Switzerland’s ‘Basic Income’ Proposal – Could It Work In The US?

Basic Income - An Old Idea Whose Time Has Come

Imagine all of us getting a $2,200 basic income per month for our entire adult lives. No work required. You won’t believe who came up with that crazy idea. Photo of pro-basic income posters from Boiling Frogs

A few months ago, the people of Switzerland put a referendum on the ballot for a basic income. This proposal would issue for every adult person in the nation a monthly government stipend of ~$2,200-$2,700 US dollars per month. This basic income would come without any means testing, just money to every adult from the day they turn of age till the day they die. With a guaranteed basic income, work would no longer be required to survive, poverty would be eliminated in one move. Where did they get this radical idea?

Would you believe the idea for a basic income for all came from a founding father of the United States?

Thomas Paine, one of our founding fathers, proposed a basic income in “Agrarian Justice.”

The origin of this basic income idea comes from the piece “Agrarian Justice” by Thomas Paine. In it, he proposed a dividend to get started in life, and a stipend for all who came of age. To fund this, his proposal was to create a national fund paid for by a flat 10% income tax for all money earned, if from labor or from business or financial transactions. He rightly understood that money from such a fund would still be spent, and that would require businesses to continue operating, paying for employees, etc.

The Swiss proposal for a Basic Income would start once a person reached the age of maturity and last until they passed on. There would be no means testing, so this basic income would apply to rich and poor alike. This would eliminate other anti-poverty programs, and lower overhead costs in the process. In effect, it would create a new paradigm.

But could such a system work for the United States?

Let us work up a basic income scenario for the United States. Instead of aiming for the $2k per month, let us instead plan for a simpler extension of an existing model, Social Security. So, taking into account the current Social Security income of $1,230 per month, we are looking at a yearly expense of roughly $3.5 trillion for every US citizen age 18 or over, current US Census. Now, in doing this, we could eliminate Social Security, food stamps, welfare, this single basic income would be used for all of this. If combined with an expansion of medicare for all, such as the proposed replacement for Obamacare proposed by Bernie Sanders, the total outlay would come to $4.4 trillion per year.

But, at this cost, we would eliminate poverty while expanding the consumer base in the United States. We could even eliminate the minimum wage as now wages no longer were needed for the basic level of survival in this country. This would make US based industry more competitive according to conservatives. A chance for them to prove their ideas once and for all.

And this could save money in other areas as well. Instead of budgeting for prisons, the money for the incarcerated would come only from this source. This plan would provide much-needed relief. A basic income would save the states just under $50 billion per year without any change in incarceration rate.

And you find similar savings elsewhere in the system, through consolidation. No more social security, welfare, food stamps, exactly what the Tea Party wants. Instead, a single, unified living cost nationwide. Sounds like a deal, right?

The Tea Party would hate giving people a basic income.

See, the problem is that there is a faction within the United States which is obsessed with people ‘not deserving’ some benefit. You hear that from this group regularly, talking about welfare queens, making children labor for school lunches, even throwing them in jail for being poor. They regularly want to turn programs designed to help the poor into some form of means-based system, where only those deemed worthy are given even the slightest help or assistance. From drug testing for benefits to voter suppression, it is the same underlying concept at work – someone that is deemed unworthy received something. So, voting while Democrat, unworthy. Welfare while a drug addict, unworthy. The list goes on and on. Conservatives simply have no cares about privacy or individual rights, they must know the most intimate of details, down to the persons bedroom habits. All so that they can sit as judge, deciding who is unworthy.

So of course, the idea of a low-overhead system which would guarantee every adult a basic income is absolutely alien to their way of thinking. Their focus on who is or is not worthy locks them into this struggle mindset, and limits their ability to function in a coherent society. They will continue to set up ever higher standards of worth until nobody can meet them. Of course these systems come with a very high price tag, making the programs incredibly inefficient. A waste of taxpayer money. But, so long as that one guy they deem unworthy does not get help, they are happy.

Milton Friedman, the father of supply-side economics, also argued for a basic income.

