 2017 study by Chapin Hall, a policy research center at the University of Chicago.
That’s partly because youth homelessness “exists in much more hidden forms,” with many choosing to crash with friends instead of living on the streets, or moving in and out of family homes due to rejection or loss, said Matthew Morton, a research fellow at Chapin Hall and the principal investigator on the forthcoming cash transfer study.
Chapin Hall is co-leading the pilot with the city of New York and Point Source Youth, a homelessness advocacy organization.
There’s little research on how to prevent or reduce homelessness among young adults, and the existing systems aren’t doing enough to address long-term housing needs, says Morton. That’s where the pilot comes in.
New York City has a right to shelter policy and the city has expanded programming for youth crisis services, but these facilities aren’t designed to be pathways to permanent housing. Long-term stable housing and homelessness prevention are the areas in need of improvement, says Cole Giannone, senior advisor for Youth Homelessness at the NYC Office of the deputy mayor for Health & Human Services.
“Young people have always said, ‘I might need shelter right now, but shelter is not all I need.’ So what else?” Giannone said. “These young people don’t have generational wealth to fall back on when they’re experiencing homelessness. Sometimes the answer is, it could just be cash.”
Youth who are homeless are also much more likely to be Black and brown and LGBTQ than older counterparts; Chapin Hall found that 95% of youth who are homeless in NYC are people of color.
Participants in the new program are set to be enrolled starting late fall and will receive payments for 24 months. The amount of money individuals will get each month, $1,250, is tied to the cost of living in shared housing in New York City. And recipients will have flexibility in how they’re paid: They can access the cash at the beginning of the month or every two weeks, or get a three-month lump sum to cover larger costs — like moving expenses and a deposit — upfront. Additional supportive services, like job training and mentorship, are optional and available, too.
“Youth are experts on their own lives,” said Larry Cohen, the executive director of Point Source Youth, who echoed a mantra that has been used in the AIDS awareness campaign and in disability activism: “nothing about us without us.”
“There’s a tremendous amount of money spent on the youth homelessness crisis,” Cohen said — it costs $130.63 per day per individual to run an NYC shelter. “If that money was placed in the hands of young people, we’re excited to show better outcomes.”
The project will cost $2.5 million, with $300,000 coming from the NYC Mayor’s Office for Economic Opportunity, $205,000 from the city’s privately-donated Covid fund, and the rest from a network of nonprofits and organizations.
This hybrid of public and private funding is similar to the approach of pilots launched in other cities this year, several of which are also targeting their cash payment experiments to specific populations, like Black mothers and low-income families with children.
NYC’s pilot will also include a control group of 30 to 40 young people, who will be compensated for their participation in surveys but won’t receive payments. The organizers hope the outcomes will inform future phases of the program that could expand to include more unhoused young people, including in other cities.
Andrew Yang Hopes To Ride His Free-Money Plan To NYC’s City Hall
Yang wants to launch the largest basic income program in history. But would it work?
When Andrew Yang said he was running for mayor of New York City in January, people were thrilled. This spring he’d do something like deliver a speech outside a Brooklyn catering company, and a passing jogger would see him, stop, and jog in place for half an hour just to listen to him talk.
He’d be outside a food hall in Hell’s Kitchen when a young woman would approach him and, her voice shaking with nervousness, ask him to sign the back of her cellphone case. On a subway platform, a teenage girl squealed when she saw him, then apologized for being too young to vote.
“Andrew Yang is pretty sick,” Alex Arce, 20, a student at New York University, told me in April. Arce and a friend had happened upon Yang as he stood outside a boarded‑up restaurant in Manhattan’s East Village and called for a full reopening of New York’s bars.
“We need commonsense regulations!” Yang was saying. “I don’t know about you, but I miss sitting next to people in bars!” At the time, less than a third of the city had been fully vaccinated.
I asked Arce why he liked him.
“I don’t know, he’s just a cool guy,” he said.
What about his policies, anything that he stood for?
Arce thought a minute. “The universal income thing?” he finally offered. “That’s pretty great.”
For someone who has never held government office and has campaigned only once before, when he ran for president in 2019, Yang is extraordinarily adept at getting people to like him. Early this year he was bumping elbows with strangers and leaning in close for photos—which may explain how he contracted Covid-19 in February, just weeks into his campaign.
When the weather was still cold he wore the same thing wherever he went: dark overcoat, blue and orange Mets scarf, and a black face mask with “Yang” printed in big white letters, a sort of Where’s Waldo approach to getting his name out there.
It’s the same trick he used while running for president, wearing a lapel pin that said “MATH” to the Democratic debates and tying himself to one signature idea: that every American should get a basic income of $12,000 from the government, no strings attached.
Yang dropped out of the presidential race in February 2020, but more than a year later, 85% of New Yorkers still knew who he was and what he stood for.
“I love it! Basic income! Stimulus checks!” said Glen Kelly, outside the Mets’ Citi Field, where Yang was meeting fans before the first home game of the season.
“That income idea,” echoed Ramon Guadalupe, a few days later, when he ran into Yang at the reopening of Coney Island. “I like that he’s for regular people.”
The irony is that under a Yang mayorship, most New Yorkers wouldn’t actually get any money.
The concept that made Yang famous, the thing people love him for, isn’t something he’s proposing for New York. He can’t—the city couldn’t afford it. Instead, he’s running on “ cash relief,” a payment one-sixth the size of his presidential proposal, targeting only the poorest 6% of New Yorkers.
“I want to be the antipoverty mayor,” Yang told me. “I’m very excited about it.” He led in the polls for months after he entered the race, and although he’s recently been slipping, he could still win the Democratic primary on June 22 under the city’s new ranked-choice voting system.
If he does—and presumably goes on to win the general election in the heavily Democratic city—his plan would, as his campaign flyers proudly proclaim, make New York City the site of “the largest basic income program in history.”
The Question Is, Would It Be Enough?
Andrew Yang is easy to talk to. There’s something familiar about him, something that makes people want to be his friend. When he speaks, his remarks come peppered with bursts of self-conscious laughter, a sort of guttural huh-huh-huh that erupts whenever he says something too personal or serious or that he thinks the other person might not like.
