When basic income was almost an American reality

Note: This post has been cross-posted at Medium.

Lately I’ve been writing about the relative virtues of basic income and child allowance proposals  to counteract poverty and inequality.  These seem like novel ideas on the American scene today.  But in fact, there was a time when both of these ideas were seriously proposed on Capitol Hill.  After forty-five years of lost faith in government, we are simply rediscovering the ambitions we once held.

In August 1969, President Richard Nixon unveiled a basic income scheme for needy families with children called the “Family Assistance Plan.” (FAP)  Under Nixon’s FAP, a family of four would receive $1,600 annually from the federal government, or about $10,500 in 2016 dollars.  For families deriving income from work, the FAP would gradually phase out above a certain level.  Indeed, FAP included a work requirement for most “employable” individuals.

Nixon’s FAP drew on proposals for a negative income tax from economists like Milton Friedman.  It also drew on work done by the Office of Economic Opportunity in President Lyndon Johnson’s administration.  A Johnson administration commission produced a report recommending a basic income, but Johnson rejected it out of hand in favor of an anti-poverty approach focused on skills training and education.

Nixon announced the FAP in a nationally televised address.  He saw FAP as an opportunity to upend the web of New Deal-era welfare state programs and to leave a conservative mark on  anti-poverty policy.

The FAP passed the House, but was attacked from both the right and left.  Conservatives fretted that the FAP would expand public dependency and expanded the size of government.  Liberals, on the other hand, thought that the basic income was too stingy and the work requirement to be punitive.

As an alternative, Senator (and future Democratic presidential challenger) George McGovern proposed a child allowance, which he called a “Human Security Plan” (HSP), on January 20, 1970 in a speech in New York City.  McGovern’s HSP would have provided at least $50 per month ($310 in 2016) for every child in the nation.  This entitlement would be paid for by eliminating the dependent tax exemptions, which today are worth up to $4,000 per child in reduced taxable income.  McGovern’s plan also included guaranteed employment, including government-provided public service employment of last resort if no private sector jobs were available.

McGovern hoped that a child allowance would “very nearly wipe out poverty among most families with children [and] would also provide a critical boost in the income of middle American families.”

McGovern evidently anticipated that the HSP would be criticized for incentivizing people to have more children at a time when many worried about overpopulation.  Indeed, the child allowance came into prominence in Europe for that precise reason: to serve pro-natalist population restorative purposes.  As Tony Judt explains in his European history Postwar, “[f]amily allowances were a key element in plans to increase the birth rate,” particularly in countries that suffered heavy death tolls in World War I.  Belgium introduced a child allowance in 1930, and was quickly followed by France, Hungary, the Netherlands, and others.

America in the 1960s had the exact opposite concern, fearing that out-of-control population would soon cause mass starvation and suffering.  McGovern tried to allay these fears by pointing out that the United States was then (and now) one of the only advanced countries without a child allowance, and that in most countries, the policy had in fact been implemented without causing birth rates to explode.

McGovern’s HSP went nowhere in Congress, but served as a prelude to his presidential run.  In January 1972, McGovern rolled out his own basic income proposal, which he called a “demogrant.”  More generous than Nixon’s proposal, the demogrant would have provided $1,000 per person as a minimum annual income, or $4,000 for a family of four.  This would replace the personal income tax exemption.

Liberals and conservatives revolted against McGovern’s demogrant plan.  In the Democratic primary, Hubert Humphrey warned that McGovern’s plan would have caused substantial tax increases on the middle class and ballooned government spending.  Others worried that the reach of the proposal would cover a large fraction of the country with new benefits.  In the general election, the Nixon campaign ran an ad blasting McGovern’s demogrant for leaving “47 percent of Americans” dependent on “welfare.”

Under pressure, McGovern ultimately scaled back his plan.  In the summer of 1972, McGovern dismantled his universal basic income proposal by “proposing a new categorical plan and by emphasizing the importance of work,” according to Brian Steensland’s The Failed Welfare Revolution.  McGovern’s new plan was a “system of national income insurance” built upon work and public service jobs.  “The best incentive is a job opening,” McGovern said.  “The best answer to welfare is work.”

