News on the Basic Income Guarantee, June 2000
Contents
1. Launch of the U.S. Basic Income Guarantee Network's web site (USBIG.net)
2. Second Basic Income Guarantee (BIG) seminar and upcoming seminars
3. Discussion of BIG around the world
3A. Eduardo Suplicy’s Interview With Milton Friedman
4. Recent articles about BIG
5. Links & other info
1. LAUNCH OF BIG NETWORK WEB SITE (USBIG.net)
The U.S. Basic Income Guarantee Network (US BIG) has launched its web site.
It includes information about BIG and the US BIG Network, papers on BIG, and
links to groups promoting BIG around the world.
2. THE U.S. BASIC INCOME GUARANTEE NETWORK'S JUNE SEMINAR
US BIG had its second seminar on May 24, 2000. Robert Harris gave a lecture
entitled "The Guaranteed Income Movement of the 1960s and 1970s."
Summary
According to Harris, the political climate in the 1960s was unique in
postwar history. Spurred by increased attention from academics and the popular
media, public attention focused on the issue of poverty and poverty elimination
was for the first time widely seen as the proper goal of policy. The New Deal
model of poverty policy, in which the government attempted to insure that jobs
were available for the able bodied and that relief was available for those who could
not work, did not seem capable of eliminating poverty, but some form of
guaranteed income did. Economists, social activists, and politicians joined the
push for a negative income tax. State governors favored federalization of
antipoverty programs to remove them from political responsibility for programs
that states could not afford to run effectively. The negative income tax
reached its high-water mark in the early years of the Nixon administration when
he proposed a modified version of it called the Family Assistance Program. The
measure passed the House of Representatives and failed by only 10 votes in the
Senate. Harris believes that it would have passed if Nixon pressed harder for
it.
Support for active redistribution of income waned in the 1970s and, with the
election of Reagan in 1980, the federal government began the process of cutting
antipoverty programs and turning responsibility back to the states. The states
were glad to accept the responsibility for welfare reform during the booming economy
of the 1990s, but Harris warned that the states may find themselves unable to
deal with the demands that welfare will come under when the next recession
hits. Another opportunity to create a basic income guarantee may come again,
but it will take committed leadership, public concern, and media attention to
the persistence of poverty.
(Harris's paper is available at www.USBIG.net.)
UPCOMING SEMINARS:
Beginning in September, the BIG seminar series will become a monthly event.
The next two seminars are:
September, 2000: Karl Widerquist, of The Educational Priorities Panel, "Citizenship or Obligation."
October, 2000: Brian Steensland, of Princeton University,
"Defining Welfare: Media Depictions of the Struggle over Guaranteed
Income, 1966-1980."
The exact dates will be announced in the next newsletter.
3. DISCUSSION OF BIG AROUND THE WORLD
THE FINANCIAL MAIL, SOUTH AFRICA, reports (April 21, 2000) that the ruling
ANC party is divided over whether to introduce a basic income grant. President Thabo Mbekis has put off further
action on the issue by appointing a commission to come up with proposals on how
to overhaul South Africa's social welfare system. The commission is expected to
take at least a year to produce its report. Some factions within the government
strongly support basic income, and traditionally, the ANC would have supported
the idea, but its new focus on fiscal discipline has made the issue an
uncomfortable one.
3A. EDUARDO SUPLICY’S INTERVIEW WITH MILTON FRIEDMAN
THE BASIC INCOME EUROPEAN NETWORK's recent
newsflash contains Brazilian Senator Eduardo Matarazzo
Suplicy's interview with Milton Friedman. The full text is reprinted here:
The Chicago economist, Nobel laureate and founding father of monetarism
Milton FRIEDMAN is commonly credited for having been the first to propose the
"negative income tax", sometimes presented as the
"right-wing" version of an unconditional basic income. The expression
"negative tax" is actually much older: it was coined by the French
economist Augustin Cournot
(Recherches sur les principes mathématiques de la théorie des richesses,1838) and clearly used in its current
sense by the British economist Abba Lerner (Economics of Control, Macmillan,
1944) in a book which Friedman reviewed (Journal of Political Economy 1947).
