The U.S. government’s coronavirus response offers surprising proof that basic income works.
Some economists think America’s poverty rate fell slightly in April and May 2020, The Economist claims. In detail, a University of Chicago and University of Notre Dame paper found a slight drop in poverty despite the highest unemployment rate since the Great Depression. For instance, 22 million Americans lost jobs between February and April 2020, Forbes estimates.
American nominal disposable household income; the amount of cash the ordinary household has, grew by 4% between June 2019 and June 2020, Goldman Sachs (NYSE: GS) estimates. In contrast, the U.S. Bureau of Economic Analysis (BEA) estimates America’s gross domestic product (GDP) shrank by 5% in 1st Quarter 2020.
That’s right, Americans’ incomes grew and poverty fell when the GDP was shrinking. We need to investigate the cause of this discrepancy because it shows we can cut poverty even in times of economic decline.
Trump and Congress just showed us Basic Income Works
Household incomes grew and poverty fell because of the federal government’s response to the coronavirus depression.
First, Uncle Sam sent most Americans a $1,200 cash payment in April. Second, Congress guaranteed most job losers $600 a week in unemployment insurance.
Therefore President Donald J. Trump (R-Florida) and Congress just proved that paying cash to ordinary people is the best way to alleviate poverty. Additionally, Trump and Congress show how government can grow the economy and prevent economic catastrophes.
The economy grew, though both programs had serious problems. I had trouble just learning the status of my stimulus payment from the Internal Revenue Service (IRS), for instance. Moreover, news reports reveal that tens of thousands of people could not access state unemployment insurance systems.
Even Flawed Basic Income Works
For instance, The Lexington Herald-Leader reports hundreds of people stood in line to meet with state unemployment insurance officials in Kentucky. Plus, there are unconfirmed reports of officials working overtime in unsanitary state offices to process enormous numbers of unemployment claims.
Neither of these measures is a true basic income such as the Freedom Dividend. However, such clumsy and limited payments alleviated poverty and prevented an economic disaster rivaling the Great Depression.
Notably, President Donald J. Trump (R-Florida) was bragging about new economic growth and a good jobs report at the end of June 2020. For instance, the economy gained 2.7 million jobs in May 2020 and 4.8 million jobs in June 2020, NPR claims. I think Trump could have had nothing to brag about without the stimulus payments.
Did Trump Just prove Andrew Yang was Right?
Hence, America just demonstrated that Basic Income works and alleviates poverty. Given these results, I think a scheme such as failed presidential candidate Andrew Yang’s (D-New York) Freedom Dividend could lead to great prosperity in America.
Under the Freedom Dividend, the federal government will pay all Americans over 18 a $1,000 a month basic income. Hence, Yang’s scheme could grow the average American’s income by $12,000 a year.
I think the May and June economic data shows a Freedom Dividend could add millions of jobs to America’s economy. Unfortunately, I think neither Democrats nor Republicans want to see this reality.
To elaborate, Republicans do not want evidence government can grow the economy because it disproves their fantasies of capitalist utopia. Moreover, Democrats reject any effort that does not involve a massive expansion of the bureaucracy.
Finally, the latest economic data shows the present American economic orthodoxy of “jobs, jobs, jobs,” as the solution to our problems is false. We can grow the economy (and create jobs) without jobs programs. Few American politicians want to see that.
The Politics of Abundance
A Freedom Dividend could make most Americans prosperous because it is a policy of abundance, not scarcity.
To explain, a basic income rests on the premise we can create enough money for everybody’s use. In contrast, they root the “jobs, jobs, jobs,” solution in traditional economics. Hence, “jobs, jobs, jobs,” is a policy of scarcity.
“Economics operates on the premise that there is scarcity and hence resources have to be rationed,” Medium contributor David O. observes. David O. notes that there are few wealthy economists because traditional economists have an obsession with scarcity.
The false notion behind the scarcity theory of economics is that all resources are scarce, so we need to ration everything. Hence, economists are poor because they spend their time rationing scarce resources rather than making more money.