McGovern’s scaled back approach had three still fairly ambitious components: more generous Social Security, an employment guarantee for those capable of work, and income assistance for those who could not work, including mothers with children, at $4,000 for a family of four.

It’s not clear why McGovern did not revive his HSP child allowance plan when he retrenched from his universal basic income proposal.  But his compromised version reflected the tendency for liberal welfare state expansions to hew toward categorical means-tested approaches instead of universal citizenship-based entitlements.

McGovern lost in a landslide to Nixon in November, shortly after Nixon’s FAP was unceremoniously killed in the Senate in September 1972.  Nixon ultimately dropped the idea entirely by his 1974 State of the Union address as he battled mounting calls for impeachment.  Congress eventually enacted a narrower version of the negative income tax concept underlying FAP, providing an Earned Income Tax Credit to top off the wages of the working poor.

The late 1960s and early 1970s arguably mark the zenith for American liberal policy imagination.  During the course of the Nixon administration, the United States came tantalizingly close to enacting a universal basic income scheme, a universal government-run childcare system, and universal healthcare.  It came less close to enacting a child allowance, but the idea was at least on the table.

Government was bold and full of ambition on the heels of the civil rights revolution and the War on Poverty.  The public trusted government to act in good faith and competently solve big national problems.  But the foundations were already cracking, and the aftermath of Vietnam and Watergate crippled public trust in government for generations, even still today.

We’re fitfully trying to pick up the pieces and restore a government to meet the needs of the twenty-first century, drawing inspiration from the audacious plans floated forty-five years ago.  But for now, the close of the 1960s seems to be the high-water mark for lofty public policy, too—one more place where, as Hunter S. Thompson once put it, “the wave finally broke and rolled back.”

Why we need a basic income for kids

Note: A version of this post has been cross-posted at Quartz.

A universal basic income is all the rage in policy circles across the globe.  And increasingly, UBI advocates are realizing that the best place to start is by providing a basic income for kids.

It’s a simple idea: to help families mitigate the costs of raising children, the government should send each household with minor kids a monthly check.  Unlike a full UBI, which is just now being piloted in a handful of cities, a basic income for children (often called a “child allowance” or “child benefit”) has already been successfully implemented in many other developed nations.  Countries like Canada, the Netherlands, and the Nordics all have one.  Britain used cash grants to families to help cut its child poverty rate by half in just fifteen years.

There are a lot of good reasons for the United States to import this tried and true policy.  On a basic moral level, a child’s wellbeing should not be dependent on her parents’ ability to earn market income.  But that’s exactly what we have allowed in the United States, and some 20 percent of all children suffer in poverty because of it.  Poor children are poor through no fault of their own, having simply had the misfortune of being born into low-income households.  We shouldn’t accept this fate.

Indeed, rampant child poverty makes equality of opportunity a fiction for poor children.  Poverty is a massive handicap for kids, impairing their ability to learn in school and literally scrambling their brain compositions from the permanent effects of stress.  The weight of poverty tragically holds kids back.

Conversely, children that get income boosts do better in school and grow up to earn more money.  Making sure that children are raised on at least a basic income gives them a fair shot to seize opportunity and achieve in school and their future careers.

A children’s basic income is also fair for parents.  Having a child is a huge financial burden, costing parents over a quarter million dollars on average.  Yet parents typically have children relatively early in their working careers, when their incomes are at their lowest.  This makes having and raising children a significant risk of poverty.  With more mouths to feed, family income just doesn’t stretch as far.

Our public policy typically tries to support and encourage childrearing, not implicitly penalize parents with the prospect of financial ruin.  Yet many millennials are finding themselves unable to afford to have children, a trend with bad long-term impacts for the size of the workforce, the prospects for the economy, and the stability of programs like Social Security.  A children’s basic income would provide the support parents need to securely raise children.

In fact, a children’s basic income would finally treat raising children like real valued work.  In 2012, when a Democratic surrogate bone-headedly bashed Ann Romney for foregoing private employment to stay home with her children, the Romney campaign rightly fought back by insisting that raising children is real work.  Most of us would undoubtedly agree, and paying parents to raise children would put our money where our mouths are.

