Interview: Scott Santens Explains Unconditional Basic Income

Scott Santens (Source: Pressenza español)

Who is Scott Santens and why is he advocating for UBI?

Scott Santens is a writer and Unconditional Basic Income advocate who has been studying and championing the idea since 2013. He hosts the Scott Santens UBI Enterprise podcast, where people can listen to audio versions of his articles and blog posts, and he runs Basic Income: Today, which is described as a “UBI News Hub”. Back in October 2014, he launched a Patreon campaign to crowdfund a monthly ‘basic income’ and he recently served as a senior policy adviser on Mike Broihier’s Senate campaign against Mitch McConnell in Kentucky.

Santens believes that it’s time to push for UBI as “technology is now forcing our hand” and that, by introducing an income platform that creates a secure floor for people, it will prevent poverty and inequality from continuing to grow as the labor market transforms.

[Editor’s Note: This transcript has been edited, for clarity, from the original interview, broadcast on The Hardy Report podcast on 21st June]

Edward Hardy: We’re all talking about Universal Basic Income now because it came to the mainstream during Andrew Yang’s presidential campaign, but you’ve been researching it for 7 years. To kick us off, for those who don’t know, could you explain the basics of UBI and the effects implementing such a policy can have?

Scott Santens: If I’m going to define a UBI or basic income, it’s an investment in society. A cash investment that is unconditional, universal, individual, and regularly provided. You receive it without any conditions, so there’s no condition to work. That means that you keep the income in addition to work. UBI isn’t paying people to do nothing. It’s paying people to do anything. It sticks with you, no matter what you do. Because of the lack of conditions, it’s also fully immersive. You’re not looking at who’s poor and drawing a line. It goes to rich and poor alike. It goes to everybody.

It’s also an individually provided payment, so that means you’re not looking at the household and how many people are in it. This is something that’s usually talked about as being at least monthly. It could be biweekly, but it needs to be something that is going to be there each and every time. That’s the most important part. That’s why I call it unconditional basic income. It’s important that you know that it’s going to be there at a certain time, every time. It’s that unconditional security of knowing that it’s always going to be there and that’s where so much of the differences come from. It’s not just people getting more money. It’s the lack of conditions and the secure floor that it creates.

Hardy: When people look at this proposal and how it will be put into practice, it brings with it the very obvious question: How will it be paid for? Because if you look at the proposal that was put forward by Andrew Yang, for example, he wanted to provide every US citizen over the age of 18 with one thousand dollars a month. That would cost roughly $2.8 trillion a year. So, where does that money come from?

Santens: I like to answer that question with another question. How much does it cost to not have basic income? What is the actual full cost of poverty and sustaining it? This is something that we pay for all the time, but none of us are receiving bills in the mail that tell us the cost of not having a basic income. Instead, it’s just something that’s added on to everything throughout our entire lives.

One example of what I mean by that was in Dauphin, Manitoba in the seventies. When a basic income guarantee was tested, they found that hospitalization rates decreased by 8.5%. We know that 80 to 90% of health outcomes are actually not from medical care but from the social determinants of health. So, we’re paying all this money for healthcare for higher rates of cancer and diabetes and heart diseases, all these things that we pay for downstream in an extremely expensive way that we could avoid.

The same thing with crime. We’re OK with putting someone in prison and spending $60,000 a year on them in prison. Yet, if we just paid $12,000, then they could actually stay out of prison and we would save all that money. The cost of child poverty alone is over $1 trillion per year here in the US. That’s just a massive amount. That’s just for child poverty. There are all these costs in society that we could actually eliminate by making sure there was actually a financial floor underneath everybody.

We can also grow the economy more. I would expect productivity to increase and spending would increase, which would grow GDP, grow the economy. That’s one way that I like people to think about this. That we’re already spending so much money that we’re not counting. That we spend a lot of money in terms of tax expenditures. All these things, like corporate subsidies, that we don’t see. This is like an invisible form of income assistance that we’re giving corporations and people within the tax code. So, if you’re getting a home mortgage interest rate deduction and that’s, say, $3,000 or something per year for you, it’s the same thing as being given $3,000 for owning a house. Look at it as assistance from the government.

And then we have the welfare system itself that has all these conditional benefits. We have unemployment support, food assistance, all these things that actually have the condition of having a low income or not working. We provide this assistance and we limit people and how they can use it. We punish people for accepting employment by removing what we’re providing them in benefits, so that has all these built-in disincentives we don’t want and that don’t really make any sense. If you provide someone food assistance and they can only buy certain things, you are severely limiting them. That’s why cash is so much more useful.

One other thing I also want to mention is that inequality is a big part of this picture. In the US, if we had not allowed inequality to increase since the seventies, effectively everyone would be earning around $12,000 more per year here. Asking if we could afford a basic income is kind of a moot point, because of course we can. We could have done it right now and not increased inequality. We have productivity that has more than doubled since the seventies, while wages haven’t. That’s where the money comes from really for basic income. The people’s share of the productivity growth that has essentially been robbed from them and has not reached them for decades. We’re not benefiting from all this economic growth. Only those at the top are benefiting.

