Universal Basic Income: Stockton Tests an Old Idea

The idea of Universal Basic Income is a few hundred years old, and has been endorsed by figures such as Milton Friedman, Richard Nixon, Martin Luther King Jr, and Elon Musk. One city in California, Stockton, is going to give it a try. 

What is Universal Basic Income?

Universal Basic Income (UBI) is the idea that everyone, even if they are not working, will receive a certain amount of money each month or year. The idea itself is not new. It finds its roots in Thomas More and his friend Johannes Ludovicus Vives, who died in 1535 and 1540, and has found proponents in Thomas Paine, Milton Friedman, Richard Nixon, Martin Luther King Jr, and Elon Musk, among others.

Why Stockton?

I think Stockton is absolutely ground zero for a lot of the issues we are facing as a nation.

In 2007, Stockton was declared California’s “foreclosure ground zero”. In 2012 Stockton declared bankruptcy after overextending itself on a series of image projects, created to draw investor’s attention to the city.  In 2016 the median income was only $45,000, less than the national average. The murder rate has even surpassed Chicago’s. Clearly, something needed to change.

Enter Michael Tubbs, the new mayor of Stockton, elected for his promise to improve the local economy.

“Twenty five percent of our population lives in poverty,” Tubbs said, “but I would argue that another 25-30% are just one paycheck away.”

Mayor Tubbs is quick to dispell the notion that it would encourage people to be idle. “People don’t stop working. They actually get into the workforce more.”

This has been borne out by programs like the Alaska Permanent Fund, the Mincome project under Pierre Trudeau, and Negative Income Tax pilot programs.

Republican President Richard Nixon tested UBI in several cities from 1968 to 1971 and found it did not negatively affect work ethic.

Tubbs continues, “We see bad things go down like drug use. Good things go up like education. People report feeling happier, feeling less stressed. You see more productivity.”

The Stockton Program

It turns out, the program won’t cost Stockton a dime. The whole pilot is funded by a grant from the Economic Security Project, chaired by one of the co-founders of Facebook who has a strong interest in UBI.

The grant, about $1M, would fund an 18-month project (the Stockton Economic Empowerment Demonstration) which will give around 100 families a no-strings-attached $500 per month. Depending on the effect this has on their families, the city might consider a tax-payer funded expansion of the pilot.

The criteria for choosing families has not yet been decided.

UBI in the Future

It should come as no surprise that technology industries are among the strongest supporters of UBI. Silicon Valley especially supports the idea, which is understandable, given their clear ability to see how machines will replace human workers in the future — in fact, they are the ones creating those them.

Mark Zuckerberg, Facebook CEO, has praised the UBI of the Alaskan Permanent Fund, and encouraged other states and cities to imitate the model.

He explains his reasoning in this way, “When you’re losing money, your mentality is largely about survival. When you’re profitable, you’re confident about your future and you look for opportunities to invest.”

Elon Musk, of Telsa and SpaceX fame, has argued that UBI will eventually be necessary as jobs worldwide are replaced by robots. “There will be fewer and fewer jobs that a robot cannot do better. I want to be clear. These are not things I wish will happen; these are things I think probably will happen.”

Even President Barack Obama saw the looming dangers of automation, warning Congress that up to 50% current American jobs could be automated by 2030.

“There are all kinds of mysteries and potential flaws with regards to universal basic income,” says former Labor Secretary Robert Reich. “But it’s inevitable. We’re going to have to seriously consider universal basic income.”

The Issue

The problem with UBI, like all things in life, is that it costs money — a lot of money, maybe even more than $3T according to Prof. Laura Tysons who works in the Economics department of UC Berley.

Tyson says even if every other social safety net program was cannibalized to pay for it, the math still won’t add up.

For example, $10,000 a year X 300 million people is $3 trillion. “That’s three-fourths of the entire federal budget,” she said.

“There are trade-offs. In order to finance something meaningful as a basic income for truly poor people, would require us to find a significant amount of additional revenue. Where would we find that?”

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