Such a program would also be great for the economy.  Because parents have more expenses, they are more likely to spend new money they receive.  More spending generates more growth, boosting the economy as a whole.  That’s why, when the economy began to sputter in 2008, President Bush and Democrats in Congress responded with an initial stimulus plan that in part gave an extra $300 per child to parents as a sort of one-off child allowance.  Parents could be counted on to spend the money.  And when money is earmarked for children, parents do indeed tend to spend it on their children rather than on vices like alcohol or tobacco.

A children’s basic income is also a wise long-term investment in the future of the economy.  By one estimate, child poverty costs the economy a whopping  $672 billion each year.  By ensuring that all children can capitalize on their potential, we’ll have more productive workers in the future and ensure that talent does not go squandered by the bad luck of being born poor.

On the campaign trail, Donald Trump has proposed a new child care tax deduction that would, predictably, only help rich parents.  Hillary Clinton’s plan is better, but would only help parents who put their kids in commercial childcare, and not those who raise children at home.  In Congress, Rep. Rosa DeLauro has proposed a new refundable young child tax credit that would go far to help the youngest children who are most ill affected by poverty.

It’s a good sign these issues are finally being debated, but ultimately, something bolder is needed.  A basic income for children would alleviate child poverty and give parents the support and flexibility they need.  So aspirants for a universal basic income should start where it’s needed most: America’s children.

The real problem with Obamacare

What happens to a universal healthcare system dependent on private insurers when those insurers don’t show up?  The good people in Pinal County, Arizona, may be about to find out.

On Monday, Aetna announced that it was withdrawing from two-thirds of the states where it had previously been selling Obamacare plans on state marketplaces.  This threatens to leave many communities with much slimmer insurance options, and Pinal County without a single insurance offering available on its health exchange in 2017.

Amazingly, Obamacare never anticipated this circumstance.  Its drafters assumed that at least some insurers would sign up to sell insurance everywhere in the country.  And they didn’t create any kind of fail-safe or backstop in the event that private insurers bailed en masse.  The only mechanism the federal government has to enlist insurers into Pinal County (or any market, for that matter) is to plead and cajole.

Sure, Pinal County is just one unfortunate insurance black hole for now.  But Aetna has reported the same struggles that a number of other insurers (but by no means all) have had in the marketplaces: sicker than expected enrollees, and insufficient risk compensation.  As more and more insurers head toward the Obamacare exit, more states and counties will be left with one or no insurance choices.  So Pinal County may just be the tip of the iceberg.

There are a number of ways we could shore up the health exchanges to avoid this dilemma.  The fundamental problem Aetna and other insurers have encountered is that Obamacare enrollees have been disproportionately sicker and expensive to insure.  To stabilize the marketplaces and make insuring these enrollees a viable business, one (or both) of two things needs to happen: the exchanges need to enroll more healthy people, or else insurers need to be compensated for taking on the risk of insuring a sicker population.

To enroll Obamacare’s relatively healthy opt-outs, policymakers could take two different tracks.  For one thing, they could make the penalty for going without insurance stiffer.  Raising the cost of disregarding the individual mandate will, naturally, persuade more people to comply and buy insurance.

For another, policymakers could make the insurance offerings on the exchanges more appealing.  Many people fall between a rock and a hard place under Obamacare.  Bronze plans provide cheap but flimsy coverage, with low premiums and high out-of-pocket costs.  Silver plans, on the other hand, provide better coverage but are more expensive.  At the same time, the government kicks in cost-sharing subsidies for silver plans but not bronze.  This is meant to encourage more people to spring for better coverage, but also creates a gulf between the silver and bronze plans that many people seem to be falling into.

So some of the uninsured are logging on to their state’s exchange and seeing a silver plan they can’t afford and a bronze plan with outrageous deductibles.  Faced with this unpleasant choice, some consumers are just throwing their hands up and walking away.  And those most likely to say “thanks but no thanks” are the young and healthy, who feel the safest to gamble by going uninsured.  These are the exact consumers insurers need to draw in to stabilize their marketplace business.

