Oct 2020. Excerpt from https://www.laprogressive.com/ubi-would-result-in-economic-growth/
The top 1 percent of Americans hold 40 percent of the wealth, and the poorest 90 percent have less than one-quarter. We’ve had about four decades of near-zero wage growth, and of declining labor unions and worker bargaining power.
Even before the pandemic, 40 percent of Americans lacked $400 to cover an emergency expense, while one-quarter had to forego medical care because they could not afford it, and 17 percent were unable to pay monthly bills.
The U.S. economy is killing people through compromised physical and mental health, suicides, and overdoses.
The moral case for UBI is strong.
Before his death in 1968, Martin Luther King Jr. called for a guaranteed income as the “simplest approach” and most effective solution to abolish poverty directly, noting that “widespread economic security” would bring about psychological benefits. “We must create full employment or we must create incomes. People must be made consumers by one method or the other,” King said, speaking of the need to increase the social good and ensure that “the potential of the individual is not wasted.” More recently, Pope Francis suggested it is time for countries to consider a universal basic wage to address the economic dislocation brought about by the coronavirus.
And the rest of the world has been embracing it – Finland, Kenya, and Ontario, Canada, have had basic income experiments in recent years. Over a dozen nations are providing their citizens with a monthly income for the duration of the emergency, with the Netherlands, Denmark, and even the Tory-led United Kingdom paying most of workers’ wages, Germany offering payments, and Spain planning to make such a measure permanent.
The idea of UBI was also picking up steam in the U.S. before the pandemic. Former presidential candidate Andrew Yang proposed a $1,000 per month UBI funded with a 10 percent value-added tax (VAT), a consumption or sales tax levied at every point of sale where value has been added to a good or service. California Assembly member Evan Low introduced UBI legislation based on Yang’s proposal. Stockton, California, is testing a UBI program with $500 per month for 130 people for 18 months, while Newark and Milwaukee have planned their own pilot programs and task forces.
Governors may point to dramatic budget shortfalls caused by the pandemic as a reason they can’t implement UBI, but the governors of New Jersey, California, and New York are multimillionaires, and their states are also wealthy. California’s GDP of $3.1 trillion would make it the world’s fifth largest economy, smaller than Germany and larger than the UK. Its Western state consortium with Oregon ($252 billion) and Washington ($600 billion) claims a combined GDP of $4 trillion. Similarly, New York and New Jersey have a GDP of $1.7 trillion and $645 billion, respectively, while their Northeast consortium with Pennsylvania, Rhode Island, Connecticut, Massachusetts, and Delaware is also $4 trillion.
States can help fund UBI by taxing corporations. For example, a VAT targeting companies with gross receipts of $200,000 or higher would rely on medium or large businesses and exempt small businesses. A corporate tax could bring about wealth redistribution by taxing certain industries who are thriving amid a second Gilded Age of vast economic inequality. The billionaire-led tech sector – including Silicon Valley companies such as Facebook and Google, and Washington-based Amazon and Microsoft – is a prime candidate for a levy in California and Washington. In New York, Wall Street banks that have profited from bailouts and consumer exploitation are ripe for a financial services tax on stock trades to spread the wealth and bring about economic justice. And in New Jersey, the lucrative pharmaceutical sector is large and growing. The Alaska Permanent Fund Dividend, the closest thing to a state UBI, has provided $23 billion in oil and gas revenue since 1982.
A UBI would allow states to fortify their economic future and provide stability to their citizens during the pandemic and beyond.
A 2 percent financial wealth tax is another potential revenue source for UBI. Elizabeth Warren and Bernie Sanders proposed a Switzerland-style progressive wealth tax to pay for such items as universal child care and health care, free public college, and affordable housing.
A Universal Basic Income would bring many potential benefits to the states that implement it, as states rely on economic activity to raise revenue and thrive. A UBI would result in economic growth by eliminating poverty and boosting the security of low-income workers – who are more likely to spend in the near term, as opposed to the rich, who are hoarding their mounting piles of money, hence the inequality. Such a policy shift would also bring permanent relief to gig workers with precarious income, those whose jobs are displaced by automation and globalization, and the massive ranks of the unemployed. Further, a UBI would empower people to choose jobs that they enjoy, allow them to spend more time with family, and make decisions that benefit themselves.