Yet, it is undoubtedly Friedman who most contributed to popularising
the idea of a negative income tax worldwide. A US-trained economist and
prominent member of Brazils main left-wingParty (PT),
Eduardo Matarazzo SUPLICY has recently been
re-elected senator for the state of São Paulowith over three million votes. In 1991, he presented a
bill which, if passed, would establish a guaranteed income for all Brazilian in
the formù of a negative income tax. The bill was
approved nearly unanimously by the Senate, but was never approved by the House
of representatives. However, many modest guaranteed
income schemes have since been experimented at a more local level throughout
Brazil. Senator Suplicy has been campaigning in support of federal backing for
an extension and radicalisation of these experiments
into a nationwide negative income tax, which he views as a realistic next step
towards a genuine basic income for all Brazilians.
As part of this effort, he is now preparing a new book ("Towards a
Citizen's Income") and to get some matters straight, he wrote to Milton
Friedman, a rather unlikely bedfellow for a prominent left-wing politician,
with a number of precise questions (29 March 2000). Friedman answered promptly
and conscientiously (11 April 2000). Here is the full text of Suplicy's
questions and of Friedman's answers.
1. SUPLICY: "You and Mrs. Rose Friedman were very good friends of George Stigler, as you mention in "Two people of Luck. Memoirs". To what extent did you interact with George Stigler about the publication of his article "The Economics of Minimum Wage Legislation", American Economic Review (June 1946); 358-65. In your memoirs you mention your interactions on price and rent ceilings, but not on the proposal of a negative income tax formulated in that article as well as in your 1962 Capitalism and Freedom."
FRIEDMAN: "I have no recollections about whether we talked with George
Stigler about the item he has in his "Economics of Minimum Wage
Legislation." Since we were very close to one another, I suspect we did
talk about it but I do not recall doing so. It is clear from his statement as
well as from my own later on that the idea was very much in the air and was not
a completely novel one."
2. SUPLICY: "When proposing the negative income tax as a rational and efficient instrument to eradicate poverty, to what extent, did you take into account the critical views expressed by the Classical Economists, Adam Smith, David Ricardo and Thomas Malthus, and from another perspective, by Karl Marx about the several forms taken by the "Poor Laws" since the XVIth Century, including the Speenhamland Act?"
FRIEDMAN: "Clearly at the time I wrote Capitalism and Freedom I had
read the classical economists whom you refer to and knew about the forms taken
by the Poor Laws. However, I do not recall that my views were particularly
influenced in any specific way by their views. It was part of the background on
which I was operating, but not specifically related to this issue."
3. SUPLICY: "To what extent, on that occasion, did you take into
account Augustin Cournot's
proposal of a negative income tax (in his 1838 "Recherches
sur les Principes Mathématiques de la Théorie des Richesses", Paris: Libraire
Hachette new edition Paris: Marcel Riviere,
1938)." FRIEDMAN: "I have no recollection of taking into account Cournot."
4. SUPLICY: "To what extent, when proposing to institute a guaranteed income through a negative income tax, have you taken into account that this proposal could have a very wide support in the political spectrum?"
FRIEDMAN: "In my book Capitalism and Freedom and the series of lectures
that gave rise to it, I was trying to present what ought to be without paying
too much attention to what was politically feasible or not feasible. In that
sense, I paid very little attention to the support that the proposition could
have. However, in many later pieces I wrote on the negative income tax (I am
enclosing a list of references), I undoubtedly was well aware that it was
capable of getting very wide support. Indeed, the person that Kennedy appointed
to head his task force on income distribution came out in support of a negative
income tax and, as you probably know from reading our memoirs, President Nixon
tried to move in that direction but without much success."
5. SUPLICY: "In the Spring of 1968, James Tobin, Paul Samuelson, John Kenneth Galbraith, Robert Lampman, Harold Watts and 1200 economists signed a document calling for the National Congress "to adopt this year a system of income guarantees and supplements". Despite having been invited, why did you prefer not to participate in it?"
FRIEDMAN: "At this date, more than three decades later, I do not have
any specific recollection of what my reason was for refusing to sign the
particular document. However, in general, I have always been reluctant to sign
round-robin documents. I have preferred to speak for myself on my own and sign
my own name. It may well also be that I found I had some difference of opinion
with the particular words in the document in question."
6a. SUPLICY: "Although the Earned Income Tax Credit, instituted in March 1975, is a form of a partial negative income tax, I could not find your analysis of this instrument in your Memoirs. Therefore I would appreciate if you could say whether: a) you consider that the EITC has been an efficient tool for the purpose of eradicating poverty in the US."
FRIEDMAN: "The EITC has contributed to eradicating poverty in the U.S.
I do not believe it has been an extremely efficient tool because of the
particular way in which it is integrated into the income tax. It has lent
itself to abuse."