There are clear ways to close this gulf and make Obamacare’s plans more attractive to more people.  We could make the law’s tax credit subsidies more generous to make silver plans more affordable.  Or we could extend cost-sharing subsidies to bronze plans to help cushion the cost of deductibles and co-pays.

The problem is that either of these things requires legislative action to constructively improve the law—something that Congress has shown no appetite for.  Instead, it has gone the other direction entirely, voting over and over and over to repeal the law in total.

While repeal efforts have failed, congressional Republicans have succeeded in weakening the law in ways that have made it harder for insurers to operate.  For instance, the law originally provided several mechanisms to compensate insurers if the marketplaces’ first few cohorts of enrollees proved to require more care (and therefore more costs) than anticipated.  Republicans slammed these mechanisms as an insurer bailout.

Eager to rack up some anti-Obamacare bonafides during his failed presidential campaign, Senator Marco Rubio succeeded in gutting one of these risk adjustment provisions.  This crippled a number of the law’s insurers, and particularly the non-profit co-op start-up companies authorized by the law as a replacement for the abandoned public option idea.  Now, even Aetna attributes part of its decision to exit on the law’s “current inadequate risk adjustment mechanism.”

So the health exchanges could be shored up by making insurance more desirable for more people, and by boosting (rather than kneecapping) the law’s compensation for insurers that take on added risk.  But perhaps a deeper structural fix is needed.  Even these reforms still leave universal coverage dependent on the voluntary participation of private insurers.  By letting the private sector provide a fundamental right, the government leaves itself vulnerable to demands and rent-seeking from for-profit corporations (which some speculate is already happening).

Michael Hiltzik argues that insurers shouldn’t be able to cherry-pick only the lucrative public health programs.  “If you want to reap the profits from participating in public health programs,” he writes, “you’ll have to participate in the Affordable Care Act too.”

That’s one option.  But there’s another option that has a history of bipartisan support, and that’s providing a public health insurance option in markets without enough (or any) private offerings.  It’s an idea that was supported during the law’s drafting by both Republican Sen. Olympia Snow and Obama’s then-Chief of Staff Rahm Emanuel.  Obama himself recently seemed to revive something like this as a way to contend with lagging competition across the exchanges.

This would reconceive the public option as a backstop—as an insurer of last resort in communities that aren’t adequately served by the private market.  It would inject competition and keep prices low.  And unlike private insurers, the public plan could be regulated from monopoly pricing if it’s the only insurer in town.  So if all else fails, consumers would at least be able to buy affordable coverage from a publicly-run insurer.

And indeed, Obamacare should have this kind of backstop.  Universal healthcare shouldn’t be left at the mercy and whims of private insurers, and shouldn’t be subject to the veto of countless decisionmakers.  That’s why Obamacare created the fallback option of federally-run exchanges if states refused to create state marketplaces (as 37 ultimately did).  Consumers in those states shouldn’t lose out on affordable health insurance just because their elected officials decided not to participate in Obamacare.

The same is true within the exchanges.  Private companies shouldn’t get the final say on whether universal healthcare gets to be actualized.  That was never in the intent or spirit of the law, but it’s what you get when you graft a universal health insurance program on to a predominantly privately-run system with no general public fallback.  Now that insurer non-participation is becoming a live reality, Congress must step up and create the fallback option that should have been there in the first place.

Like all major new social insurance systems, Obamacare, in its extraordinary complexity, needed tweaking after enactment.  But Congress has adamantly refused to do this, continuing to attack the law’s very existence.

Aetna held the door open for one day returning to the Obamacare business, saying that it “may expand [its] footprint in the future should there be meaningful exchange-related policy improvements.” We know what those improvements are, but we just aren’t doing them.  There are flaws in Obamacare’s design, but those aren’t what are truly getting in the way.  The real problem with Obamacare is our broken political system.

Trump, Clinton, and the fate of the economy

As Hillary Clinton and Donald Trump duke it out on the campaign trail, the economy hangs in the balance.  Contrary to Trump’s doom and gloom non-reset speech yesterday, the economy continues to gain steam and add jobs.  But the fate of the recovery may rest on the outcome of the November election.

