We’re facing a crisis without precedent in modern economic history. The coronavirus pandemic will certainly have a greater impact on jobs, wages, and living standards than the financial crash of 2008; it may very well do more damage than the Great Depression. Already, we’ve seen more than 3 million people apply for unemployment benefits this week, a record-breaking figure, up from just 200,000 three weeks ago. In New York City, there’s been a 1,000 percent increase in claims.
Governments are scrambling to respond, implementing emergency measures to prop up the economy that would have been unthinkable just a few months ago. The United States Senate voted unanimously to approve a $2 trillion package of federal spending in response to the crisis.
In that context, the demand for a basic income has gained new momentum. But the politicians who passed the emergency stimulus bill clearly saw that as a bridge too far. The bill gives most Americans a one-off payment of $1,200 and temporarily extends and increases unemployment benefits for laid-off workers. That falls well short of what’s needed.
Politicians who represent the interests of capital clearly grasp the point that a guaranteed basic income would tilt the playing field in favor of workers. That’s why they see it as a dangerous step. For the very same reason, the Left should see it as a vital opportunity.
Getting Money to Everyone
Advocates of universal basic income (UBI) sometimes like to think of it as a panacea for social problems. Although they’re wrong about that, UBI does form part of the necessary cure for the coronavirus pandemic. A basic income would provide a minimum level of protection against the havoc that the virus is already wreaking on people’s ability to meet their basic needs.
The 2008 Great Recession boosted the US unemployment rate to 10 percent, but this crisis will turn out to be even worse. Long stretches of time will pass during which more and more people will go without pay. Many will suffer, especially poor and working-class people, and cash transfers are an essential way to ease some of that suffering. It’s also an obvious response to inadequate consumer demand. When people don’t have enough money, we should give it to them, and a one-off payment won’t be enough.
A global pandemic is unpredictable, and so are its far-reaching economic consequences. We simply don’t know who will find themselves out of work or ill, or when. Along with comprehensive social supports and protections, we need a universal program that delivers cash to people straightaway in order to insulate workers from massive uncertainty.
Reactive and targeted programs aren’t going to be sufficient. Targeted programs that narrowly determine who needs what and who is suffering the most will leave far too many gaps. The impending financial crises inside families will stretch fairly high up the income ladder; earnings that may have been relatively high last year won’t necessarily protect people from this economic shock. A financial cushion of $2,000 a month per person — the figure Bernie Sanders has been demanding, as well as the House Financial Services Committee — would alleviate suffering and reduce fear.
The Problem With Selectivity
Of course, benefits paid through unemployment insurance should also be made more widely available. The stimulus package takes a few steps in the right direction, though not nearly enough. But the problem with unemployment and sick benefits is that they aren’t sufficiently blunt, and they won’t cover all social needs. The rates and rules governing benefits also vary widely from state to state. This introduces needless complications that make it harder to get money into people’s hands.
Unemployment might take some time to peak: the policy response ought to be rapid. And it must be easy for people to stay away from work so they can avoid infecting themselves or other people. They shouldn’t be forced to cling to their jobs out of desperation, exacerbating the dangers of the pandemic. They shouldn’t have to wait to be laid off. The expanded unemployment benefits still exclude people who quit or want to quit because they believe they are at risk of infection. There’s no point in scolding people for putting themselves in harm’s way if they have to choose between staying safe and making rent.
The bill for paid sick leave that was passed recently leaves out many workers. Food stamps (the Supplemental Nutrition Assistance Program) can’t be relied on either; they frequently exclude a wide range of essentials, from diapers and hot prepared foods to pet food and soap. With any of these targeted programs, the concern is that we can’t foresee all of the reasons why someone who needs — or will soon need — the program might not be eligible. A blunt, broad-based cash transfer sidesteps that problem.
Basic income isn’t just a remedial measure: it’s also a preventative one for a broad swath of workers at risk in various ways. We have to get ahead of the crises that will unfold in countless people’s lives.
No Time to Waste
Of course, there are many ways to implement a cash transfer program badly. The payroll tax cut proposed by Donald Trump is a good example of how not to do it. Its practical effects will be small, its implementation is slow, and, worst of all, it excludes the poor. The payroll tax is levied on your salary, so if you don’t have one, you get no tax relief. If your salary is low, so is the benefit.
The LIFT plan put forward by Kamala Harris would be just as bad. It’s based on the preexisting Earned Income Tax Credit, which, by design, provides no support for people without incomes. The cash payments dispensed under the scheme steadily rise with your market income. Both forms of transfer provide poor people with nothing, or with a disproportionately lower sum.
The most recent Senate package — the CARES (Coronavirus Aid, Relief, and Economic Security) Act — doesn’t technically exclude the poor, but it effectively does so in practice. The bill, as written, is meant to deliver a $1,200 payment to each American adult, which will decrease as people’s incomes go up.
But leaving aside the phaseout, the payment is only available to adults who file federal taxes: something in the region of 40 million Americans do not. Many of the most vulnerable people will receive nothing. What’s more, it’s a one-off transfer that will quickly prove to be insufficient.