But, with their position, they actually are turning against their own economic hero, Milton Friedman. In his book “Capitalism and Freedom,” he argued for a universal basic income, which he called a negative income tax. He even stated that such a program would not create a disincentive to work, which is a problem often cited by the GOP, but would instead make work more market driven. He rightly pointed out that with work now a commodity to trade, instead of a basic function of survival, the market would stabilize, and grow. His argument was for a basic income of $2,700 per month, almost twice what is being discussed here. He even discussed how to pay for it.

The father of trickle down himself stood for basic income, yet his ideological children would resist it.

How Can We Do It?

Let us first look at the president’s 2014 proposed budget.Medicare for all, the other part of the program, is already well understood so we will focus just on the basic income portion.

By the merging of programs such as social security, welfare, etc into a single, uniform, non-means based system, we can take approximately $1.7 trillion of the current budget and move that to this program. That is roughly halfway to a fully funded program.

So, how do we make up the rest?

The most direct method would be to close major corporate loopholes, which would immediately add a little under $250 billion in revenue to the system. These loopholes hurt our economy in general as well, starving our businesses for needed growth revenue by locking away income into tax shelters designed to harbor wealth for their investors tax-free. This would in turn increase our GDP, raising taxable revenue. By estimates, the total revenue gained from this would increase by 5.4% on top of the base amount, resulting in a total increase of $410 billion in revenue. We are already 1/4 of the way financed.

Next, let us look at Financial Transaction Taxes. These taxes on large financial transactions, such as stock sale or commodity trading, gives a double advantage to the system. By effecting large volume trades it slows down the rate of these which in turn stabilizes the market. If the United States implements a 1% FFT, it would be looking at roughly $600 billion per year. This would have us past the $1 trillion mark.

Now, this model assumes that the FICA taxes would remain intact. If FICA is expanded, with no upper cap on income, and it applies to both earned income and capital gains, FICA could bring in an additional $503 billion per year, not counting the economic growth which would bring in an additional $40 billion on top of this. That brings our total to $1.6 trillion, only $100 billion away from our goal. If we increase the FICA tax by an additional 1.6%, we now would have hit the goal by increasing the total adjusted FICA revenue from $1.3 trillion to $1.4 trillion.

And we have not yet handled the dramatic reduction of need for unemployment insurance.

A good idea whose time has come.

The cost savings, the improved efficiency, and the elimination of social welfare programs while still attacking poverty, are hard to argue with. The idea of basic income is taking root. The US is not yet ready for such a radical idea, a life without wage slavery, where the free market the GOP keep talking about can actually take root.

After all, without the freedom to survive without work, how can capitalism function? Consider that a moment. Right now many people drift from job to job, or work a job they hate, because they would starve otherwise. This creates a captive market, which undermines capitalism’s ability to function. Freedom of selection, including the freedom to choose not to work and still survive, must exist for a true free market to function. That is the same issue for health insurance, there is no fallback to someone who elects not to have healthcare, aside from death. Health insurance does not work in a free market structure. Employment, as we have it in the United States right now, is in the same boat. Unless you are lucky enough to be born into wealth, there is no option to not work and survive.

Imagine the options available to people who will have a basic income to survive on. Starting a business, following your artistic inspiration, even just taking a year off to explore our nation, all available. And it would cause an improvement in the jobs market to boot. Without fear of starving to death, a person unhappy in their workplace could quit.

Employers who mistreat their staff would find themselves facing a challenge in filling positions. Imagine where Wal-Mart cannot hire staff at all due to nobody willing to put up with the way they are treated. They would be forced to change their corporate culture, or else they would be unable to service their customers. Employment would literally be at-will, with the employee holding the trump card. Unlike now, where a bad employer can lord their power over the employees ability to survive over them, they would find themselves facing a real prospect of no staff with which to do even basic labor. The culture would have to change, or else the company would go out of business due to being unable to even function.

Some would say that this is the ultimate expression of the service based economy. With the US moving away from a manufacturing base and to service, it is the only logical solution to the problems a service based economy bring. Without divorcing survival from employment, service sector jobs will never achieve their maximum productivity, and will not give the economy the long promised boost.

This would change the entire workplace dynamic. Employers, Unions, and the general population, everything would change. It is a solution which would in one step change everything. People would no longer be dependent on anything but themselves. Think of the army of entrepreneurs and artisans which would be unleashed. Just imagine, a life where real progress can be had by anyone.

It is an unorthodox approach, but perhaps, just perhaps, this old idea’s time has come.