A team of respected economists at Moody’s Analytics attempted to forecast the economic implications of each presidential candidate’s policy agenda, and the difference couldn’t be more stark.  Put simply, a Clinton presidency would strengthen our economy’s steady growth, while a Trump presidency would be an all-out economic calamity.

Clinton’s policy platform is carefully crafted to build up the economy.  The Moody’s team looked at the suite of Clinton’s major policy proposals, including increased spending on education and infrastructure, higher taxes on the rich, guaranteed paid family leave, and a higher minimum wage.

Moody’s found that if Clinton’s agenda were fully enacted, it would boost economic growth and create 3.2 million new jobs by the end of her first term.  The biggest benefits would flow to low- and middle-income families, and the average household’s after-tax income would rise by some $2,000.

Unemployment would fall as low as 3.7 percent—a level of full employment not seen since 2000.  With a new paid leave program and subsidies for child care, more parents would join the labor force.

These staggering employment figures are all the more remarkable because Moody’s expects Clinton’s new $12 minimum wage to eliminate 650,000 jobs.  This is somewhat controversial, and economists are largely split on how the minimum wage affects employment.  Some think a higher minimum wage makes workers more expensive and costs jobs; others think it gives workers more spending money and grows the economy to generate new jobs.  Regardless, Moody’s still sees a higher minimum wage as a net win for the economy, because the pay raise for low-wage workers substantially outweighs the lost income for those who might lose their jobs.

Importantly, Clinton’s tax plans wouldn’t drag down the economy either, even though she intends to impose new taxes on the rich.  This is because the economy can stomach these kinds of taxes, and so can the wealthy.  “[A]ffluent taxpayers,” the analysts explain, “are much less likely to change their spending behavior due to a tax increase than lower- and middle-income consumers.”  Because individual spending isn’t harmed, taxing the rich doesn’t inhibit economic activity.

All told, Clinton’s economy would build off of the steady growth and 70 months (and counting) of job creation of the Obama economy—the longest streak in American history.

And what of President Trump?  Batten down the hatches and stock up on canned goods.  According to Moody’s, the only thing “great” that Trump will make for America is another Great Recession.

Moody’s found that Trump’s major campaign promises—mass deportations and curtailed immigration; tearing up and rewriting trade deals; and slashing taxes on the rich—would cause economic catastrophe.  “By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%,” Moody’s calculated.  The economy would plunge into recession for two years starting in 2018 and would shrink by 2.4 percent.

It gets worse.  Trump’s agenda would produce no income gains for the typical American family.  Stock prices would plummet, and the federal budget deficit would balloon by an additional $1 trillion.  As Trump rounds up and exiles undocumented immigrants, the economy would struggle from the loss of workers.  Not to mention, Trump’s overt hostility (in both rhetoric and policy) to Mexico and China would spark a retaliatory trade war, costing the United States $85 billion in exports.

A Trump administration would be an abject economic disaster, quickly collapsing the fragile momentum the economy has painstakingly gained since digging out of the last recession.  As Moody’s puts it, under Trump, “the U.S. economy will be more isolated and diminished.”

Now it’s true that this analysis fancifully assumes that either candidate will be able to swiftly enact their entire agenda upon taking office.  This is exceedingly unlikely, as Clinton may find herself stymied by a Republican Congress, and Trump could get bogged down in the courts.

Be that as it may, the White House under President Hillary Clinton would be an active aid to the economy.  Under President Trump, it would be a constant drag and an unprecedented risk.

The economy is perpetually the foremost issue on Americans’ minds.  As they go to the polls in November, voters face an unparalleled choice—a choice between growth or recession, between 3 million new jobs or 3 million lost.  The candidates’ agendas present a vast chasm in economic fortunes for the next four years.  Voters must decide which side they want to be on.

 

Hillary Clinton’s bold defense of government

Government is in deep disrepute in the United States.  Dismayed by gridlock and scandal, and prodded by endless right-wing anti-Washington invective, public faith in government reaches perpetual new lows.  Which is why it’s so remarkable and refreshing to see Hillary Clinton sticking up for the old-fashioned notion that acting through government, we can achieve great things by working together.