In the two months I followed him around New York, he was almost always in a good mood—“Tell me more! Tell me more!” he once giddily exclaimed as a grocer in Queens explained the difference between city and state dining regulations—except for a few times when it was very obvious he was not.
Yang grew up a slightly nerdy kid, the son of Taiwanese immigrants, in mostly White suburban neighborhoods in Schenectady and Westchester County. He played Dungeons & Dragons and Atari and did well enough in school to both skip a grade and get a scholarship to the prestigious Phillips Exeter Academy.
From there it was on to Brown University, Columbia Law School, then the corporate law firm Davis Polk & Wardwell, where it took only a few months for Yang to discover he didn’t want to be a lawyer after all. “They’d sit you at a desk and say, ‘Here are a bunch of documents. Go,’ ” Yang says. “I said, ‘OK, that is not what I want.’ ”
He was looking for something else to do when a friend he’d made at the firm, Jonathan Philips, came to him with an idea: What if, instead of wasting money on black-tie galas, a charity could hold an online auction for almost nothing, freeing it up to put more money toward its actual cause?
“Andrew immediately perked up,” Philips says. “I remember his eyes just lit up. He’s a problem solver, and he very much wanted to solve this problem.” The two men quit their jobs and launched a company, Stargiving, an online platform for auctioning off celebrity meet-and-greets.
It didn’t work. For one thing, they didn’t know any celebrities. Also, the first dot-com bubble had just burst. “It failed miserably,” Yang says. “I will never forget how that felt.”
He spent the next few years hopping between jobs. He was in his early 20s and had $100,000 in student loan debt. He couldn’t afford rent in New York, so he slept on friends’ couches and ate a lot of free bread samples at the sandwich chain Così. For extra money he became the first instructor at a small GMAT test-prep company called Manhattan Prep.
Yang got the job because he knew Manhattan Prep’s founder, Zeke Vanderhoek. In 2006, Vanderhoek left to start a charter school; he asked Yang to replace him as chief executive officer. Soon after that, Yang met his wife, Evelyn.
“Things really clicked into place for a number of years,” he says. “They were, I think, some of the happiest years of my life.” He ran Manhattan Prep for about five years, taking it from $2 million in revenue to more than $17 million. In 2009 he sold the company to Kaplan Inc., a deal that earned him several million dollars, but stayed on as president.
Over time, though, a problem began to nag at him. The Great Recession had just happened, and yet here were all these college kids taking out massive loans for an MBA, even though there wouldn’t be many jobs available when they graduated.
At the same time, Yang was touring colleges across the U.S., visiting parts of the Midwest and South he’d never seen before. He was shocked at how economically depressed the regions were. He wondered if he could figure out a way to get college graduates to work in Middle America, boosting local economies.
Yang left Manhattan Prep in 2011 to start his attempt at a solution: Venture for America, a nonprofit modeled on Teach for America that would place college graduates at startups in cities such as Detroit and New Orleans. VFA fellows, as they were called, would get work experience and maybe go on to found companies of their own.
Yang launched VFA with the ambitious goal of creating 100,000 jobs in smaller U.S. cities by 2025. The nonprofit was immediately popular; Tony Hsieh, the late e-commerce entrepreneur, donated $1 million so VFA could help revitalize his hometown of Las Vegas. President Barack Obama named Yang one of his “Champions of Change” before the first class of VFA fellows had even been placed in their cities.
“The fundamental problem that VFA was trying to solve wasn’t something most people were talking about,” says Ethan Carlson, a former VFA fellow who graduated from Yale and was matched with a tech company in Providence. “By pointing it out and saying, ‘I’ve designed a solution for it,’ it felt very compelling. Of course, the real story is much messier than that.”
VFA never achieved what Yang wanted it to, at least not on the scale he envisioned. The economic forces that had hollowed out the middle of the country were too big, too intractable, to be fixed by plopping a few hundred Ivy League graduates in Cleveland.
Earlier this year the New York Times reported that only 150 people work at companies started by VFA fellows in their original cities. The Yang campaign disputes this figure; it says VFA created 4,000 jobs, though not necessarily in smaller cities. When contacted by Bloomberg Businessweek, Venture for America said it no longer tracks job creation as a metric of its success.
VFA’s shortcomings bothered Yang. In 2016 he was driving across northwest Michigan, passing through small towns with boarded-up storefronts, when he stopped at a diner to eat. “I just thought, ‘How am I talking about entrepreneurship?’ ” Yang says. “The scale of need for changes to the economy is so massive, it gave me a sense of how hollowed out communities really were.”
He started reading books about job loss and automation. He fretted about the growing number of working-age adults receiving disability payments in lieu of a job. But it was Raising the Floor, written by Andy Stern, the former head of the Service Employees International Union, that pushed Yang into politics.
In his book, Stern argued that a $12,000 universal basic income could help offset the wage stagnation and job loss so many Americans faced. He called for a “huge public awareness advertising campaign” for the idea and said the best way to do that was for someone to run for president. Yang liked the book so much that he went to hear Stern talk and, when the event was over, asked him to lunch.
“He said, ‘I’m going to make you an honest man. You said someone should run for president in 2020 on basic income, and I’m going to do that,’ ” Stern recalls.
“Andy was like, ‘Who are you again?’ ” Yang says.
The idea behind basic income is simple: People need money to live, so the government should give it to them. Ideally, a thriving economy allows people to prosper on their own. But there are always some who are left behind. A basic income would ensure that everyone could afford food, shelter, and other necessities, no matter what.
The U.S. has never implemented a national basic income program, though it did come close. In 1969, Richard Nixon included what he called a “guaranteed minimum income” of $500 per adult (about $3,600 today) and $300 per child in his Family Assistance Plan; it passed the House of Representatives twice but died in the Senate and never became a law. A few cities launched pilot programs; the largest, in Denver, ran from 1971 to 1982 and involved 4,800 families.
