April 01, 2006
Poor Richard

Nixon was castigated out of office for what? (I’m not an apologist for the war, but look what we’ve got now).

Perhaps this:

A negative income tax, proposed by Milton Friedman, came close to implementation in the United States under Richard Nixon. Also, the U.S. does have the GMI-inspired Earned income tax credit. The citizen's dividend is a similar concept, but the payment made to individuals is based upon the revenues that the government can collect from leasing and selling natural resources (such a dividend in fact exists in the state of Alaska).

Where did this obscure fact come from? Well, actually, Mrs. Batard told me, but the whole scheme is outlined in an entry in Wikipedia:

A guaranteed minimum income is a proposed system of income redistribution that would give each citizen a certain sum of money independent of whether they work or not. It is sometimes known as a “Basic income Guarantee (BIG)”, “universal basic income”, “citizen’s income scheme”, or just a basic income (the term “guaranteed annual income” is often used in the United States), but these systems also often include a method of paying for the income as well.

Poor Richrd.jpg

The system would be a government administered one that would allot every citizen a sum of money large enough to live on. A common amount proposed is 20% of per capita GDP. The wealthiest as well as the poorest citizens would receive this. Salaries from employment would be a supplement to this government income. An often proposed way of paying for this system is through a negative income tax where a government flat tax would be charged to all citizens. The current model of progressive income taxes used throughout the western world could be eliminated, but the system would still be progressive, since those at the lower end of the wage scale would pay less in taxes than they would receive in guaranteed income. For the most wealthy members of society the few thousand dollars of the guaranteed income would only make a small dent in the taxes they have to pay.


Posted by Buck Batard at April 01, 2006 12:30 PM
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Welfare mothers demonstrated against the Nixon minimum-income proposal at the time it was made because of the small size of the proposed minimum benefit.

Charles Murray of "Bell Curve" infamy has been proposing something similar this week -- search Google News on "$10,000" plus "Charles Murray" and you'll see what I mean.

Of course the welfare bureaucracy we've got genuinely is a ghastly anti-progressive neo-Victorian study in petty sadism enlivened by frequent modest incompetence and occasional outright fraud, and if there were an honest proposal to replace it with a humane locally controlled form of income support, that would be wonderful.

But then of course, right-wingers don't dislike welfare because it mistreats recipients; they dislike it because it employs welfare workers and thereby creates a political base for liberal and labor politics, and because it raises the level of pay below which citizens eligible for benefits can afford to refuse employment. As Frances Fox Piven notes, the welfare system is not really a system for regulating benefits, it's a system for regulating wages.

In this case it looks like Murray would like to externalize the problem of rising medical costs onto poor people and their families: if you think of $10,000 as an annual income for one healthy person it doesn't sound so bad, but Murray's idea apparently is that if Grandmother needs a new wheelchair, then her grandchildren, if loving, will feel morally obligated to put together bits of money out of their own annual grants and pay up, leaving less for themselves and their own children. The family in my example, meanwhile, has next to zero bargaining power regarding the price of the wheelchair, whereas a national health care system would be able to make the medical supply companies charge prices that bear some relationship to items' cost of production.

As the Pittsburgh article you'll find on Google News suggests, it's also possible to wonder if what Mr. Murray has in mind is something like what was cynically done to some of the Indian tribes at mid-century: paying people who have next to no bargaining power, and who are not used to being able to plan far ahead in life, to sign away their long-term rights in exchange for lump-sum checks for more money than they've ever seen in one place in their lives, then watching as they're deceived into paying their temporary riches to swindlers for overpriced products such as cars or home appliances, or pressured into placing the money "in trust" with attorneys or other money managers who take an unreasonable cut of the principal for every money management service performed. And then pointing at the victims of the process and calling them childish, improvident, and all sorts of other superior and completely unfair names.

Just to begin with, imagine what kinds of money management or payday-loan plans the corner check-cashing joints in your nearest inner city would try to impose on the very poor recipients of annual $10,000 checks. If you know anyone very poor who gets SSI disability benefits, ask them what they did with their retro check. And tell anyone who starts rooting for Murray to think very carefully indeed about what the proposal would do.

