November 29, 2020

by Steve Stofka

In the vacant greenspace near my childhood home some kids built a makeshift treehouse using cardboard and pieces of plywood. My brother and I occasionally played baseball and football with these guys, but we didn’t hang out all the time. I pulled myself up and sat in the treehouse, surveying the area from this private space.

One of the kids lived across the street from the tree and came running over. We needed to pay dues to use the tree. How much? Half of my week’s allowance. Too much. My little brother for free. How come he gets in free and I have to pay? They used a ladder to get the plywood up there. If the tree house had a ladder, maybe it would be worth it. No ladder. Negotiations broke down, but we respected their space.  

A few weeks later, a city crew mowed the tall grass, weeds, and flowers, and removed the treehouse. Even though the space was public, the public didn’t own the space, my dad explained; the city owned it. “Who did the city buy it from?” I asked my dad. He shrugged and guessed it was the Indians.

As a kid I struggled to understand the difference between owning something and using something. We could use public spaces, but we couldn’t dispose of them, like selling them to someone else. The example everyone used was the Brooklyn Bridge. Any person who offers to sell you the bridge is trying to cheat you.

As a result of this, many of us associated ownership with responsibility. If the city owns the Brooklyn Bridge, then the city is responsible for the bridge. Many people extended this association to other common goods: our schools, roads, parks, museums, hospitals, and libraries; and to public goods: the air we breathe, the water we drink; and to our natural resources: our forests, national parks and seashores. We could use them, but some government was responsible for them.

The Buddhist, Christian and Jewish traditions charge us to help the poor. Despite this moral tradition, too many of us believe that the poor are responsible for their own condition. Why? If it’s their problem, we don’t have responsibility. If it is not their problem, it’s the “city’s” responsibility. What a wonderful relief to have dodged that problem!

We have many programs to help the poor; despite this, thousands of poor crowd our downtown streets. Driven by crime and power struggles in other nations, poor people come to our country to make a better life for themselves.

This week the Supreme Court will hear arguments whether the Trump administration can exclude illegal immigrants from the census count. If the court rules in favor of the administration’s position, New York, Florida, Texas, and California will lose representation and Federal funding for programs that help the poor.

Like many of our common resources, people can attend their local church without contributing to the collection basket. However, members of the congregation are supposed to put money in the collection basket, not take it out. Should the same rules apply to the people of an entire nation?

Most of us are net takers from the collection plate because we benefit from the institutional wealth accumulated by our society, the congregation. We do not own the wealth, but we use the wealth without paying our dues. Instead we store those savings inside of us in different forms: education, skills, health and a respect for law. Undeveloped countries do not pass the collection basket around; it stays in the inner sanctum away from the prying fingers of the congregation.

The urbanization of the American population has taken place over the past 150 years; in China it has happened in the past 20 years. Freed from the need to grow our daily food from the land where we live, we have congregated in the cities, where we can tap the wealth of our institutions.

An entire set of property rights had to be negotiated for any of us to have access to a familiar institution: the internet. Institutions are built on incentives and regulations; without incentives, an institution becomes weak. Without regulations, corrupt. When regulations overwhelm the incentives, the institution becomes a yoke; the concentration of political power within Executive agencies is an example. When incentives control the institution, it becomes a rampaging monster; slavery was an example.

Many of us are distrustful of institutions; we may dislike our growing dependence on them. The American myth was built on the self-reliant individual as exemplified by the actor John Wayne. Most westerns dwell on the romantic individual, not the quotidian institutions that supported that individual. How did the wood get to the prairie to build the cabin? How did the guns, the saddles and all the accoutrements of the cowboy get made? A network of connected industry and artisans.

In the past century we have established several institutions whose benefits are accessible only by those who have paid a lifetime of dues: Social Security and Medicare. These are built on the Catholic Clubhouse model for admission to heaven: pay dues for most of a lifetime before admission to the benefits of the clubhouse.

The fitness club model lets a person access all the benefits of the club from the moment they start paying dues. The Universal Basic Income (UBI) plan is such a model in disguise (Yang, 2020). Wait, what?! One of the features of UBI is that people start getting money from the federal government even if they don’t pay federal income taxes. Where’s the dues, dude?

The funding for the program comes from a 10% VAT tax, a value added tax on many goods and services. It is a sales tax added at the production point, not at the transaction point, so it is added to the cost of goods. Because most people spend all their income, the UBI payment is put back into the economy. The dues and the UBI payment happen simultaneously.

Imagine a fitness club which pays its patrons $10 a month to join the club, the amount of the monthly dues. Why would they do that? The gym equipment is part of a network that generates electricity while the patrons work out; they generate the power for the club each month. How does the club make money? The patrons are more productive away from the gym and earn more income. The businesses that surround the gym get more sales from the gym patrons and pay a fee to the gym. The city makes no additional sales tax from the gym but makes a great deal more tax from the surrounding businesses.

Can a business model like the UBI be successful? Yes. It promotes local business growth, reduces uncertainty for firms and people, and circulates money in the economy. It incentivizes micro businesses to take a risk and boost the fortunes of local communities. In supporting the financial fitness of our communities, it promotes the fitness of our families.

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Photo by Fidel Fernando on Unsplash

Yang, A. (2020). The Freedom Dividend, Defined – Yang2020 – Andrew Yang for President. Retrieved November 28, 2020, from https://www.yang2020.com/what-is-freedom-dividend-faq/