Towards a progressive European basic income?

An EU-wide scheme could address progressives’ concerns about proposals for universal basic income.

As the Conference on the Future of Europe progresses, its interim reports indicate that the proposal for a more social Europe most frequently suggested by citizens is a European universal basic income (UBI). This poses a dilemma for progressives who promised to seriously consider the proposals from the conference but have valid concerns about such a scheme.

They could flatly reject UBI but this would risk alienating citizens and feeding into scepticism about how seriously the European Union takes civic participation. Irrespective of whether progressives are in favour of UBI, by offering constructive visions they can stay on top of the debate.

Striking patterns

For the Foundation for European Progressive Studies, we conducted an analysis of UBI debates and reflected on the arguments for and against from a progressive political standpoint. We found some striking patterns.

First, support for and opposition to UBI can be found within various political movements, irrespective of ideological background. Secondly, the arguments are much more complex than often assumed, given UBI is typically framed as a simple solution. Thirdly, the (limited) evidence suggests many likely positive effects of UBI, although it is by no means a silver bullet. Fourthly, some important arguments against UBI are predominantly concerns about policy design—careless implementation could have significant detrimental social effects.

As UBI remains salient, it is all the more important then to develop a differentiated view of where and how it bears potential for progressive goals:

  • it must be supplementary, complementing rather than replacing the welfare state;
  • it must be redistributive, so that it acts as a net benefit for the less wealthy;
  • it must render individuals independent of market forces, and
  • it must foster European solidarity by giving the EU a tangible social dimension.

If European progressives choose to embrace UBI, it should be at EU level, administered by the union and paid directly to every adult EU denizen each month. Minors’ caregivers should receive a reduced payout, with the remaining amount accruing to a European sovereign-wealth fund. Part of this accumulated residue would be paid out to individuals as a lump sum of starting capital once they reached maturity, with part retained in the sovereign-wealth fund to help fund the scheme over the long run.

To discourage the wealthy from actually claiming UBI if they do not need it, starting at the national median income automatic payouts would be tapered at a linear rate with increasing income. In principle, everyone could still claim their UBI regardless, but unclaimed funds would be channelled into the sovereign-wealth fund. Such a universal right to income would be more in line with progressive ideals than a universal income paid out automatically without exceptions.

Universal entitlement however sets this scheme apart from traditional means-tested approaches. It is key to overcoming issues such as discriminatory practices while avoiding problematic incentives due to cut-off points.

Protection against poverty

In the long run, a progressive UBI would need to protect citizens against poverty at 60 per cent of the respective national median income or 50 per cent of the mean income—whichever were higher. To keep the scheme feasible while incentivising upwards convergence and ensuring sufficiency, no national UBI should fall below 20 per cent of EU-wide median income or exceed 60 per cent of it. Responding to persisting concerns, progressives might embrace further differentiation at the local level.

While the existing empirical research indicates that phenomena such as moral hazard associated with a UBI are smaller in magnitude than is often suspected, there are valid concerns about what one can extrapolate from it. One way of engaging with citizens’ proposals while taking the risks seriously would be to introduce the scheme at very low levels, raised slowly as increasing funds became available.

This would also allow policy-makers to react swiftly with complementary schemes and regulations if employers were to abuse the scheme by wage-dumping. As such risks exist in any event and are being addressed through policy measures, it seems unlikely that a UBI could work without such policies or that the latter would stop working if a UBI were implemented.

By implication, a progressive UBI would only be part of an encompassing mix of social policies and regulations, avoiding the overall system being reductively focused on monetary tools. Established welfare systems must remain in place from a progressive perspective, as UBI can never be a panacea but bears potential as a complement to means-tested schemes which closes otherwise unavoidable gaps.

Even initially low levels of UBI would be a non-stigmatising social improvement, especially for low-income individuals. The only social policies which could be voluntarily replaced as a result would be monetary transfers whose value was by then fully covered by the EU UBI.

Revenue sources

For funding, we propose stepwise utilisation of various revenue sources. These would include designated EU resources, such as a financial-transactions tax, a carbon-dioxide tax, a green border tax, extended emissions trading, a sovereign-wealth fund, a digital-services tax, an EU-level value-added tax and a ‘robot tax’, as well as taxes on luxury goods, high incomes, inheritances, wealth and land value. In addition, national corporate-tax contributions could be partly hypothecated.

Could such funds not be used otherwise more effectively? Means-tested schemes are ostensibly more targeted than UBI but they suffer from stigmatisation and low uptake, as well as mistreatment and discrimination by case workers of the most vulnerable. And a UBI might be conceptually more appealing for progressives at EU level, since it would visibly strengthen the social acquis without directly competing with national welfare policies.

Further issues, such as legal limitations in the EU treaties and political scepticism towards a UBI, must be taken seriously. In light of the Conference on the Future of Europe, however, progressives should engage with the debate in an appropriately nuanced way, by discussing more openly the conditions a European UBI would need to fulfil to be considered desirable.