Posted by: Martha Bridegam on April 2, 2006 1:22 AM

Thanks Martha! I knew this post would be most controversial. I hope others with "Bad Attitudes" will respond. I didn't expect this post to set right with a lot of folks, and I hope more people will respond. 35 or so years have come and gone since this event and the world has changed quite a bit. (at least in some ways).

Posted by: Buck on April 2, 2006 6:01 AM

I was indignant at the time about Nixon's guaranteed minimum income proposal. In those days before equal workplace treatment for women, when help-wanted ads were divided into male (good jobs) and female (crappy low-paying jobs) sections, I was earning barely more than Nixon's floor, which would have made working kind of pointless.

At $10,000 in today's money, Murray's offering a lot less. Then again, is there an audience that would treat any proposal from Murray as credible and worth studying?

Posted by: Joyful Alternative on April 2, 2006 7:55 AM

We can argue about what the minimum should be, but I believed in the 70s and do now that it is a good idea. One flaw, however, is that one of the good points of the system is that it would have tended to raise wages at the margin. This would be less true now because of the effects of illegal immigration. Increasing supply indefinitely at the bottom will bring and keep down wages. Which is just fine with the ruling class. Presumably, this would only apply to citizens.

One argument against a minimum income, or welfare, for that matter, is that it discourages the lazy from seeking work. I consider this a positive thing. We can always find enough people who want to work to keep the economy going. If some people are taken out of the labor pool at the bottom, then that just helps other low income folks who want to work.

People work too hard, too long, and too much in this society, anyway. And what do we produce? And, more importantly, what do we consume and what are the effects of consumption? In summary, our level of consumption, especially of energy intensive activities is leading to disaster.

Regardless, I would not favor a flat tax, in any event. I don't believe that wealthy people are discouraged from engaging in income producing activities at the margin, and even if they were, a progressive tax would be a good thing.

But really, none of this is going to happen, anyway, is it?

I'm not sure I understand Martha's argument. So we should keep people destitute because they might blow their income or be ripped off? Would they be better of begging in the streets? People at the margin will be ripped off regardless of what system of income, guaranteed or otherwise, we institute.

As for National Health care, that needs to be instituted regardless of whether we have guaranteed income. It's not just the very poor who are having trouble affording health care. Why, I have fairly decent insurance but am still putting out thousands of year on top of that.

A guaranteed income does not make working pointless as it is only reduced to the extent that you enter a bracket where you start to pay income tax. It is only pointless if you are satisfied with the guaranteed amount. In which case, you are better off because you don't have to work at a crappy job unless you want to.

While we're at it, we could significantly raise the minimum wage and automotically tie it to inflation, real inflation, not the phony inflation numbers the government comes up with.

But then, that's not going to happen either under the current business ruled government we currently have.

Posted by: on April 2, 2006 11:08 AM

Having read a little more about the proposals at hand via the Last column, thanks to Ben Burrows, I see it truly stinks. Its reason for being is to do away with Social Security, with incantations of average stock market returns, as well as to abolish Medicare and Medicaid. That $10,000 also supposedly enables one to buy one's own health insurance and pay one's own medical bills, which from my experience would require that annual allotment, leaving nothing for investing or subsisting.

So this trickster wants to give me $10,000 a year for my giving up Social Security, Medicare, and Medicaid? That makes sense only if I owe $10,000 to somebody who's threatening my kneecaps.

Posted by: Joyful Alternative on April 2, 2006 6:01 PM

A client once told me a story about the day (many years prior to our meeting) when he got his $6,000 SSI retroactive benefits check. When he got the check, he was broke and homeless. He didn't have his own bank account, nor any credit. I don't even remember if he had a picture ID. And in our part of town (I don't know about yours), banks look suspiciously at very poor people trying to cash very large checks. Finally a corner check-cashing shop offered to waive its lump-sum limits and cash his check for him... for the illegal and unconscionable price of $600. (Check-cashing fees may not legally exceed 3% in California, and actually 3% is bad enough.) My client took the deal because he didn't know how else to get any spendable money out of the check. Six hundred dollars is what he paid to get his own money in cash.