Clinton’s defense of government is in part a reaction to Donald Trump.  Political scientists Norm Ornstein and Thomas Mann have argued that Trump’s rise is the logical conclusion of the Republican Party’s three-decade war on government.  “[T]he dysfunction of the Republican Party, [. . .] its obstructionism, anti-intellectualism, and attacks on American institutions were making responsible governance impossible,” Ornstein and Mann write.  “The rise of Trump completes the script[.]”

In resisting the mean-spirited nihilism of the Trump campaign, Clinton has emphasized the benefits of unity over the pitfalls of Trumpian divisiveness.  And by arguing that we are greater than the sum of our parts, Clinton has implicitly pushed back against thirty years of GOP anti-institutionalism and made a positive case for robust government.

Clinton’s acceptance speech at the Democratic National Convention was laden with tributes to the virtues of collective action.  Arguing that when we must “work together so we all can rise together[,]” Clinton reminded us that “[o]ur country’s motto is e pluribus unum: out of many, we are one.”  The message of her 1996 book “It Takes a Village,” Clinton explained, was that “[n]one of us can raise a family, build a business, heal a community or lift a country totally alone.”

It’s a message Democrats have been honing for years.  In 2012, video of then-Senate candidate Elizabeth Warren’s living room meet-and-greet went viral, where she argued that we all rise together.  “There is nobody in this country who got rich on his own,” Warren argued.  Success is built on the back of communal goods like public roads, protections of property, and publicly educated workers.

That same summer, President Obama tried to echo Warren.  “If you were successful, somebody along the line gave you some help,” Obama argued.  “If you’ve got a business — you didn’t build that. Somebody else made that happen.”  Republicans treated Obama’s somewhat clumsy case for communal success as an epic gaffe, spending an entire day of their 2012 convention insisting that “We Built It.”

But Clinton hasn’t shied away from making the case for an interconnected American destiny.  Faced with Trump’s “I alone” strongman act, Clinton has lifted “stronger together” beyond a mere slogan, proclaiming it to be “a guiding principle for the country we’ve always been and the future we’re going to build.”

Her policy priorities back this up.  Clinton aims to create an “economy that works for everyone, not just those at the top.”  To Clinton, public infrastructure investment has the awesome capability to “not only create jobs today, but lay the foundation for the jobs of the future.”  By pursuing debt-free college, a livable minimum wage, a full-employment economy, and tax hikes on millionaires, Clinton expresses a profound faith in the ability of government to shape economic life.

And rightfully so.  The mixed economy is the key to American prosperity, with government and the private sector working in tandem to create broad-based and sustained growth.  Government produces public goods like health, roads, infrastructure, education, and research, laying the groundwork for dynamic markets to monetize and innovate off of public investment.

And contrary to conservative revisionism, an active government has always been part and parcel of American history.  From Hamilton’s national bank and absolution of state debts, to Jefferson’s advocacy for government land grants to all citizens, to FDR’s New Deal adoption of modern social insurance, government has been a force in structuring the economy throughout our history.  Government has also been an ever more diligent steward of freedom, liberating minorities from discrimination and protecting workers from the tyranny of excess employer power.  Government has thus created a richer and more meaningful American freedom.

In the United States, we too often fall into the false belief that a free and productive economy is a natural occurrence.  This takes for granted the role of government in setting the ground rules for the economy: the antitrust regulations that preserve competition, the property rights that promote innovation, and the government investments that produce a healthy, knowledgeable labor force, among many others.

Clinton and the Democrats are reminding us of this.  Contemporary problems like rising inequality aren’t hopeless laws of nature, but can be tamed by smart, determined government action.

The specter of Trumpism has made Democrats bolder.  If Trump is the end result of the conservative campaign against government, Democrats have responded by doubling down on the virtues of community and the common good.  When confronted with a candidate manifestly unfit to serve, Democrats have increasingly embraced their role as proud, effective managers of government to meet the needs of the twenty-first century.