In a nation where COVID-19 and economic devastation join forces and Washington is missing in action, a UBI would allow states to fortify their economic future and provide stability to their citizens during the pandemic and beyond.
David A. Love https://www.laprogressive.com/ubi-would-result-in-economic-growth/
Six months have passed since the capitalist economy crashed and the IRS deposited its first round of so-called “stimulus checks” worth a paltry $1200. The extended unemployment insurance that many workers relied on for survival dried up at the end of July.
The two-party corporate duopoly has not agreed to implement a second round of assistance for working people to survive the economic fallout from the COVID-19 pandemic. In fact, Congress has taken an extended vacation in the months leading up to the presidential election in November.
While the big story of the U.S.’ COVID-19 saga has been the 225,000 fatalities to the disease, millions more have seen their livelihoods completely demolished.
Economic misery is indeed the “new normal” of U.S. capitalism’s late stages. The numbers do not lie. Working class and poor Americans are struggling more than ever from Great Depression-like conditions.
Eight million people have fallen into poverty since May, six million in the last three months alone.
Fifty-four million people, roughly fifteen percent of the population, could be food insecure by the end of 2020.
Even agents of finance capital in the foundation world cannot turn a blind eye to the sixty-five million people in the U.S who have filed for unemployment since March.
COVID-19 has facilitated a criminal level of economic precarity for everyone except the lords of capital and their closest confidants. Capitalists may have lost control over the stability of their system but have managed to accumulate enormous profits off the backs of the poor.
Billionaire wealth in the U.S. has increased by nearly one trillion dollars since the pandemic. This number increases to 10.2 trillion U.S. dollars when the world’s billionaires are taken into account. Jeff Bezos, the world’s richest man, has made $74 billion since the clock struck midnight last January.
But the worst has yet to come. Precarity for the working class will only intensify once eviction, foreclosure, and student loan moratoriums end. When they do, tens of millions if not hundreds of millions will be faced with enormous bills they simply cannot pay.
Only a massive overhaul in the U.S.’ non-existent social welfare system can reverse the explosive misery that will be added onto the working class’ already enormous economic pain. The failure to contain the pandemic in the U.S. means COVID-19 will spread for many more months to come and keep even a modest stabilization of the capitalist economy effectively out of reach.
U.S. capitalism had not yet overcome the crisis of 2007-2008 when the decision was made to enact a policy of “herd immunity” as a means to preserve the rule of austerity during a pandemic.
The 2007-08 crisis set Black wealth on a collision course toward zero by 2053 . This is likely to accelerate in the aftermath of the current crisis. Black jobs and livelihoods have been most impacted by the thirty percent contraction in the U.S. economy since the pandemic.
And while so-called “jobs” numbers had improved prior to March, stagnant incomes and the uncounted millions of part-time and/or discouraged workers were a stark indication that life for majorities of people had not.
Finance capital may be the engine behind the U.S.’ service-based economy, but the exploitation of labor remains the source of all profit
The latest crisis of U.S. capitalism has burst asunder a host of illusions about the durability of the system. One of the biggest illusions of modern U.S. capitalism is the assumption that a post-industrial economy is also a post-labor economy.
Finance capital may be the engine behind the U.S.’ service-based economy, but the exploitation of labor remains the source of all profit. The very prospect of a further impoverished working class sent the global capitalist economy into a depression after years of slow growth.
COVID-19 disrupted global supply chains and rendered large sections of the working class unable to sell their labor. Thus, behind the derivatives, asset swaps, and the myriad forms of speculation partaken on Wall Street resides the exploited living labor that the lords of capital rely on for existence.
