Governors Who Are Banding Together on Pandemic Response Should Adopt Universal Basic Income
The federal government is not going to lead the way on addressing the economic pain caused by the shutdowns. But states have the power to do something about it now.
This piece is a commentary, part of The Appeal’s collection of opinion and analysis.
Over the past several weeks, the COVID-19 pandemic has wiped out tens of millions of U.S. jobs, creating unemployment numbers not seen since the Great Depression. Now Universal Basic Income, once regarded as a fringe concept, is gaining traction as a solution to the crisis.
Given the lack of guidance or leadership from the White House on dealing with the pandemic, state governors have formed regional consortia to coordinate their response.
The federal government is also not going to lead the way on addressing the economic pain caused by the shutdowns needed to slow the spread of the virus. The president has lavished trillions in tax breaks on the wealthy and corporations, and the Senate leadership would rather see states go bankrupt than offer coronavirus aid. The one-time, $1,200-per-adult payment provided by the CARES Act is wholly inadequate because it is a Band-Aid for a bullet hole, and it excludes some of the most vulnerable in our society. A single payment will cover some expenses for one month, but will not help the millions of people who will remain on lockdown, jobless and penniless for months on end—possibly for a year or more if there is no coronavirus vaccine or treatment in sight, and if death rates accelerate as some states prematurely reopen.
But states have the power to do something about it now. While governors are already banding together to procure supplies, provide mutual aid, and plan the reopening of businesses, UBI must be part of their response. And while the governors of California, New York, and New Jersey may say they don’t have the money to provide UBI, these states are resource rich with large corporations available for taxation.
The pandemic has laid bare the systemic flaws of American capitalism: perverse and systemic inequality, and an economic system lacking resilience or a robust social safety net. The top 1 percent of Americans hold 40 percent of the wealth, and the poorest 90 percent have less than one-quarter. We’ve had decades of near-zero wage growth, and of declining labor unions and worker bargaining power.
Even before the pandemic, 40 percent of Americans lacked $400 to cover an emergency expense, while one-quarter had to forego medical care because they could not afford it, and 17 percent were unable to pay monthly bills. The U.S. economy is killing people through compromised physical and mental health, suicides, and overdoses.
A Universal Basic Income would serve as a means of downward wealth redistribution to correct these inequalities, which will only be worsened by the pandemic.
The moral case for UBI is strong. Before his death in 1968, Martin Luther King Jr. called for a guaranteed income as the “simplest approach” and most effective solution to abolish poverty directly, noting that “widespread economic security” would bring about psychological benefits. “We must create full employment or we must create incomes. People must be made consumers by one method or the other,” King said, speaking of the need to increase the social good and ensure that “the potential of the individual is not wasted.“ More recently, Pope Francis suggested it is time for countries to consider a universal basic wage to address the economic dislocation brought about by the coronavirus.
And the rest of the world has been embracing it—Finland, Kenya, and Ontario, Canada, have had basic income experiments in recent years. Over a dozen nations are providing their citizens with a monthly income for the duration of the emergency, with the Netherlands, Denmark, and even the Tory-led United Kingdom paying most of workers’ wages, Germany offering payments, and Spain planning to make such a measure permanent.
The idea of UBI was also picking up steam in the U.S. before the pandemic. Former presidential candidate Andrew Yang proposed a $1,000 per month UBI funded with a 10 percent value-added tax (VAT), a consumption or sales tax levied at every point of sale where value has been added to a good or service. California Assembly member Evan Low introduced UBI legislation based on Yang’s proposal. Stockton, California, is testing a UBI program with $500 per month for 130 people for 18 months, while Newark and Milwaukee have planned their own pilot programs and task forces.
Governors may point to dramatic budget shortfalls caused by the pandemic as a reason they can’t implement UBI, but the governors of New Jersey, California, and New York are multimillionaires, and their states are also wealthy. California’s GDP of $3.1 trillion would make it the world’s fifth largest economy, smaller than Germany and larger than the UK. Its Western state consortium with Oregon ($252 billion) and Washington ($600 billion) claims a combined GDP of $4 trillion. Similarly, New York and New Jersey have a GDP of $1.7 trillion and $645 billion, respectively, while their Northeast consortium with Pennsylvania, Rhode Island, Connecticut, Massachusetts, and Delaware is also $4 trillion.
States can help fund UBI by taxing corporations. For example, a VAT targeting companies with gross receipts of $200,000 or higher would rely on medium or large businesses and exempt small businesses. A corporate tax could bring about wealth redistribution by taxing certain industries who are thriving amid a second Gilded Age of vast economic inequality. The billionaire-led tech sector—including Silicon Valley companies such as Facebook and Google, and Washington-based Amazon and Microsoft—is a prime candidate for a levy in California and Washington. In New York, Wall Street banks that have profited from bailouts and consumer exploitation are ripe for a financial services tax on stock trades to spread the wealth and bring about economic justice. And in New Jersey, the lucrative pharmaceutical sector is large and growing. The Alaska Permanent Fund Dividend, the closest thing to a state UBI, has provided $23 billion in oil and gas revenue since 1982.
A 2 percent financial wealth tax is another potential revenue source for UBI. Elizabeth Warren and Bernie Sanders proposed a Switzerland-style progressive wealth tax to pay for such items as universal child care and health care, free public college, and affordable housing.
A Universal Basic Income would bring many potential benefits to the states that implement it, as states rely on economic activity to raise revenue and thrive. A UBI would result in economic growth by eliminating poverty and boosting the security of low-income workers—who are more likely to spend in the near term, as opposed to the rich, who are hoarding their mounting piles of money, hence the inequality. Such a policy shift would also bring permanent relief to gig workers with precarious income, those whose jobs are displaced by automation and globalization, and the massive ranks of the unemployed. Further, a UBI would empower people to choose jobs that they enjoy, allow them to spend more time with family, and make decisions that benefit themselves.
In a nation where COVID-19 and economic devastation join forces and Washington is missing in action, a UBI would allow states to fortify their economic future and provide stability to their citizens during the pandemic and beyond.
David A. Love is a Philadelphia-based writer, commentator, and journalism and media studies professor. He writes for CNN, Al Jazeera, Atlanta Black Star, theGrio, and other publications.