That is a sample of what happens to very poor people who occasionally get very large checks.

Consider also the case of an abused wife or girlfriend who is scheduled to receive her annual check on a date that is known to one and all including her abuser.

Consider also the case of a drug addict badly in debt who receives the said annual check on a date that is known to one and all including the person or persons menacing his or her kneecaps.

Consider, less drastically, the case of a very poor person who has been blacklisted on Chexsystems, cannot open a bank account, and has no safe other place to keep so much money. Consider the likely advantages to the "friend," relative, or neighborhood loan shark who offers to "hold" such money until it is needed.

Finally, consider the case of a person who uses up that first $10,000 before the end of the year and agrees to borrrow throughout the rest of the year from a business willing (for a price) to wait for repayment until the arrival of the next $10,000 check. Consider the resemblance of such a borrower's position to that of a sharecropper or "company town" dweller.

Yes, given enough intelligent preparation for the first distribution, those $10,000 checks could go into community credit unions and microbusiness loan programs and limited equity co-ops and structure-only home purchases facilitated by community land trusts and all kinds of other groovy stuff... but you just know that in real life there's never enough wonderfulness to go around.

Does that help?

Posted by: Martha Bridegam on April 3, 2006 2:39 AM

I've read Charles Murray's book and his proposals make sense if a) a market is the only and always perfect economic system and b) everybody has equal opportuntity to succeed.

He seems to actually believe this, but talking to the rational humans out there, let's forget about welfare and talk about justice.

To actually give people anywhere near an equal shot, we probably don't want to try to equalize talent, luck, parents, or even the damn legacy slots at elite schools. Why don't we just assume that the staggering differences in the wealth people are born into have some impact on whether someone will need welfare or not?

Even smaller differences in wealth are often reproduced across generations, and all it takes is a technicolor tour of history -- the genocidal taking of lands from First Peoples, the enslavement of and (continued) discrimination against Blacks -- to see just how unfair these differences are on average.

So let's not tax incomes, with all the possible disincentives for market work, let's tax wealth, which grows at more than 10% a year for the wealthy in this unfair, self-perpetuating system.

Just a 4% annual tax on all wealth, while producing even less than even with none of the

The banking infrastructure would arise for the (now not so) poor. Minimum wage laws would be rendered redundant, as would the most punitive welfare, or workfare, or whatever they next call we're-going-to-make-your-life-hell-because-you're-poor-and-have-kids.

So is this proposal even more unlikely than Murray's barely reheated non-starter? Well, maybe, but if enough people start asking for this modicum of justice -- more equal opportunity represented by a share of society's wealth -- I guarantee you the existing unrest-managing welfare system would become a lot more generous.

(Calling all People Who Give a Damn.)

Posted by: Benjamin Melanšon on April 5, 2006 5:43 PM

Benjamin-- Bingo and congratulations. You are one of the tiny number that gets it. I have a number of family and friends that have to listen to this point of view. They look at me like I have a screw loose, which may be true but this is not evidence.

Taxing income is the worst possible form of a tax. First, taxing something is a way to discourage it; income is a measure of productivity--that is the last thing you want to tax. Secondly--exactly what is "income" and when is it received--this is the problem with "flat tax" schemes. Most importantly, it requires a Gestapo like agency like the IRS to enforce. Who else can come into your house, decide that you could not have afforded that TV on your reported income and confiscate your assets as a result? Inconsistent with a "free" society.

The thing that makes me scream is the idea that the income tax is taxing the wealthy--it is taxing getting wealthy, which should be encouraged, not discouraged.

Reagan got it--he was a high income, low wealth guy that actually paid the 90 percent incremental rate a time or two--there was no way you could convince him that it was a good idea.

If you will note, most of the truly wealthy (Kennedys, Gates, Buffet, etc.) are not anti-income tax--they fear a wealth tax much more. Many of them actually have fairly low, in proportion, taxable income. Perot famously had most of his wealth in tax free municipals.

Posted by: Rich McClellan on April 5, 2006 8:04 PM
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