But by the time Ronald Reagan took office in 1980, Washington was looking to curb welfare programs rather than expand them, and the political momentum for a minimum income petered out.
For the next 35 years, it was relegated to a niche idea occasionally floated by academics and policy wonks but rarely taken seriously. “You’d go to these conferences for basic income enthusiasts, and you’d be lucky to get 20 people in a room,” Stern says. “And you’d never see a politician there.”
Then, in 2016, two things happened: Chris Hughes, one of the co-founders of Facebook Inc., created the Economic Security Project with the goal of funding what he calls “guaranteed income” programs, and Michael Tubbs, then the 26-year-old mayor of Stockton, Calif., decided to try it in his city.
Hughes and Tubbs were attracted to the idea as a way to alleviate poverty. Tubbs came to it from a practical standpoint—“I grew up poor, I saw how hard my mom worked and still didn’t have enough money to pay the bills”—while for Hughes it felt more like a moral imperative.
He looked at wage stagnation; the long decline of the middle class; that the U.S. was home to 40% of the world’s millionaires yet still had the highest poverty level of any developed country. “We have the tools and wealth to eradicate poverty in the United States and stabilize much of the middle class in the process,” Hughes says. “I think there is an ethical responsibility to do that.”
In 2017, Stockton became the first U.S. city to announce a basic income program in almost 40 years. Partially funded by Hughes’s Economic Security Project, 125 people were randomly chosen (given a few parameters) to receive $500 a month. Payments didn’t start until 2019. Giving money to people, it turned out, was more complicated than it looked.
Some recipients didn’t have a bank account, so the money was delivered on debit cards. Many of them were already receiving welfare, usually housing vouchers and food stamps, both of which had income limits.
Stockton’s experimenters had to figure out how to give them cash without kicking them off other programs. “The goal wasn’t to remove something they were already receiving,” says Sukhi Samra, director of the Stockton Economic Empowerment Demonstration (SEED). “If you do that, you aren’t benefiting anyone.”
Because the money came on a debit card, researchers could track how it was spent. About half went toward groceries and household supplies. Utilities and auto repairs came next. Then there were little things, small purchases that meant much more than they cost. One parent was able to afford a birthday cake for his child for the first time in years.
The payments also helped people find work. At the start of the program, only 28% of recipients had a full-time job, but by the end of the first year, 40% of them did.
Some people bought suits for interviews. One man had been eligible to get his real estate license for more than a year but couldn’t take the test because he couldn’t afford to miss a shift at his hourly job. With an extra $500, he took—and passed—the test.
The Stockton experiment had just gotten under way when Yang ran for president; not many people knew about it yet. But he wasn’t proposing a supplement to existing welfare programs. He envisioned something that could replace the “vast majority” of welfare altogether.
Yang called his version of basic income the Freedom Dividend because the name polled well with conservatives. (Liberals liked the idea no matter what it was called.) It looked an awful lot like what Stern proposed in Raising the Floor: a monthly payment of $1,000 for every American between the ages of 18 and 64, pegged to rise with inflation.
“It will help lighten up the bureaucracy of the 126 welfare programs we currently administer,” Yang explained in a 2019 interview at LibertyCon, a convention for libertarians. As an example, he said that someone could choose between food stamps and the Freedom Dividend, but he stopped short of saying he wanted to eliminate food stamps completely.
This didn’t make a lot of sense. For one thing, according to a 2013 Cato Institute analysis of the maximum amount of welfare available in the U.S., even Mississippi, the state with the paltriest programs, offered $17,000 in potential benefits. Most poor Mississippians were only getting a fraction of that, of course, but Yang wasn’t necessarily offering a better deal.
On top of that, the program was going to cost $1.3 trillion. Yang’s primary method of financing it was to institute a value-added tax similar to those found in Europe. He was, and remains, vehemently against raising income taxes on the wealthiest Americans.
“I think an income tax is a poor way, an inefficient way, to generate revenue,” Yang told LibertyCon in 2019, explaining that it penalizes people for working hard and earning money.
“Giving people $2,000 or $3,000, you’re not lifting huge numbers of New Yorkers above the poverty line”
But a VAT, like a sales tax, is regressive. Poor people spend almost all of their income on goods and services because they have to, and a VAT would therefore capture a larger portion of their money, which means Yang would essentially be financing the Freedom Dividend by taxing the very people he was trying to help.
Rob Hartley, an assistant professor at Columbia’s School of Social Work, analyzed the Freedom Dividend and found that while it would bump many people above the poverty rate, it actually increased the number of children living in deep poverty, because their families would be getting fewer benefits and would be paying more in taxes to finance the program.
This kind of nuance was hard to parse when Yang was running for president. He got enough donations to make the Democratic debate stages, but as a minor candidate he was rarely given time to talk at length. It was only at places like LibertyCon or on Joe Rogan’s podcast that he had time to elaborate beyond his elevator pitch.
In those venues, he took some unusual positions. He said he wanted to appoint a White House psychologist and turn April 15 into a holiday to “make taxes fun.” At one point he told Rogan that he was most concerned about male unemployment figures because “men deal with joblessness very, very poorly,” whereas “women are more adaptable” and can more easily find work.
“Joe put Andrew into another dimension,” says Brian Yang, one of Yang’s lifelong friends (they’re not related) who worked with him at Stargiving and raised money for his presidential run.
“The day after he went on the podcast, the donations started pouring in.” Yang raised more than $40 million during his campaign, inspired a #YangGang community on Reddit, and at one point had 3% of voters supporting him, which made him a little less popular than Pete Buttigieg but much more appealing than Amy Klobuchar and Kirsten Gillibrand.
Yang dropped out of the presidential race having achieved his goal: to teach Americans about basic income. He quickly formed a nonprofit called Humanity Forward, through which he planned to further advocate for the idea.
“His exposure, his ability to grab people’s attention, his almost single-minded focus on basic income as his major policy proposal took the idea to a completely different level,” Stern says. “A lot of people set the table for basic income. But Andrew served the meal.”
