Riches for All

One of our more prosperous citizens, Facebook founder Mark Zuckerberg, just announced to the nation “We should explore ideas like universal basic income (UBI) to give everyone a cushion to try new things.” Not to be outdone by a young novice still experiencing his first decade of billionaire status, Tesla magnate Elon Musk told a gathering of world leaders in Dubai “Some kind of UBI is going to be necessary.” Another concurring endorsement of the plan can be heard from Robert Reich, President Bill Clinton’s labor secretary, who stated “We will get to a point, all our societies, where technology is displacing so many jobs, not just menial jobs, but also professional jobs, that we’re going to have to take seriously the notion of a UBI.”

The concept of society’s providing basic sustenance for all persons is far from novel. A proposal for “capital grants provided at the age of majority” dates back to Thomas Paine’s pamphlet Agrarian Justice, published in 1797, proposing those who possess cultivated land owe the community a ground rent, thereby justifying a tax to fund a sum to he paid to all citizens upon reaching maturity. From then on the principle that all citizens or residents of a country receive a regular, unconditional sum of money, either from a government or some other public institution, independent of any other income, became ingrained as an ideal precept in the minds of many. Basic income schemes have been promoted within various economic systems, where they would be financed through select forms of taxation, although basic income could be paired with virtually any form of economic organization whether capitalist or socialist.

Opposition to UBI is not hard to understand. A firm dissenter is Andy Kessler, an American businessman, investor and regular contributor to The Wall Street Journal, The New York Times and Forbes. He contends “All through history, automation has created more jobs that it destroyed. The economics, which they apparently stopped teaching at Harvard, are straightforward: Lowering the cost of goods and services through automation allows capital – financial and human – to attack even harder problems … If last year’s presidential election proved anything, it’s that people want jobs, not handouts … Paying people not to work means you’ll never get them back into the workforce. Why would you want to work when you can beat on a drum all day?”

Despite the objections, the idea of a guaranteed income for all Americans is gaining unprecedented traction. The U.S. economy increasingly shows instability, with more and more persons stuck in low-paying jobs. With the clout of labor unions reduced due to globalization, and a narrowing of the path into middle class for the poor, we see a growing host of workers who must rely upon an insecure gig of work with few benefits. But worst of all, I don’t believe we’ve begun to feel the brunt of another threat looming over the average worker. The peril is automation, and it’s advancing at an inconceivably rapid rate. Consider just one possible application: the development of the driverless car. Thus far four states enacted laws permitting operation and testing of such vehicles on public roads.  Nevada’s went into effect in 2012, with the first license issued to a Toyota Prius.  Florida became second, California third, and finally Michigan in December 2013.  In May 2014, Google presented their concept for a fully functioning prototype, with neither steering wheels nor pedals, and plans to offer these cars to the public in 2020.  A spokesman announced in June 2015 their testing teams drove over one million miles, essentially driverless, with no serious hazardous events.

If the driverless car is perfected, can there be any doubt a driverless truck will follow shortly afterward. According to estimates by the American Trucking Association, there are approximately 3.5 million professional truck drivers in the United States. The number of people employed in the industry, including those in positions not involving driving, exceeds 8.7 million. It’s therefore understandable why driverless vehicles incur hostility in areas where they threaten politically powerful groups, particularly the Teamsters Union and lobbyists representing firms which profit from the employment of drivers. Is it not obvious the effect on the national economy if millions of workers in the $30,000-$40,000 per year income range find themselves without employment?

Although economists still debate whether automation will ultimately devastate American labor, many observers point out prior mechanization created as many jobs as they destroyed. However, there’s a new factor. Most of our workforce lacks the skills required for jobs of the future, and costly retraining programs fail to close the gap. This is offered as justification for establishing a UBI as the only way to prevent widespread disruption automation is sure to bring. As to how it must work, most advocates maintain it must be financed by increasing taxes on the corporations and the wealthy.

As might be expected, the political community is beginning to embrace UBI. In June of 2017 Hawaii’s legislature unanimously passed a bill that directs state agencies to study UBI as a way to provide security to all Hawaiians. In several other states, volunteer groups as well as individual legislators are calling for action at various levels to mandate such programs. It’s said there’s no more powerful a force than an idea whose time has come; it appears UBI may be just such a force.

With an appreciation for the plight of the less fortunate, there’s an aspect of providing everyone a guaranteed income that deserves a second look. Consider, if you will, how the least prosperous among us is currently able to conduct their lives. Who, for example, must go without food? Households which meet certain minimum income levels are eligible to receive food, complements of the U.S. government. The system, once known as the food stamp program but now named Supplemental Nutrition Assistance Program (SNAP), actively solicits low income persons to apply. The most recent statistics, in April 2017, reveal over 43.5 million persons receive such assistance at an annual cost of $5.44 billion.

On the matter of housing for the indigent, Uncle Sam is equally generous. For families unable to afford a suitable place to live, several government programs assist with rent. Accordingly, millions of low income families across the country live in some kind of subsidized housing. Just one such program, known as Section 8 of the Housing Act of 1937, authorizes payment in the billions of dollars for rental housing assistance to private landlords on behalf of approximately 4.8 million low-income households. 

But by far, the nation’s beneficence extends the furthest when it comes to medical services for the poor and the elderly. The former receive care under the Medicaid system, in effect since 1965. This governmental operation is the largest source of funding for medical and health-related services for people with limited means in the United States, providing free health insurance in 2017 to 74 million low-income and disabled people at an annual cost of approximately $545 billion. As for the elderly, the Medicare system, operating since 1966, provides health insurance for nearly 50 million persons age 65 and older, as well as 10 million of those younger and disabled, at a federal outlay of $646 billion.

I’ll conclude with the following thought. To suggest the United States does not currently provide basic sustenance to the needy among us is to ignore the untold trillions devoted to helping the deprived meet their needs. Perhaps if Messrs. Zuckerberg, Musk and Reich were inclined to devote their substantial fortunes to actually addressing the injustices they envision, rather than merely advocate the sprinkling around of other peoples’ money, something of benefit might actually occur.

Al Jacobs, a professional investor for nearly a half-century, issues a monthly newsletter in which he shares his financial knowledge and experience. You may view it on http://www.roadwaytoprosperity.com.

al@beachcomber.news