Malthus was Wrong
This theory appeals to politicians because the rationing of resources increases the power and influence of leaders and bureaucrats. For instance, politicians claim the only way to get or keep or get a “good job” or health insurance is to vote for them.
History proves we can grow the amount of money and resources available at an incredible rate. For instance, obesity is one of our greatest public health crises because our economy produces too much food.
In fact, the Centers for Disease and Prevention (CDC) estimates that 42.4% of Americans were obese in 2018. The percentage of obese Americans rose from 30.5% in 2000 to 42.4% in 2018, and the rate of severe obesity rose from 4.7% to 9.2% in the same period.
That’s a direct contraction of the teachings of the father of scarcity economics; English clergyman Thomas Malthus. Malthus taught that all civilizations eventually run out of food leading to starvation.
History shows Malthus was wrong. Human ingenuity can create enormous amounts of resources. Unfortunately, human nature drives people to ration resources to increase their own power and wealth.
How the Freedom Dividend could Lead to Incredible Prosperity in America
I think recent events show a Freedom Dividend could lead to incredible prosperity in America.
For instance, I estimate a Freedom Dividend could add $331 billion to the U.S. economy each month. Moreover, I calculate the Freedom Dividend could add $3.972 trillion to American each year.
I got those numbers by multiplying $1,000 by 331 million (Worldometers rough estimate for the U.S. population in July 2020). Then I multiplied the monthly figure by 12.
In contrast the St. Louis Federal Reserve estimates the U.S. Gross Domestic Product (GDP) was $21.54 trillion in first quarter 2020. Hence, basic income could grow America’s GDP to $25.512 trillion and create millions of new jobs.
To elaborate a Freedom Dividend could grow the economy by giving ordinary people more money to spend. Consequently, the people will buy more, leading to more economic activity, more investment, more tax revenues, greater corporate revenues, more factory production, more retail sales, and more jobs.
Study Shows Money could Buy Happiness
There is evidence a Freedom Dividend could improve mental health. A San Diego State University (SDSU) study found that the more money a person makes, the happier the individual is.
For instance, levels of happiness among white Americans with no college degree; who are more likely to be poor, have dropped since 2000, the study claims. In contrast, levels of happiness among white Americans with a college degree; who have more money, grew in the same period, ZME Science claims.
Moreover, happiness rose for black Americans with a college degree. Conversely happiness levels for blacks with no college degree stayed the same.
More Money Seems to Equal Happiness
“More money seems to equal more happiness, even after basic needs are met,” SDSU psychologist Jean Twenge observes. Twenge and A. Bell Cooper of University analyzed data from the General Social Survey of U.S. adults to create the study, an SDSU press release states.
Twenge and Cooper published the study The expanding class divide in happiness in the United States, 1972–2016 in the American Psychological Association journal Emotion.
Thus, a Freedom Dividend could make Americans happier and improve mental health by giving more money. Moreover, a Freedom Dividend could increase economic security which could improve mental health.
Andrew Yang was Right about the Robots Too
It appears Andrew Yang is right about the economics. That’s scary because it shows Yang’s prediction about technological unemployment could be accurate.
In his fascinating book,The War on Normal People: The Truth About America’s Disappearing Jobs and Why Universal Basic Income Is Our Future Yang predicts robot trucks will kill millions of jobs leading mass unemployment and widespread unrest. Now, a company they call TuSimple is testing the world’s first network of autonomous semitractors, Recode reports.
In fact, TuSimple plans to move UPS (NYSE: UPS) shipments between Dallas, San Antonio, and Houston this year, Recode claims. Moreover, several other companies including automaker Daimler (DAI: DE) are testing robotic trucks.
Hence, history is proving Yang’s thesis correct and exposing Yang critics; such as Paul Krugman and Ross Douthat, as shortsighted fools. The coronavirus shows Yang was right: America needs to implement a Freedom Dividend now.
Originally published at https://marketmadhouse.com on July 10, 2020.