COVID-19 has also rendered useless the axiom that “There is No Alternative” (TINA) to U.S.-led neoliberal capitalism. Two countries in the Asia Pacific, China and Vietnam, have proven that neoliberal capitalism is incapable of containing the pandemic or facilitating an economic recovery for the masses.China’s market socialist economy contained the pandemic in three months .
The People’s Republic of China has since steered its economy back on a path of positive growth while setting its sights on eliminating extreme poverty by the end of 2020 and becoming a carbon neutral country by 2060.
Vietnam organized perhaps the most impressive response to COVID-19 after several consecutive years of significant economic growth and reductions in poverty.
The examples set by China and Vietnam will have an enormous impact on the political and economic development of the global order itself. Global South nations already looked upon both countries as economic miracles prior to the pandemic. China and Vietnam’s emphasis on a people’s centered development model and state ownership of the commanding heights of the economy lays a framework for how the rest of the Global South can achieve economic growth and address social problems like pandemics.
The U.S. comes out of the COVID-19 experience with nothing to offer the Global South but economic misery, mass death, and political instability. More than two hundred thousand dead and a hemorrhaging economic base simply cannot compete with the winds prosperity and modernization blowing East.
Unfortunately for most in the U.S. and Western world, basic political economy is clouded by white supremacy and imperial hubris.
Unfortunately for most in the U.S. and Western world, basic political economy is clouded by white supremacy and imperial hubris. The U.S. will not give up its hegemony without a fight, which is why the State Department, U.S. intelligence, and the Pentagon have been busy waging a new Cold War against China and keeping pace with its many wars against China’s allies in the Middle East, Africa, and Latin America.
Such militarism is a further drain on the economic life of the masses, but this externality is of little concern to the predatory capitalists that wield the power of the U.S. state to the benefit of their addiction to endless war. The pandemic and economic crisis are secondary to the ultimate objective of keeping U.S. corporations and financial institutions at the top of the global pecking order.
Oppressed people everywhere are facing a monumental moment of transition in global politics. Whether the outcome is positive or negative for the U.S. is dependent upon the people, particularly Black Americans and their allies in the broader working class. Economic misery may be “new normal” of U.S. capitalism but ever-increasing levels of exploitation have always been a key feature of the system. History is on the side of the people because history is defined by the life and the eventual death of social systems. However, this fact will remain buried in the propaganda of the dominant system until a deeper consciousness of why capitalism has failed the masses is developed and nurtured into a mass movement.
Last March’s ‘CARES ACT’ was not a fiscal stimulus. It was instead about ‘mitigation’–meaning the various measures contained in that $2.3 trillion package (actually nearly $3T when the additional $650 billion in business-investor tax cuts are added to the Act) were designed only to put a floor under the collapsing US economy–not to generate a sustained economic recovery. Even the politicians voting for it publicly acknowledged at the time that it was not a stimulus bill, but rather a set of measures designed to buy time–no more than 10-12 weeks at most–until a more serious economic recovery Act could be implemented.
The real fiscal stimulus bill was to follow, designed to pick the economy up off the floor and generate a sustained recovery as the economy reopened. The reopening began in May and gained a little momentum over the summer. But not enough to generate a sustained recovery by itself that was expected by late summer.
In a typical Great Recession trajectory, the reopening over the summer resulted in a roughly two-thirds recovery of lost economic activity by end of July. It was thought by politicians and mainstream economists that, when the reopening crested at two-thirds in July, a subsequent real stimulus bill would follow. The two forces–reopening and fiscal stimulus–would together generate a sustained recovery.
But it just didn’t happen that way. Nor is it to date.
The Democrats in the US House of Representatives presented their version of a fiscal stimulus bill–called the HEROES ACT-in late May. But the Trump administration and the McConnell led Republican majority in the US Senate balked at joining in passing a stimulus bill.
McConnell & friends looked around and it appeared big business and corporations and banks were doing just fine by June–even if small business and working households were not. A few exceptions to big business doing well were the airlines, hotels and some leisure and hospitality industries. But banks and other big corporations were fat with cash. The Federal Reserve had already pumped nearly $3 trillion in virtually free money into the banks. And big corporations had raised trillions of dollars more by selling corporate bonds at record historical levels, at cheapest rates, also made possible by the Federal Reserve. Trillions more were hoarded by borrowing down their credit lines with banks, saving on facilities operations, and temporarily suspending dividends and stock buybacks.