Hardy: You mentioned unconditional basic income can provide those benefits. One proposal that’s been put up against it as an alternative is the idea of a negative income tax, as people believe it would have the same economic impact. Why do you support unconditional basic income over a negative income tax?

Santens: A negative income tax and UBI are both forms of a basic income guarantee. It’s two ways of guaranteeing a basic income. UBI is a flat amount provided to everyone with a clawback done via the tax code. A negative income tax (NIT) is a varying amount of income based on what your income is. Let’s say someone’s provided with a UBI of $1,000 and then it turns out that, because of what they earned during the year, they need to pay an additional $500 in taxes at the end of the year. In contrast, a negative income tax says we’re looking at your earnings and we’re going to provide you with $500 per month, and at the end of the year you don’t pay any more in taxes because it’s already been clawed back via the monthly amount. So that’s the two ways of increasing someone’s income and creating that floor.

I prefer a UBI instead of an NIT approach because of how the labor market has been transformed. NIT makes sense if you know what your income is going to be month to month. However, incomes are actually varying a lot more and they’re continuing to vary, so, if you don’t know what you’re going to earn month to month, you’re just kind of guessing, and it’s very possible that there are going to be a lot of errors where people receive less in negative income tax than they should have received. You can cause issues with people falling into holes because they’re late on payments or they didn’t get enough. Also, there’s a calculation efficiency perspective. Does it make sense to do a calculation on both the front end and the back end? Does it make sense to just calculate it on the back end and that’s it? That’s why I think it makes more sense to avoid those issues entirely and why UBI makes more sense.

Hardy: When it comes to putting UBI in place, the concern that some people have is the effect it will have on the economy, believing that it would result in some form of inflation and affect the prices of products, essentially making it have no real financial benefit for them.

Santens: That is probably the most common concern. There are a few variables that I think it’s important for people to understand. First of all, when we’re talking about a UBI, I think a lot of people think that we’re talking about everyone receiving the same amount, as in we just create that money and then give it to everybody. But, as we were just talking about a few moments ago, there’s a tax code involved, so there are net payers and net receivers. We’re essentially circulating money from the top to the bottom and to the middle. Therefore, there aren’t more dollars chasing the same amount of goods and services. It’s the same dollars chasing the same amounts of goods and services, but the money is in different hands. I think that helps people better understand that the inflationary concerns can be addressed.

Second of all, competition still exists with basic income. In fact, it’s enhanced. We know that self-employment and entrepreneurship actually increase with basic income, so we can expect more people starting businesses, not fewer. Let’s say you own a store, people have more money, so you’re going to raise the cost of milk from $4 a gallon to $8 a gallon. All that it takes is for another store to say we’re going to have a sale, so milk is now $3 a gallon. We actually see this happen every year in Alaska.

Alaska has had the closest thing in the world to a UBI since 1982, where everyone, every year, receives, on average, one thousand dollars to two thousand dollars a year as a dividend funded from Alaskan minerals revenue. Every time that payment goes out to everybody, we’re seeing ‘dividend’ sales because the companies know that people have that extra money, so they’re actually competing against each other to try to get that money, instead of assuming that because people have more money, they’re going to spend it at their place.

I know that people tend to be worried about inflationary pressures leading to rising rents, but there’s a couple of things that are important to remember about UBI. Whereas right now many people are essentially coupled to larger cities because that’s where the jobs are, UBI actually opens up the country for more people to live elsewhere. Right now, you can’t really get by in rural areas in the US as the economies have dried up. UBI reverses this and makes it possible for businesses to start up and to thrive because everyone in town will actually have money to spend at those businesses, so it’ll make more sense for people to move from higher cost of living areas to lower cost of living areas, which will put downward pressure on rents.

The other thing is that there’s a lot of people who want to own their own homes, but currently they can’t afford it. In those experiments in the seventies I mentioned earlier, homeownership rates actually increased by 26%. That was a surprise to researchers because everyone knew the experiment was temporary, yet more people were taking out mortgages over 30 years. So, we can expect that, with UBI, more people will be buying homes and that will put downward pressure on rents, as there’s less demand for those rental properties.

Hardy: You touched on the different cost of living that exists in different areas of the United States. There are those who believe that the amount of UBI should differ depending on where people live. Do you think there is merit in the condition that amounts vary from city to city based on living costs?

Santens: This is one of those counter-intuitive things. People want to make sure that it’s fair that if someone is paying higher costs in an expensive city, then they should get correspondingly more income. I would say that if you’re in a city like New York, then it’s full of opportunity. That’s why it’s more expensive.

Varying amounts based on living costs destroys the incentive structure that opens up the country and helps rural areas of America. You’d actually be subsidizing, say, landlords in expensive areas. In fact, you would provide them with the excuse to actually raise rents, because we’d be paying variable amounts of UBI based on cost. That’s how you’d kind of destroy the downward pressure on rents I mentioned a few moments ago.

I would say that it’s important for the national UBI to be a flat amount. However, it doesn’t stop states and cities from doing their own top-up programs. If they recognize that it is more expensive to live there, then, essentially, they could compete against other areas to help people live there. That could help to create incentives to have more state-wide dividends, like in Alaska. I would like to see more states doing the same thing.

