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Coming Soon to A City Near You: Universal Basic Income


Once in a while a concept emerges in the mainstream of public thought which strikes me as totally foreign, literally and figuratively. Recently one of those arrived in my digital mailbox, and I found myself shaking my head at the mention. Universal Basic Income, or UBI is back, and being tried in a pilot program in California.

Studying for a minute, I saw that it was in the city of Stockton, California, and that name triggered a thought. A quick search later I remembered why. In 2012, Stockton filed Chapter 9 bankruptcy, having gotten themselves into financial trouble before and during the Great Recession. Today, pension obligations are underfunded to a degree that threatens every other aspect of the budget.

The UBI test project will give several families $500 per month for doing absolutely nothing. At this time, the project is being funded with private funds, most likely to circumvent a taxpayer revolt. The spending habits of these families will be monitored, as well as the impact on the families’ (are ready for this?) self-esteem!

Stockton has a huge problem, along with California in general. One in four Stockton residents lives below the poverty line, home prices are rising, and wages are stagnant. Homelessness is everywhere. The argument that “something needs to be done” is undeniable. What should be done is, of course, where the disagreements begin.

Many people believe that UBI will encourage people not to work, but some people believe the opposite is true. Hence the UBI experiment. Here it gets more interesting:

  • Many Tech CEOs favor the proposal, as they worry about rapid automation replacing a large percentage of the workforce
  • “People without Borders” advocates deny that illegal immigration is the cause of stagnating or shrinking wages, so UBI is no problem
  • Various well-known economists and politicians have been supporters of UBI, including Milton Friedman (usually my Economics role model) and the late New York Senator Daniel Moynihan
  • Others argue that funds from existing welfare programs would be diverted to families who don’t need the money, exacerbating all-too common class warfare arguments

Oakland is starting a similar trial, but with $1,500 being the monthly stipend. Most people probably remember that Oakland is in the news lately for helping illegal immigrants avoid the law. This program simply fits the pattern of mismanagement that we have come to expect in some California cities.

It will be interesting to see the interpretation of the UBI experiments.  I am not holding out any optimism that UBI will prove to be the “silver bullet” in restoring fiscal sanity to California’s troubles. Soon, I fear, we will all be ponying up the bailout funds for the bankruptcy of the so-called “Golden State.”

Van Wie Financial is fee-only. For a reason.