McConnell, Trump and their business constituencies didn’t need more stimulus. Indeed, they didn’t even need the Cares Act. That Act, passed in March, included among its provisions no less than $1.1 trillion in loans for medium and large businesses, along with $650B in tax cuts for the same. But as of this past August, less than $150 billion of that $1.1 trillion had actually been borrowed by big businesses and spent into the economy, and it appears little of the tax cuts resulted in production increases or hiring as well.
So in June, McConnell and the Republican Senate dug in their heels for two months and simply ignored the Democrat House stimulus proposal in the form of their late May passed $3.4 trillion HEROES ACT bill.
In July McConnell eventually put forth his proposal, called the ‘HEALS Act’. It totaled $1.5 trillion, but was loaded with ambiguous and onerous language like exempting all businesses from any and all legal claims for negligence for failing to provide safety and health conditions for their workers.
By end of July the only provisions of the Cares Act that provided any semblance of economic stimulus ran out. That was the $500 billion in extra unemployment assistance to workers, the $1200 checks, and the $670 billion in grants and loans (mostly grants) to small businesses. The unemployment, checks and grants amounted to government spending of only $1.2 trillion of the Cares Act’s $3 or so trillion. That $1.2 trillion was, and remains, the only actual spending to hit the economy, since the $1.1 trillion in loans to large-medium corporations has never been actually ‘taken up’ and spent into the economy by business. Ditto for the $650 billion in business tax cuts in the Cares Act. So only a little more than a third of the Cares Act resulted in any economic spending.
That $1.2 trillion, moreover, amounts to barely 5.5% of US GDP. In GDP percentage terms, that’s roughly the size of the 2009 stimulus of $787 billion spent during the previous Great Recession of 2008-09. That $787 billion proved insufficient at the time to generate a prompt recovery from that recession. It took six years just to get back to the level of jobs in 2007 before that recession, for example. But today’s 2020 Great Recession 2.0 is four times deeper in terms of economic contraction compared to 2008-09. And it’s still only an effective 5.5% spending package as contained in the March Cares Act.
The Trump administration and the McConnell led Republican majority in the US Senate balked at joining in passing a stimulus bill.
A much more aggressive stimulus bill was desperately needed as a follow up as the Cares Act spending ran out at the end of July. The May HEROES ACT was an attempt to provide that follow up actual stimulus but, as noted, McConnell, Trump and Republicans weren’t interested. Their banker and big business constituencies were doing quite well by early-summer. No doubt Trump-McConnell further believed the reopening of the economy, as Covid 19 disappeared, would prove sufficient to lead to a sustained economic recovery.
Of course, history has already proven them wrong.
By late July many sectors of the US economy began to weaken again. And a second, worse wave of Covid 19 hit the economy in July-August, just as the weak Cares Act spending ran out at the end of July. Unemployment claims began to slowly rise again through August and into September. Small businesses began to close, many permanently now, in greater numbers. Large corporations began to announce mass layoffs, more permanent than just furloughs now. Evictions of renters by the millions began to occur. Low income homeowners began to miss mortgage payments. And the much predicted V-shape recovery began to look increasingly like a ‘W-shape’.
But instead of seeing the trend, Trump and McConnell doubled down and refused to negotiate seriously with the Democrat House on its HEROES Act proposal. In early August, House Speaker Pelosi, thinking the Trump administration might bargain in good faith, reduced her proposal from the HEROES Act $3.4 trillion cost by $1.2 trillion. Instead of following up, however, the Trump negotiators, led by Trump’s Staff Secretary, Mark Meadows, abruptly broke off all negotiations–without making a counter offer. What he did leave though was a bad taste in the mouths of Pelosi and Schumer, who now could not trust the Trump team should further negotiations resume. Nor could they trust McConnell and his Republican Senate, who followed Trump and withdrew their prior HEALS ACT $1.5T and refused to consider anything more than $650 billion if brought to the Senate by the Trump-Pelosi negotiators in the future. Moreover, $350B of the $650B was unspent funds left over from the Cares Act. So the net spending increase proposed was only $300B.