Why We Need Modern Monetary Theory (MMT) and Why It Needs Universal Basic Income (UBI)

Going from “can we pay for it?” to “can we resource it?” is the mindset shift needed for a human-centered resource-based economy built with a mindset of abundance on a foundation of human rights.

In the beginning, man said, Let there be money: and there was money. Centuries later, on March 27, 2020, the United States passed into law the Coronavirus Aid, Relief, and Economic Security Act and with the stroke of a pen, over $2 trillion was spent without first taxing or borrowing from anyone. It included $1,200 stimulus checks for adults and $500 for kids. Another $900 billion was spent without first taxing or borrowing from anyone nine months later as the Consolidated Appropriations Act. It included $600 stimulus checks per adult and kid. Another $1.9 trillion was spent without first taxing or borrowing from anyone another three months later when a third stimulus check went out thanks to the American Rescue Plan Act, this one for $1,400 per adult and kid. It was followed in July by the first of six monthly payments of $250 to $300 more per kid. All told, within one year, $1 trillion in cash was sent directly to the bank accounts and mailboxes of about 85% of Americans, no strings attached.

We didn’t “pay for” any of this. We just did it. None of it was made possible by taxing or borrowing from anyone first, and that’s the big lesson I believe everyone needs to take away from the COVID-19 pandemic besides the effectiveness of direct cash payments and dangers of politicizing science and public health. Americans needed money, so it was created out of nothing. The thing is, that’s not new. It’s how money works in any country that issues its own currency.

Here’s the now less secret truth: the US government is not funded by taxes. It creates its own currency out of nothing. It spends it into existence. Taxes then remove money from the money supply to maintain its value (among other things). For the cryptocurrency enthusiasts out there, the US dollar utilizes a mint and burn model. The eater address is the IRS.

In other words, yes there is in fact a “magical money tree.” All money is a human invention and there is in fact no limit to the amount of money that can be created. There is however a limit at any point in time to the goods and services that can be exchanged for money at that point in time, and that real and always changing limit depends entirely on the amount of natural resources, human labor, machine labor, knowledge, skills, time, energy, etc. that is available to meet demand with supply at that point in time. That’s what really matters – what money is meant to measure – not money itself. Money is only a human construct created to very roughly measure the stuff it’s traded for, and taxation is important for a multitude of reasons, but making spending possible by a currency issuing government just isn’t one of them. This is the heart of what’s come to be known as Modern Monetary Theory (or MMT).

Conventional thinking says that the US government first needs to obtain money from taxes or borrowing in order to spend it. MMT says that the government first spends money, then it taxes or borrows money to remove it from circulation. That may seem like a somewhat silly difference, but I’ve come to believe it’s actually an extremely important one, and one that once adopted, is the most likely path to a better future that includes a truly Universal Basic Income — like Alaska’s annual dividend but monthly and larger — that’s the highest it can be without surpassing inflation targets.

I’ve never been against MMT as a descriptive theory, but for years I’ve just seen it as an alternative way of looking at federal spending and taxes, but having just lived through the year 2020, and having read Stephanie Kelton’s book The Deficit Myth, I’ve come to believe MMT may just be the key to achieving UBI, and perhaps even the only way.

Now to begin this MMT-UBI journey (which I admit will take some time to fully explore) let’s first imagine a very special bathtub…

The Magical Bathtub

Imagine a bathtub where our goal is to fill the tub as close to the brim as possible without spilling over onto the floor. Water flowing into the tub represents government spending and water flowing down the drain represents taxation. The tub itself represents the economy and an overflowing tub is inflation. If more money flows into the tub than down the drain, the water level rises. That’s what running a federal budget deficit looks like, because a deficit is spending more than taxing, and the government’s deficit is the private sector’s surplus. A balanced budget would be matching the rate of water flowing in with the rate draining out, which would keep the water level steady where it is. If the tub is full, that would make more sense, but if it isn’t, it makes sense to either increase the flow rate, or decrease the drain rate to fill the tub all the way.

Curious for the ending?  You can read further  on

or buy the book

or download the pdf: Why We Need Modern Monetary Theory (MMT) and Why It Needs Universal Basic Income (UBI) _ The Swamp (PDF)

ECB confirms ‘Helicopter Money’ is Legally Feasible under Conditions

Mario Draghi first discussed the notion of ‘helicopter money’ in March 2016, saying “it is an interesting concept.” Since then however, the head of the European Central Bank repeatedly stated that the idea that central banks could distribute money directly to citizens, was fraught with accounting-wise, technical and legal complexity.” However the ECB had declined at several occasion to specify in detail which were the foreseen legal obstacles.

In a letter dated 29 November to Spanish MEP Jonas Fernandez, the ECB finally provides clarifications. And our interpretation of the letter lead to the conclusion that those legal issues are very weak and solvable.

The QE for People campaign praises the ECB for finally providing this legal clarification. “By providing a detailed answer on this point, the ECB acknowledges its understanding of our proposal, which many economists say could bring significant benefits to the economy” said Stan Jourdan, QE for People campaign coordinator.

Helicopter money must be designed as monetary policy

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