Supply and Demand
Former Federal Reserve economist Claudia Sahm developed the Sahm Rule — which proposes supplying automatic cash transfers to every household whenever the three-month average of the unemployment rate rises by 0.5 percentage points above its low point in the prior year. It’s a smart idea, but there’s no reason to wait for the official unemployment rate to increase. We’re in a unique situation, where we know for sure that GDP is contracting in real time. We shouldn’t need to wait for a specific trigger point to figure out what’s happening.
While responding to the impact of the crisis on the demand side of the economy, we also need to think about supply shocks, which might become just as important. If production bottlenecks emerge, for example, there’s no reason to rule out government takeovers. Especially in the health-care sector, government may need to take control of companies with relevant production capabilities.
Interventions on the supply side could include producing various medical supplies and equipment, building facilities for hospitals to expand into, not to mention coordinating the deployment of labor. Many of these essential tasks would be ignored if left to the market.
This means that a basic income cannot be the only tool deployed by the government, but it’s an important one all the same.
There are other reasons why giving people money is a smart move right now. A recent empirical paper of mine, published last week, shows a significant correlation between basic income and lower levels of crime, including violent crime. We want to avoid a whole range of dangerous scenarios that are all too easy to imagine when you have large numbers of people with very little money of their own to spend.
Basic income is the quick fix we need to respond to an emergency pandemic. But it can also pave the way toward the kind of society we want to build once that pandemic has been contained. Left activism around welfare policies often focuses on a demand to “raise the rates,” that is, to increase the payments going to a very small, marginal group. But we should be demanding instead the easing of conditions attached to such payments.
Weakening the strict eligibility criteria for social assistance — the degrading and invasive caseworker discretion, the searching investigations into the personal lives of recipients — ought to be an end in itself. Almost every welfare activist will agree with that. But how far should we go? Where should the line be drawn?
If you find the eligibility criteria cruel and unnecessary, but dislike basic income, you face an insoluble dilemma. There is no socialist case for retaining a highly conditional welfare state whose main function is to foster divisions between social groups. Instead, we ought to fight for a welfare state that opens up channels of communication among groups, not one that draws sharp lines between them.
This is a moral argument, but there’s a strategic point here, too. Social policies generate their own constituencies of support: the greater the number of people benefiting from a policy, the broader its base will be.
By treating groups that are usually kept well apart in the same way, under the same policy umbrella, we can generate the kind of political commitment that firms up social programs. This has implications for a basic income implemented under crisis conditions. Social policy has both evolutionary and revolutionary aspects; policies that are adopted rapidly can sometimes have far-reaching consequences.
Consider first the slow-moving changes. Most cash and public-service programs like social security have steadily grown in size during their long histories around the world. That’s because they are popular. Even if there are forces pushing for retrenchment, that still tends to be the exception: there is a near-universal trend in OECD countries for social spending to grow. Employers usually dislike the taxation required to fund these programs, as well as their effects on the distribution of power in the labor market, but ordinary people strongly support them, which is what keeps them in place.
Now think about the rapid transformations. Although the New Deal came in response to a crisis, large parts of its legacy simply never went away. Popular fixes sometimes achieve broad public support during periods of crisis. Social Security was introduced during the Great Depression, only to become a permanent fixture of the welfare state. Its inflation-adjusted average benefit value, not to mention its eligibility, have sustained uniform increases over the last eight decades.
Almost every universal social policy that significantly improves the conditions of life for large numbers of people proves to be more or less irreversible. Once public health systems have been set up, they are never repealed.
After the Crisis
Eventually, the sharpest economic consequences of the coronavirus pandemic will subside, but the economy will still take years and years to recover. If we can successfully pressure governments to adopt basic-income programs, it won’t just help people get through the worst of the crisis. In the meantime, it will also prove to have solved a whole range of problems in their everyday lives. If the program brings stability to countless ordinary people, it could well build a constituency that ensures its own sustainability.
Many people on the left are skeptical about the idea of basic income, and sometimes with good reason. But if a short- or medium-term cash-transfer policy does indeed have these problem-solving effects, should the Left really call for it to be scaled back? On the contrary, we should be calling for its expansion.
Even if we secure a basic income policy in the midst of the coming depression, at some point, both Democrats and Republicans will start demanding that these income transfers be rolled back; the worry for many of them will be that they work. At that point, the fight will be over the scale and longevity of the basic income policy. The role of the Left will be to help mobilize a social constituency for the preservation and expansion of its best versions.
Of course, such an expansion would have to be paid for. That’s when creative solutions, such as large-scale nationalizations, may all of a sudden become politically feasible. When programs are popular, states typically find ways to fund them.
It may seem crass to worry about the future shape of social policy in the middle of a crisis. And it’s not unreasonable to argue that we should focus on economic responses that are strictly designed to stave off the threat of ruin. On the other hand, crises are often moments when big policy shifts happen, and these can shape the world far into the future. We can be sure that others won’t let a good crisis go to waste; we shouldn’t either.