Basic income might have faded into the background again, Yang’s candidacy relegated to a Trivial Pursuit question, if it weren’t for the Covid pandemic. The first lockdown orders came less than a month after he ended his presidential campaign.
Huge sectors of the economy were shuttered overnight, pushing millions of Americans out of work. And New York City wasn’t just hit hard—it was gutted. More than 20,000 New Yorkers died from Covid that spring, so overwhelming hospitals that they ran out of places to store the bodies.
The number of payroll jobs in the city dropped almost 14% last year, more than twice the national decline, according to a study by the New School Center for New York City Affairs. Nearly 70% of the newly unemployed were people of color, and two-thirds of them were making less than $40,000 a year.
Affluent New Yorkers fared better, of course, but many of them did it somewhere else: More than 330,000 people fled the city during the pandemic. Yang was one of them, moving his family from their Manhattan apartment to their second home outside the city. (“Can you imagine trying to have two kids on virtual school in a two-bedroom apartment, and then trying to do work yourself?” he later asked, essentially describing the living conditions of millions of New Yorkers.)
But he hadn’t given up on basic income—or politics. He stumped for Democratic candidates in Georgia. His nonprofit, Humanity Forward, repositioned itself as a Covid-relief organization, donating $1 million to 1,000 families in the Bronx and lobbying Congress on cash relief for Americans.
Yang doesn’t take credit for the three rounds of stimulus checks Congress ultimately approved, but he does consider it an extension of his original idea. “We’re essentially running a very, very large trial” for basic income, he says, pointing out that while the checks aren’t likely to continue past the pandemic, they are a rare example of the U.S. government giving people cash simply because they needed it.
Yang is cagey about why he decided to run for mayor. New York magazine reported that Bradley Tusk, who ran Michael Bloomberg’s 2009 mayoral campaign and is now a venture capitalist and a political strategist for clients such as AT&T Inc. and Uber Technologies Inc., had been casting about for a candidate who’d be amenable to his business interests and landed on Yang after his first choice fell through.
(Michael Bloomberg is the owner of Bloomberg Businessweek’s parent company.) Yang puts it slightly differently. “My team talked to the Tusk team, and then we did an evaluation and figured out what the process would look like and a bunch of other things,” he says, an answer so vague it’s almost nonsensical. Either way, by January he’d returned to the city and announced his candidacy. Tusk Strategies would run his campaign.
Things got goofy almost immediately. Policies touted on his campaign website included luring TikTok stars to the city by letting them live in “hype houses” and throwing “The Biggest Post-Covid Party in the World.” When he delivered the necessary signatures to the Board of Elections to officially get on the ballot, he broke into a song from Rent.
At the beginning, the silliness paid off. “He’s very upbeat and positive, I think that’s resonating with voters,” says Christine Quinn, who ran for mayor in the 2013 Democratic primary but lost to Bill de Blasio. “It’s been such a dark time, I think people want to know things are going to get better.”
Yang knew people saw him as the basic income guy. He also knew that in New York, basic income wouldn’t work.
“My first thoughts were, ‘OK, we can’t do the Freedom Dividend,’ ” he says. Most cities and states are required by law to balance their budgets—something the federal government doesn’t have to do—and the Freedom Dividend would cost more than New York’s entire budget. “So what can we do instead? What’s a realistic commitment?”
He tasked Sasha Ahuja, a social worker and progressive activist who’d joined his campaign as co-manager, and another staff member, Jesse Horwitz, with crafting his official proposal.
They settled on $1 billion, about one-tenth of New York’s projected 2022 budget. If they divided it up into average payments of $2,000, they could reach about half a million New Yorkers. Their goal is to bump “every New Yorker up to within 50%” of the city’s poverty threshold, Horwitz says. Homeless people, undocumented residents, and the formerly incarcerated would all qualify.
Getting money to people in these groups isn’t easy, though. Many of them don’t have bank accounts; Stockton got around this with debit cards, but Yang wanted to create what he called the People’s Bank, a city-run system through which New Yorkers could use a municipal ID card to open an account and access their payments.
And how would the city find the 500,000 recipients? Ahuja says they’d work with agencies such as the Human Resources Administration, which administers many existing programs, to figure out who gets money and how much. But that’s about as specific as she can get.
Then there was the question of how the money would interact with other welfare programs. “I only talked to them once, and it was to reemphasize to them that this has to be supplemental to existing benefits,” says Samra, who designed Stockton’s experiment.
They took her advice; Yang’s cash-relief proposal will supplement state and federal welfare. This is a major ideological shift from his original Freedom Dividend, but Yang insists it isn’t a big deal to him.
“I know that people took me as being very anti-helping-people with the current safety nets, but really I’m anti-bureaucracy more than anything else,” he says. “I think targeted cash relief to alleviate extreme poverty is great! I’m very excited about it.”
Once Yang and his team settled on a plan, they had to figure out how to fund it. This is where things get hazy. Yang says some of the money will come from private donations, but he won’t say how much or from whom. “I’ve talked to various individuals and philanthropists that led me to believe that we could have more resources,” he says. The $1 billion figure is just what he expects the city to pay.
New York is home to 112 billionaires and an additional 7,700 people who have at least $30 million, but Yang still eschews raising income taxes, which for millionaires are already the highest in the country; a hike would require the state government anyway. Instead he’d target vacant commercial property, which is currently taxed below its assessed value.
Early in his candidacy he also suggested that the city raise money by putting a casino on Governors Island—that is, until he learned it was prohibited by a federal deed. Then he floated the idea of eliminating tax breaks offered to places like Madison Square Garden, though, again, the state is in charge of that.
Yang assured me he could find $1 billion somewhere. “Am I confident that I’m going to find all sorts of things in the budget where I’m like, ‘I could get rid of this and no one would notice?’ ” he asks. “Like spending $3 million on a city bathroom when you could get the same bathroom for $1 million?”
He estimates it will take as long as two years before his cash-relief program is up and running, mostly because he has to create the People’s Bank first. So it will be a while before anyone benefits.