Trump had set up Pelosi and then ‘sandbagged’ her, in bargaining parlance. Within 24 hours Trump publicly announced four executive orders as his personal fiscal stimulus offer. But the EOs were no stimulus in fact. Just a diversion of already existing government funds and payroll tax cuts that would have to be repaid in 2021.
Both sides maneuvered in the press thereafter, as the US economy weakened further throughout September and into October–and as the Covid 19 infection rates surged once again. The Virus was not cooperating with economic recovery. And there was no stimulus to assist in that either. Meanwhile, millions more were becoming unemployed–at least 30 to 35 million remained jobless as of mid October. Food deprivation worsened and food lines began emerging again. Rent evictions were now escalating as well. Hundreds of thousands more small businesses were closing their doors, with predictions by the National Federation of Independent Business that millions would fail in coming months–even as bankers, big corporations, and stock and financial markets attained record levels.
Trump then shot himself in the foot by declaring there would be no further negotiations on a stimulus until after the November 3 election. McConnell said that was fine since 20% of his Republicans were against any further stimulus out of concern of its negative impact on the US deficit, which by October hit a record $3.1 trillion for the 2020 fiscal year–the largest in modern history.
Trump’s walking away from any further negotiations hurt his political chances, since not only were workers, renters, and small businesses being ‘thrown under the bus’, but the announcement had serious negative effects on stock market values. Now big corporations were worried too. So Trump back-tracked and made another bargaining offer.
Which brings us to events of the last 10 days. Trump offered Pelosi-Shumer an $1.8 trillion counter offer–complete with loophole language permitting him to renege on items of his choice. $350B of the $1.8T was just carry over of unspent Cares Act funds. So Trump’s offer last week was the same $1.5T of the July HEALS ACT. But it was an offer he now couldn’t deliver. McConnell in the Senate quickly added he wouldn’t even bring the $1.8T up for a Senate vote because he couldn’t get it passed within his own Republican ranks.
What the $1.8T did achieve was to get the corporate wing of the Democrat party, including its mainstream media arms–MSNBC, CNN, etc.–to raise the pressure on Pelosi to accept Trump’s phony $1.8T offer that he couldn’t deliver. What Trump wanted, and still wants, is just an announcement of a ‘deal’ that he can take credit for as he campaigns across the country before the election. What big business wants is the same, an announcement, not necessarily a deal right now. Stock prices and especially tech sector stocks have begun seriously wavering on news of no stimulus negotiations. An announcement would quell that issue and ensure stock prices remain strong through the election. Even some ‘left’ Democrats like Rho Khanna and Andrew Yang–both from silicon valley–chimed in and demanded Pelosi accept the Trump offer.
So what happens next, this week? Trump’s negotiator, Treasury Secretary Mnuchin and Pelosi have begun to talk yet again. Trump wants to announce a deal before the next presidential debate with Joe Biden this thursday, only 72 hrs away. Today, October 20, Trump reportedly has instructed Mnuchin to increase his offer to $2T. (He even said he’d go higher than $2.2T to get a deal). He knows he’s got nothing to lose, and he knows McConnell’s ‘hard cop’ is there backing him up to stop (or at least change the terms of any tentative deal) for him. Trump gains a campaign message. McConnell blocks any deal. And Pelosi and the Democrats get nothing once again except more negotiations, now with McConnell. It’s a clever ‘double-teaming’ of the Democrats by the Republicans, once again!
Apparently getting wise to Trump-McConnell games, Pelosi on Tuesday said language likely can’t be finalized on a deal until Friday–thus denying Trump the opportunity to claim ‘he got the deal’ in this coming Thursday night final presidential debate with Biden.
Jack Rasmus Counter Punch