Hardy: On a similar note to the issue with local living costs, there are those who believe that there should be a cap on the amount someone is earning if they are to receive UBI. Why do you believe that everyone, regardless of income and wealth, should get UBI?

Santens: I just want to go back to the explanation of a negative income tax and UBI. The rich would be net payers into the system. Let’s look at the crossover point for negative income tax, being the point where someone is earning enough money that they’re getting $0 in negative income tax. They would receive UBI and, also, their taxes would increase. Their net total income hasn’t increased. It’s just that someone is receiving $12,000 in basic income, but their taxes have increased by $12,000, so their net increase is zero, just like under a negative income tax arrangement.

So, the rich are going to be net payers into the system, even though they would be receiving the basic income amount. I think it’s important that we realize they are net payers and it’s also important that they receive UBI. It’s the same reason why we say that if you’re earning, say, $200,000 per year, universal healthcare goes to you too. There’s no such thing as saying that you earn so much money that the nationalized healthcare system excludes you. The same thing with the government school system. You don’t earn so much money that your kids aren’t allowed to go to a government-run school. You’re paying taxes for the schools, you’re paying taxes for the national health care system, and you’re paying taxes for the UBI, so you are entitled to all of them.

Hardy: One reason why UBI has been pushed into the mainstream is this growing concern over how automation is creating unemployment by taking jobs from ordinary citizens and giving work to robots and machines. You’ve written how: “The future of the United States depends on the immediate adoption of UBI”. How do you see UBI helping to address this issue?

Santens: I don’t think that UBI is the be all and end all solution. It’s just that I think so many more problems can be solved once UBI is in place. The fact that people don’t have a solid economic floor actually leads to a lot of problems. Part of that is a complete lack of bargaining power. When you have no bargaining power, that’s part of the reasons why wages have stagnated, even though productivity has increased. There’s no way for people to demand their fair share of the overall national productivity if they’re losing more and more bargaining power.

What we’re seeing right now is, essentially, automation put on fast forward. We’re seeing so many people lose their jobs. People are being thrown into the unemployment system. Especially here in the US, the unemployment system is just not designed for this. They’re terribly designed. You only get income if you’re unemployed and that’s only if you qualify. You go through the bureaucracy, you meet all the conditions and then, maybe, you’ll get some income while you’re unemployed. Then what?

We want a system that actually operates more like a trampoline. Where there’s no friction. You’re unemployed, but then you’re able to bounce right back. You don’t have to go through lots of problematic steps. So, if you lose your job because you become unemployed due to being replaced by a machine, then you don’t have to worry about not being able to eat and pay your rent. Your basics are covered and now you can focus on figuring out what’s the next job you want to do. Do you want to create your own job? Do you want to retrain? Do you want to look for new employment? Those are choices that are opened up by UBI. Whereas, if you’re in the current unemployment system, you have to immediately take whatever job you can find that may or may not utilize your skills. You also have no bargaining power to say: ‘I’m only going to take this job if you pay me enough.’. That’s one of the reasons why I think so many jobs are actually paying less and less.

We’re creating a larger and larger pool of people who are looking for work and they’re competing against each other. So, I think it’s important that, as we automate, we want to make sure that the productivity growth benefits everybody. Everyone should benefit with automation. No one should be worried about losing their jobs and falling into poverty. As a result, we should actually be essentially incentivizing automation. Business owners are already increasing their investments in automation to the point where it’s scary to think how many jobs that have been eliminated are gone for good now. Employers are going to either utilize existing productivity, and re-hire fewer people, or they will further invest in automation resulting in even more job losses. I’ve seen a couple of estimates that say maybe 42% of the jobs that have been eliminated are gone for good. That’s a big problem and I don’t think those people should be required to go through all these welfare systems to try to get money or to try to prove that they deserve assistance.

Hardy: Given the scale and initial cost, how long do you believe it would take for UBI to become a reality in America?

Santens: We just distributed a stimulus check to most people in the country. Even though some people still haven’t received it, there was a clear determination to do it and it happened promptly. For those receiving direct deposits, they got it pretty quickly. Those who were already on social security got it even more quickly. Now, it’s a matter of reaching the people who do not have direct deposit information, getting the cheques mailed to them, getting payments to people who don’t file taxes. But that’s very achievable. We’ve seen that it can be done if we set our minds to it.

If we were to distribute another similar payment, maybe expanding it out a bit, so that more people receive it, that would be even easier because the processes are already set up. More people are signing up for direct deposit and that’ll make things easier. We could also enable options like Venmo and PayPal, or other ways to get money to people by easier methods. If it’s a regular, recurring payment, then it’s that much easier to keep it going and improve it. If concerns arise about over-stimulating the economy, measures could be taken such as raising interest rates, or changing the UBI amount to make it a perfect fit for the economy.

If we set all those processes in place, it’s going to be difficult to get rid of it because people will like it and see the benefits. People will see that it’s working, reducing poverty, and having lots of positive effects. If we’re enabling more entrepreneurship, that’s also going to have more positive effects. So, I think that just getting something in place, it’ll make it clear that it makes sense to keep it.