And while 500,000 recipients sounds like a lot, that’s still less than 6% of New Yorkers. By the city’s own estimate it entered the pandemic with 41% of its population at risk of falling into poverty—and that was considered a good thing, because the figure used to be even higher.
To reach 500,000 people, Yang’s offerings have to be relatively small. An average payment of $2,000 a year works out to just $167 a month. That’s a third of what residents got in Stockton. In a city with one of the highest costs of living in the country, $2,000 is practically nothing. Yang’s cash-relief plan is essentially offering the equivalent of a monthly MetroCard for the subway plus an extra $40.
Hartley, the Columbia professor, points out that the people Yang is targeting have so little money that even a seemingly negligible amount can improve their lives. “For some people it doubles their disposable income. That’s substantial.
That means something,” he says. A recent analysis of Census Bureau studies showed that the federal stimulus checks, which provided as much as $3,200 per person, helped people buy food and pay their bills during the pandemic, reflecting just how close to the bone millions of Americans live.
Surprisingly, New York has tried something similar before. In 2007 the city launched what it called a “cash transfer” pilot program for 4,800 low-income families, who received about $2,900 a year for three years. It wasn’t a basic income, because the cash was conditional; parents had to “earn” money by participating in job-training programs, for example.
“In hindsight it was a huge headache,” says Kristin Morse, then the executive director of the NYC Center for Economic Opportunity, which oversaw the program. “But families did earn the money. They spent it on food and rent and electric bills. In that sense it was a success. But giving people $2,000 or $3,000, you’re not lifting huge numbers of New Yorkers above the poverty line.”
This is the harsh reality of basic income. Giving money to people who need it really does work, but to do it on a grand scale is almost prohibitively expensive, especially for a city. “No city in the United States can afford a guaranteed income for its residents without support from other levels of government,” says the Economic Security Project’s Hughes.
“Even with the fuzziest of fuzzy math, it still requires an economic investment at the state or federal level. I think it would be better for people if we’re clear about that.”
That’s not to say a cash-relief program isn’t worthwhile, or that it wouldn’t work, just that the vast majority of New Yorkers won’t notice its effect. Just as Venture for America was a noble but ineffectual answer to a struggling Middle America, so is cash relief a small gesture, one that gnaws away at the edges of poverty but doesn’t come close to solving the deep, intractable inequities that cause it to endure.
Yang knows this. “Is a billion dollars enough? No,” he admits. His cash-relief program needs to operate in tandem with other efforts.
That’s why he wants to equip homeless shelters with broadband internet so the children in them can do better in school; expand mental health services and inpatient psychiatric beds to reduce street homelessness; and give a $1,000 annual voucher to families with children who are living in poverty, are English language learners, or have a disability that requires specialized instruction.
But these are all small programs, one-off ideas that are unlikely to be enough, and Yang seems reluctant to make the kind of sweeping changes necessary to really be the “anti-poverty candidate,” as he calls himself. New York’s public school system is one of the most racially segregated in the country and serves 100,000 kids who are homeless.
Although the city uses a weighted model that drives more money to schools with lots of low-income students, most of them aren’t fully funded according to what the formula says they deserve. But Yang rarely talks about desegregation. “An extra $1,000 is important and good,” Morse says, “but if families aren’t getting their kids’ needs addressed by the public education system, $1,000 isn’t going to fix it.”
Basic income has a life beyond Andrew Yang. Tubbs is no longer mayor of Stockton, but before he left office he created Mayors for a Guaranteed Income, a coalition of leaders interested in re-creating Stockton’s experiment in their own cities. Samra is now director of MGI, helping municipalities design their own programs.
“We’re doing this to feed into one comprehensive agenda to make the case why this should be policy at the federal level,” Samra says. “It’s expensive, but budgets are just lists of a government’s priorities. If you can’t make a financial commitment to the most vulnerable communities, that’s a moral problem. Not an economic one.”
In fact, the idea is so popular that some of Yang’s opponents have proposals of their own. His rival, Brooklyn Borough President Eric Adams, wants to do it through the earned income tax credit, raising the city’s contribution in a plan that he says would cover 900,000 New Yorkers and get them $3,000 a year.
Kathryn Garcia, the former head of the city’s sanitation department, proposes free day care for babies and toddlers whose parents make less than $70,000 a year. That’s certainly not basic income. But private day care costs close to $2,000 a month in New York; she’d be saving even some middle-class parents more than $10,000 a year.
Garcia’s campaign is the polar opposite of Yang’s. She can be awkward and stilted in speeches; she’s never been, and probably never will be, a Reddit meme. But she knows what levers to pull to make the city’s slow, bureaucratic machine come to life. Yang admires her so much that he said he wanted to hire her, until she began to eclipse him in polls.
Yang is not an expert on the mechanics of how the city operates, and as the mayoral campaign has intensified, he’s increasingly seemed out of his depth. Speaking at a virtual forum dedicated to homelessness in May, he suggested the city should create shelters for victims of domestic violence, prompting the event’s moderator to point out that they already exist.
At a press conference he’d called to discuss police reform, he appeared unfamiliar with a recently repealed law that had shielded officers’ disciplinary records from public view.
Maybe Yang was just having an off day at the homelessness forum. Maybe his mind went blank when asked about the records law. Mistakes happen. But that doesn’t explain the press conference he held in late May outside the headquarters of the Metropolitan Transportation Authority, which oversees New York’s subway, bus, and regional rail systems. Yang announced that as mayor he’d wrest control of the MTA away from the state, but he couldn’t articulate how.
“The plan is to take the case to Albany and the people of New York,” he said. “The plan is to ask for mayoral control.” The MTA is a complex network of different transportation systems that collectively employ 75,000 workers and have an operating budget of $17 billion. It’s also one of the largest issuers of municipal debt in the country.
When pressed for more specifics, Yang deferred to his policy adviser, who said details weren’t important. “It doesn’t make a lot of sense to ask Andrew Yang or me or anybody else out here exactly how they’re going to unwind the financing structure,” said Jamie Rubin, the former director of operations for New York state.