6b. SUPLICY: "b) Can we assert that the EITC, as significantly expanded since1993, has contributed to the US economy achieving the lowest unemployment rates in the past 30 years (arbout 4.2%)?"
FRIEDMAN: "I do not believe the EITC has been a major factor
contributing to lower unemployment rates. It may have made a minor
contribution, but the major factor contributing to such low unemployment rates
has been the unprecedentedly high and stable growth
of the economy for the past decade."
6c. SUPLICY: "c) Would the full negative income tax design, such as proposed in "Capitalism and Freedom", or illustrated by President Nixon's "Family Assistance Plan", be more efficient for the purpose of eradicating poverty?"
FRIEDMAN: "I have no doubt that the full negative income tax design
that I proposed in Capitalism and Freedom would have been more efficient for the
purpose of eradicating poverty. As to the "Family Assistance Plan,"
that took so many versions that it is hard to identify that with a valid
proposal. I at first favored it but then I ultimately testified against it as
you will see from the items listed in the enclosed references."
7. SUPLICY: "Are you acquainted with the movement in favor of a basic income, such as represented by BIEN, the Basic Income European Network, an organization that was founded in 1986 to further the proposition that everyone, no matter his or her origin, race, sex, age, civil or socio-economic condition, should be entitled to an unconditional and modest income, sufficient to cover his or her vital needs, as right of citizenship? Do you know the contributions of some of the founders of BIEN, with which Herbert A. Simon and James Tobin have recently engaged, such as
Philippe Van Parijs (Secretary General), Guy Standing (President), or the books about James Edward Meade`s Agathotopia?"
FRIEDMAN: "I am not acquainted at all with the movement you refer to in
this question."
8. SUPLICY: "How do you evaluate the proposition of a basic or citizen´s income compared to the alternative of a negative income tax?"
FRIEDMAN: "A basic or citizen's income is not an alternative to a
negative income tax. It is simply another way to introduce a negative income
tax if it is accompanied with a positive income tax with no exemption. A basic
income of a thousand units with a 20 percent rate on earned income is
equivalent to a negative income tax with an exemption of five thousand units
and a 20 percent rate below and above five thousand units."
9. SUPLICY: "The Alaska Permanent Fund is now completing 20 years of distributing a dividend to all citizens that have been living in Alaska for more than a year. According to several studies it has contributed the Alaskan economy's steady rate of growth, with everyone having a basic right to participate in the wealth of the State. It is the practical demonstration that a basic income can work. In 1999, the 600,000 inhabitants received US$ 1.679,84 each. I visited Alaska in 1995 and observed that the population was very enthusiastic about the system. I could not see people not working because of that dividend. I saw there the application of a very similar proposal made by Thomas Paine in his 1795 "Agrarian Justice". I noticed in the autobiography of Jay Hammond [the governor who created the scheme in the early 1980s] that you once suggested him to divide among the population the total oil revenue obtained at the beginning of the Alasca Permanent Fund. He preferred, however, to think not only of that generation, but also of future generations. How do you evaluate the experience of the Alaska Permanent Fund dividend? Would you recommend it to other nations, each one building a fund based on the nation's wealth so as to have a citizen's income to all?"
FRIEDMAN: "I believe the Alaska Permanent Fund works very well, but I
think it is difficult to generalize it to other states. The Alaska situation is
a very special one. The problem arose because it was clear that Alaska was
going to have a very high income that would be temporary and not permanent. The
decline in that income is now coming about, and the problems about what to do
about the Permanent Income Fund are becoming pressing. At the time, the issue
was whether to divide the extra income among the people year by year or instead
do what they actually did, which was to use a considerable part of it to
support government spending and then accumulate the rest in a fund which would
yield a dividend that could be paid to each individual. It is still not clear
to me at this date which would have in principle been better. I have no doubt
that because of the way in which it was done Alaska has a larger government than
it otherwise would."
10. SUPLICY: "Did you know that in April 1991 a Brazilian Senator presented a legislative initiative to institute a Guaranteed Minimum Income through a Negative Income Tax paid to all residents aged 25 years or more with an income below the equivalent of about US$ 150 per month? Did you know that this proposal was approved by the Brazilian Senate on December 16, 1991, with the support of all parties, despite the initiative being from an opposition senator from the Worker´s Party? And that, since 1992, this initiative is waiting for a vote in the Chamber of Deputies, having received a favorable report in the Finance Committee?"
FRIEDMAN: "I knew nothing whatsoever about the facts you cited."