When the press conference ended, Yang looked deflated. He knew it hadn’t gone well. Hecklers had started to disrupt some of his events; a few days after the MTA debacle, I’d witness a woman call him names as he tried to eat his lunch.
Yang came in fourth in one June poll, behind Adams, Garcia, and progressive civil rights attorney Maya Wiley. But the city’s new ranked-choice voting system—in which the least popular candidates are eliminated and their votes reallocated to supporters’ second-choice candidates—means that if enough New Yorkers pick him second, he could win. Not because of anything he promises to do or not do as mayor, but because of what he represents.
“I met him a couple years ago when he was running for president. He really impressed me,” Jenny Kam, one of the NYU students I met back in April, told me. She liked Yang’s cash-relief plan fine, she said, but disagreed with a lot of his other positions, and as an Asian-American woman she was unimpressed by his plan to combat the rise in hate crimes with yet another police task force.
But she still liked him. He seemed honest and kind, and you couldn’t say that about most politicians. “I think he could be something really great,” she said. “Or he could turn into something disastrous.”
There was only one way to find out.
What A National Guaranteed Income Could Look Like
A new proposal pitches expanding the earned income tax credit in the U.S. to take monthly cash payments national.
Over the last year, a wave of new “guaranteed income” programs has emerged that experiment with providing people no-strings-attached cash every month. The general goal is to lift people out of poverty, but many of these programs also function to eliminate the income gap between white and non-white families.
While these localized projects are already showing signs of promise, they only cover a small fraction of the people in need. The ultimate goal for proponents of such pilots is to build toward a comprehensive federal guaranteed income program that could fill these gaps. But what would that look like?
A proposal for a new federal guaranteed income program published by the New School’s Institute on Race and Political Economy, and funded by the advocacy organization Economic Security Project, offers one potential path. The experts propose modifying the U.S. tax code to expand the existing earned income tax credit program.
This change would mean including people who are not earning an income at all, and who are so low on the income scale that they are not currently eligible for the funds.
Essentially, it would be a negative income tax, which would refund every adult making less than the national median household income with a sum of up to $12,500 a year, calculated on a sliding scale based on earnings. It would also provide families up to an additional $4,500 per child. All told, researchers estimate the program would cost roughly $876 billion annually.
In tandem with other guaranteed income projects, such as an expanded child tax credit or baby bonds, this could bring Black and Latino families substantially closer to financial parity with white families.
“People are beginning to realize that for people to have real agency in their lives, to really be self-determining in their lives, they need resources,” said Darrick Hamilton, a co-author of the plan, an economist and the founding director of the Institute on Race and Political Economy at the New School. “And that’s what this program is about. It’s a recognition that poverty is rooted not in deficient attitudes, behaviors and norms. But rather, poverty is rooted in deficient resources. And this aims to empower people.”
To those who might argue that the federal government is not set up for such an expansive program: The feds showed they were capable when they sent two rounds of stimulus checks to every American family for Covid-related relief. This month, the federal government will begin paying families $300 a month through an upfront refund of the child tax credit, which is expected to last for six months, though advocates hope to extend it.
For years, the dream of a national basic income has been deemed too radical or just impossible. A Pew study conducted in 2020 showed that a slim majority of people opposed offering a federal guaranteed income for all adults. But new polling shows that the idea of monthly cash transfers, at least for the lowest income, is gaining traction with the public.
In a poll released Thursday of 1,137 likely voters by Data for Progress and Mayors for a Guaranteed Income, 55% of people said they would support universal payments of $500 to $1,000 per month. That support is still divided across familiar lines: Three quarters of polled Democrats say they’d support this kind of program, while only 31% of Republicans would.
However, the majority of likely voters in all parties believed in the overarching ability of such a policy to help them prepare for financial emergencies. Black and Latino respondents were more enthusiastic about a guaranteed income than white respondents.
“The results speak to the fact that the pendulum has swung,” said Michael Tubbs, the founder of the Mayors for a Guaranteed Income coalition and the former mayor of Stockton, California. He said when he first started the pilot program in Stockton in 2017, “it was seen as radical to think that folks deserve a guaranteed income. Fast forward to 2021, now it’s a very mainstream position. The majority of voters agree.”
“Despite all the rhetoric of, ‘what’s good for the corporate sector would trickle down to us all in a way that lifts all boats,’ that empirically has not happened.”
Researchers behind the Guaranteed Income for the 21st Century proposal estimate that it could elevate the nearly 14 million U.S. households who lived in poverty before the pandemic above the federal poverty line. It claims even more profound effects on Black households, which are disproportionately represented under the poverty line.
“We know that poverty is not race-neutral. We know that employment interactions are not race-neutral,” said Hamilton. By structuring the tax to benefit those with the fewest resources, it “will have heroic effects on addressing some racial inequities,” he said. “We know that there are dramatically disproportionate shares of Black and white people in poverty, particularly Black children. So what this does is say, well, we’re going to eliminate it in its entirety.”
A negative income tax has been proposed in the past, most famously by conservative economist Milton Friedman during the Nixon administration. “A negative income tax has always been something supported by both sides of the political spectrum,” said William Lee, the chief economist for the Milken Institute.
“The way it’s often proposed that gets the broadest support is to say we need a complete replacement of the existing benefits program in the U.S. with a basic minimum level of income.”
That’s where this proposal diverges from past iterations: It wouldn’t be a replacement of other elements of the social safety net, or an answer to calls for reparations or universal health insurance. Instead, it would flip the existing tax code — which is designed for “poverty maintenance, rather than income mobility, or income maintenance, rather than income mobility,” Hamilton says. Because the plan is linked to the median income of the country, indexing such support structurally would mean that “in perpetuity, we are trending families towards the middle class.”
Other economists have proposed strengthening other welfare programs, like the child tax credit, or Social Security; or paying for monthly checks from other sources, like closing capital gains tax loopholes or introducing new taxes on carbon. But having a plan like this to present to legislators in Congress will be helpful for the broader mission of implementing national policies, says Tubbs.
“The mayors, we’re not economists, we are pragmatic political leaders trying to serve our constituents,” he said. “And we are all through the moon and excited by the proposal by Dr. Hamilton because it speaks to what we know is possible — that there’s a way to structure this.”
Basic, Not Universal
There’s one thing this national basic income plan isn’t: what’s come to be known as “universal basic income.”
The original idea of UBI is that everyone in the U.S. would receive a monthly cash payment from the government. The concept’s universality has been heralded for its potential to fight stigmas that have become associated with welfare programs in the U.S. But the structure of a universal program could actually be inequality-enhancing, Hamilton says.
“If you give a wealthy person an income, a smaller share of their income goes towards consumption, so they end up saving it and promoting wealth inequality,” he said. “Whereas by definition, those that are at the low end will consume it.”
It could also have inflationary effects, he added.
Enter the concept of a “guaranteed income,” which hews more closely to the ideals set out by Martin Luther King, Jr., Shirley Chisholm, and the Black Panthers — Civil Rights-era leaders who viewed economic redistribution as a tool for fighting racial inequities. It’s targeted, not indiscriminate, and has clear goals in narrowing income gaps for the lowest earners.
One of the biggest critiques of any such broad cash transfer program — and one of the barriers to its implementation so far — has been the fear that it will distort other incentives for individuals to enter and stay in the labor force. “The big drawback of negative income is if you give people enough money, they’re not going to want to work,” said the Milken Institute’s Lee.
Some of the early results from city-level guaranteed income studies in Stockton, California, and Jackson, Mississippi, have shown that the extra cash — $500 and $1,000 a month, respectively — didn’t lead to sustained unemployment, instead resulting in better health, less anxiety and even more employment opportunities.
Research found that the stimulus checks sent out as part of December’s Covid relief bill and March’s American Rescue Plan substantially eased food insecurity and mental distress, especially among the poorest recipients — but the payments and enhanced unemployment benefits have since proven divisive.
It’s been a challenge for some businesses to hire unemployed workers, a dynamic that some critics have attributed to safety-net payments. Rather than a reflection of a labor shortage, however, economists say it shows people are holding out for better wages and conditions in a Covid-transformed country.
To those who fear that such a transformative restructuring of how the country thinks about income will change the way capitalism works forever, Hamilton says: good.
“Despite all the rhetoric of, ‘what’s good for the corporate sector would trickle down to us all in a way that lifts all boats,’ that empirically has not happened,” he said. “The fact that the program puts pressure on the corporate sector so that they can’t exploit and extract from workers with low wages, because of the threat of being destitute and unemployment — that is exactly what government should be doing.”
Baby Bonds For Wealth
A basic income is geared at poverty and income inequality. But what about wealth? Nestled in the proposal is a call for a federal baby bonds program, where the Treasury would deposit a sum between $2,000 and $50,000 into a bank account for every U.S. child. That money couldn’t be touched until the child turned 18 years old, which they could then withdraw with interest accumulated.
The proposal comes from City University of New York professor Naomi Zewde, Hamilton’s co-author on the guaranteed income paper. In 2018, Zewde’s research found that if the U.S. had instituted a baby bonds program in the mid-1990s, it would have dramatically narrowed the Black-white wealth gap today.
In 2015, the median net worth of white Americans was nearly 16 times greater than the Black median net worth. Had the baby bonds program been put in place, the median net worth for young white adults would have only been 1.4 times greater.
The state of Connecticut is giving the baby bonds plan a run: In June, it passed a program to deposit $3,200 in an account for every baby born to a family participating in the Medicaid program.
When these babies turn 18, they could withdraw an estimated sum of nearly $11,000 due to interest accrual, which by law they will only be able to use for college, buying a house or opening a business. Zewde’s research was cited in passing the legislation.
While that state program is earmarked for low-income families, Zewde’s would be nationwide and go to every family, though the deposit would be tiered so the poorest families would get the maximum amount while the wealthiest families would get the minimum. For baby bonds to really be effective for low-income families, though, Zewde says they need to be paired with something like a guaranteed income.
“The guaranteed income is just more about [addressing] the trauma that comes out of poverty, and just giving people a little bit of breathing room to just make ends meet,” says Zewde. “If you don’t have those basic needs covered, and then you get a lump sum from something like baby bonds, then you might not be able to use it to really change your life. If [baby bonds] just have to go to paying the rent you can end up depleting it.”
Minneapolis Joins Guaranteed Income Experiment Using Federal Aid
About 200 families will get as much as $500 a month for two years in the latest city program to test unrestricted cash payments.
Minneapolis is joining a slew of cities across the country testing out guaranteed income as a way to ease the disproportionate economic effects of the Covid-19 pandemic.
The Minneapolis City Council approved a $3 million guaranteed basic income pilot program this month as part of the city’s plans to spend its share of the federal American Rescue Plan funds. About 200 families will get as much as $500 a month for two years, with no restrictions on how they can spend it. The guaranteed basic income (GBI) program seeks to address a widening wealth gap in the wake of the economic fallout from Covid-19.
“The pandemic exacerbated disparities between white people and people of color in educational attainment rates, wages earned, and unemployment or underemployment in Minneapolis,” Mayor Jacob Frey said in an emailed statement. “Addressing these disparities with a GBI program like this would help stabilize Black families and provide for opportunities to grow generational wealth.”
Minneapolis plans to spend its $271 million portion of the $350 billion in federal aid for states and local governments in two phases. The measures passed on July 2 allocate more than $100 million to projects focused on addressing housing and business instability.
To qualify for the city’s pilot program, participants must be Minneapolis residents and have a household income that is 50% or less than the city’s median income, which is $104,900 for a family of four in 2021. Families facing housing insecurity due to high rent or mortgage burdens will be given priority, along with those in job training or educational programs that may drop out because of financial hardship, and households headed by young people, according to council documents.
Minneapolis based the proposal off of data coming out of other cities, according to Frey. Similar programs have been launched in cities like St. Paul, Minnesota; Long Beach, California; and even a smaller one in New York City. These programs have been bolstered by organizations like Mayors for a Guaranteed Income, a coalition of 56 mayors that advocate for federal guaranteed income.