11. SUPLICY: "Are you familiar with the evolution of that proposition during the 90´s in Brazil? There were many local initiatives offering a complement of income to poor families so that their children could go to school instead of working at a very early age. On the basis of the positive results of those experiences - Minimum Income Programs Related to Education or Scholarship Programs (Bolsa-Escola) -, a new law was approved in 1997 authorizing the Federal Government to finance 50% of the costs of the municipalities that institute programs with that objective, although with very modest sums. Would you have elements for evaluating this procedure vis a vis the alternatives of a basic income or a negative income tax?"
FRIEDMAN: "I am not familiar with the evolution of this proposition
during the nineties in Brazil. With respect to the local initiative you refer
to, a similar program has been instituted in Mexico for a particular section of
the country in which the government is paying families a supplement if their
children go to school instead of to work. A basic income or a negative income
tax is a much more comprehensive measure for assuring a basic level of living.
However, the provision of funds to subsidize the schooling of children has many
more precedents in the actual behavior of various countries. I suspect that
Brazil's government already finances schooling and this could be seen as part
of that. As you know from my book Capitalism and Freedom, I am not only in
favor of a negative income tax; I am also in favor that if government chooses to
finance schooling, it should do so through a voucher to parents rather than by
administering the schools. I have done no writing or work on the negative
income tax in recent years so I am not familiar with the latest developments in
respect of it. I hope these comments are of some help to you."
Follows a comprehensive list of Milton Friedman's publications on the Negative Income Tax:
Capitalism and Freedom (Chicago: University of Chicago Press, 1962; reissued 1982), pp. 191-94.
"Transfer Payments and the Social Security System." The Conference Board Record, September 1965, pp. 7-10.
"Mr. Friedman's Negative Tax." Wall Street Journal, February 15, 1966.
"A Tax-Based Subsidy for the Poor?" OutLook, April 1966, pp. 13-14.
"The Case for the Negative Income Tax." National Review, March 7, 1967, pp. 239-41.
"The Case for the Negative Income Tax," pp. 202-19 in Republican Papers, edited by Melvin R. Laird. Garden City, New York: Anchor Books, 1968.
"Negative Income Tax-I." Newsweek, September 16, 1968.
"Negative Income Tax-II." Newsweek, October 7, 1968.
"Welfare: Back to the Drawing Board." Newsweek, May 18, 1970.
"Welfare Reform Again." Newsweek, September 7, 1970.
Free to Choose (New York and San Diego: Harcourt Brace Jovanovich, 1980,
with Rose D. Friedman), pp. 97, 120-23, 124,
125-26.
4. RECENT ARTICLES ABOUT BIG
Emmanuel Saez, "Optimal Income Transfer
Programs: Intensive Versus Extensive Labor Supply Responses." NBER Working Paper 7708, May 2000.
Jon Gruber and Emmanuel Saez, "The Elasticity
of Taxable Income: Evidence and Implications." NBER
Working Paper 7512, January 2000.
Book Review, F W Musgrave; Freedom and Security: An introduction to the
basic income debate; Choice, Middletown; Jan 2000; Vol. 37, Iss.
5; pg. 982.
Erik Olin Wright. "Reducing Income and Wealth
Inequality: Real Utopian Proposals," Contemporary Sociology; Washington;
Jan 2000.
Robert. Goodin. "Crumbling Pillars: Social Security
Futures." Political Quarterly 71 (2), April-June 2000, pp. 144-150.
LINKS & OTHER INFO:
The Basic Income European Network (BIEN) will have its next conference this
fall in Berlin. BEIN also maintains a website and a
newsletter promoting basic income in Europe and around the world. If you are
interested in finding out more about it, see the BIEN website:
http://www.econ.ucl.ac.be/ETES/BIEN/bien.html
Britain's Citizens' Income Trust publishes a newsletter and maintains a
website; both have news on basic income/citizen's income from the United
Kingdom and around the world. See their website:
Email:
A lively email discussion group on basic income is up and running in Canada.
If you're interested contact:
Sally Lerner <lerner@watserv1.uwaterloo.ca>
The Australian Basic Income group, OASIS, publishes an email newsletter.
Anyone interested in receiving a copy should contact:
Allan McDonald <allanmcd@satcom.net.au>
If you have any news on basic income or any comments on the newsletter or the web site, please let me know. If you know anyone who would like to be added to this list please send me their email address or ask them to contact me. If you'd like to be removed from this list please email me.
-Karl Widerquist, coordinator, US BIG.