“Whether it’s food, housing, fixing your car or assistance with childcare, people are best equipped to utilize resources made available to them and that’s exactly what this program is all about — trusting people to make the best decisions for them in their time of need,” Frey said.
The city will work with organizations that can place households into the program and then act as a resource for them through the two years to help make and meet individualized financial goals. Data on employment status, household income, and demographic information will be collected from participants before, during and after the pilot to determine its success, according to the council documents.
“We are still providing targeted funds like emergency rental assistance and small business support but the flexibility of direct payments shows great promise and I expect we will learn a lot from this pilot,” City Council President Lisa Bender said in a statement.
Will New Mexico Prove A Universal Basic Income Can Work?
A statewide “stability stipend” under consideration there would provide the perfect laboratory to test the pros and cons of government cash benefits.
Americans are talking again about the possibility of some form of universal basic income. In the past, talk has died down with little action, but this time the idea might have legs. Individual states make a perfect laboratory for experimenting with basic income — and New Mexico could lead the way.
New Mexico’s government is considering giving everyone in the state a so-called “stability stipend.” The amount hasn’t been decided, but $400 is a number being thrown around, since that’s the amount that some Santa Fe, New Mexico, residents are getting in a pilot program in that city.
The price tag for the whole state would be $800 million — about 11% of New Mexico’s current annual budget. If the state goes forward with the plan, it will be a landmark experiment that could eventually lead to the transformation of the entire U.S. welfare system.
The idea of a guaranteed basic income has a long history, but different people have supported it for different reasons. Some, like pamphleteer Thomas Paine, saw it as a recognition of social equality. Others, like Martin Luther King Jr., Richard Nixon and George McGovern, saw it as a way to alleviate poverty. In recent years, some figures from the technology industry and elsewhere have suggested cash payments to citizens as an insurance policy against the possibility of mass unemployment due to automation.
This multiplicity of justifications might have made a universal basic income seem like a solution in search of a problem. Without a clear idea of why it should exist, it was more difficult to justify the inevitably large price tag — and some conceptions of a basic income would carry a very large price indeed.
If a basic income was designed as a full substitute for a job, it would have to be budget-bustingly enormous. Also, if the payments were substantial enough to replace a low-wage job, it seems likely that many people would stop working, lowering national productivity.
Recently, supporters have been converging on a more modest goal for a basic income — not as a replacement for a job, but as a way of providing a bit of extra money to help ease all the bumps and risks of our financial lives. For poor people, the ability to make car repairs, pay parking tickets or cover an emergency medical expense can be a lifesaver, but even for the middle class, having a few hundred extra dollars a month can make life a lot easier.
Basic income experiments like the one in Stockton, California (on which Santa Fe’s experiment is modeled) have achieved promising results with modest monthly sums. Most encouragingly, recipients worked more rather than less, consistent with the idea that a modest stipend represents a hand up instead of just a handout; extra monthly cash gave them the time and mental space to focus on long-term self-betterment.
A few hundred extra dollars a month is also unlikely to hurt labor supply; something that’s borne out by economic evidence. And while still somewhat expensive, it’s at least within the realm of fiscal possibility.
States are the perfect place to try out this new, scaled-down basic income. Unlike cities, they have the money to carry out these experiments at a truly universal level; Stockton or Santa Fe can hand out money to a few people, with the help of private foundations, but states have far deeper pockets.
On the other hand, states generally have balanced budget amendments that prevent them from funding the programs with debt. That’s important, because essentially everyone believes that a federal basic income would have to be funded by taxes in the long run. States are good political laboratories for testing the public’s tolerance for paying the taxes that would be needed to sustain a cash benefit over a period of years.
Crucially, carrying out such stipend experiments at the state level will allow researchers to get a better feel for any downsides. Opponents are going to worry that even a small basic income will reduce work participation or productivity. But by comparing counties within states that offer a stipend with similar nearby counties in non-stipend states, economists will be able to get a very good idea of the program’s impact on local labor markets.
If New Mexico ultimately decides not to go through with the plan, other states should try it. Then, if a universal basic income is shown to have unambiguously positive results at the state level, it can more easily be scaled up to a national program. This is too important of an idea to leave it untested yet again.
Missouri Mayor Suggests Giving Residents Up To $1K In Bitcoin
Jayson Stewart hinted Cool Valley residents could be required to HODL the funds for five years.
The mayor of Cool Valley, Missouri said he was exploring giving more than $1 million in Bitcoin (BTC) to the city’s 1,500 residents.
In a Thursday interview with St. Louis news outlet KSDK, Mayor Jayson Stewart said he wanted to see “every single household in my city receive some level of Bitcoin.” Stewart said the funds would likely come from some “very supportive donors” but did not rule out using money from the government’s pandemic relief response to launch the venture.
The mayor did not specify how much Bitcoin the city would be able to distribute to each resident but suggested it could be any amount up to $1,000 — roughly $1.5 million — more than 30 BTC at the time of publication. However, he also hinted the funds could require Cool Valley residents to HODL for five years.
“My number one concern is that someone just sells their Bitcoin to pay their car note, and then when Bitcoin is sitting at like $500,000 all these years later, they’re going to really regret that,” said Stewart.
“I feel that fundamentally, this is the best way to meet [everyone’s] basic needs — to get Bitcoin into the hands of people who can use it the most.”
Stewart’s Bitcoin initiative is similar to that proposed by Andrew Yang, a candidate in the 2020 United States presidential election. Yang supported giving every American $1,000 a month in universal basic income, or UBI. Though he failed to receive the Democratic party nomination, UBI was often in the media spotlight and had seemingly strong support.
Lawmakers in other U.S. cities have also taken a pro-crypto policy stance. Francis Suarez, the mayor of Miami since 2017, has proposed allowing residents to pay taxes with Bitcoin and said he was aiming for the city to have the “most progressive crypto laws.”
As data from Cointelegraph Markets Pro shows, the price of Bitcoin is $48,710 at the time of publication, having briefly risen to more than $49,000 earlier today.
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