Tag Archives: Daniel Moynihan

Amazing Grace: Dr. King and the guaranteed annual income

15 Jan

Here’s an inconvenient truth, the Reverend Dr. Martin Luther King, Jr. was a Christian, a Baptist minister and a deeply spiritual man. What he was not was a deity. He was like all of us a human in need of grace. As a human he attempted to lift not only the spirit, but the human conditions of others. He was human and humane.

Dr. King wrote one final book, which was  excerpted on a blog

Few people have heard of the Rev. Martin Luther King Jr.’s last book. It was called Where Do We Go From Here: Chaos or Community? (New York: Harper & Row, 1967).

Even fewer people realize that King was an advocate of a guaranteed income. He weighed the issue carefully before drawing conclusions and making the following statement.

Toward the end of Where Do We Go From Here, in a chapter titled “Where We Are Going,” King states his support for the guaranteed income policy, that right-wingers and left-wingers had both been studying. See what he says to us.

This is an excerpt of what Dr. King said in the last chapter of Where Do We Go From Here:Chaos or Community? (New York: Harper & Row, 1967).

We have come a long way in our understanding of human motivation and of the blind operation of our economic system. Now we realize that dislocations in the market operation of our economy and the prevalence of discrimination thrust people into idleness and bind them in constant or frequent unemployment against their will. The poor are less often dismissed from our conscience today by being branded as inferior and incompetent. We also know that no matter how dynamically the economy develops and expands it does not eliminate all poverty.

We have come to the point where we must make the nonproducer a consumer or we will find ourselves drowning in a sea of consumer goods. We have so energetically mastered production that we now must give attention to distribution. Though there have been increases in purchasing power, they have lagged behind increases in production. Those at the lowest economic level, the poor white and Negro, the aged and chronically ill, are traditionally unorganized and therefore have little ability to force the necessary growth in their income. They stagnate or become even poorer in relation to the larger society.

The problem indicates that our emphasis must be two-fold. We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available.

In 1879 Henry George anticipated this state of affairs when he wrote, in Progress and Poverty:

“The fact is that the work which improves the condition of mankind, the work which extends knowledge and increases power and enriches literature, and elevates thought, is not done to secure a living. It is not the work of slaves, driven to their task either by the lash of a master or by animal necessities. It is the work of men who perform it for their own sake, and not that they may get more to eat or drink, or wear, or display. In a state of society where want is abolished, work of this sort could be enormously increased.”

We are likely to find that the problems of housing and education, instead of preceding the elimination of poverty, will themselves be affected if poverty is first abolished. The poor transformed into purchasers will do a great deal on their own to alter housing decay. Negroes, who have a double disability, will have a greater effect on discrimination when they have the additional weapon of cash to use in their struggle.

Beyond these advantages, a host of positive psychological changes inevitably will result from widespread economic security. The dignity of the individual will flourish when the decisions concerning his life and in his own hands, when he has the assurance that his income is stable and certain, and when he know that he has the means to seek self-improvement. Personal conflicts between husband, wife and children will diminish when the unjust measurement of human worth on a scale of dollars is eliminated.

Two conditions are indispensable if we are to ensure that the guaranteed income operates as a consistently progressive measure. First, it must be pegged to the median income of society, not the lowest levels of income. To guarantee an income at the floor would simply perpetuate welfare standards and freeze into the society poverty conditions. Second, the guaranteed income must be dynamic; it must automatically increase as the total social income grows. Were it permitted to remain static under growth conditions, the recipients would suffer a relative decline. If periodic reviews disclose that the whole national income has risen, then the guaranteed income would have to be adjusted upward by the same percentage. Without these safeguards a creeping retrogression would occur, nullifying the gains of security and stability.

This proposal is not a “civil rights” program, in the sense that that term is currently used. The program would benefit all the poor, including the two-thirds of them who are white. I hope that both Negro and white will act in coalition to effect this change, because their combined strength will be necessary to overcome the fierce opposition we must realistically anticipate.

Our nation’s adjustment to a new mode of thinking will be facilitated if we realize that for nearly forty years two groups in our society have already been enjoying a guaranteed income. Indeed, it is a symptom of our confused social values that these two groups turn out to be the richest and the poorest. The wealthy who own securities have always had an assured income; and their polar opposite, the relief client, has been guaranteed an income, however miniscule, through welfare benefits.

John Kenneth Galbraith has estimated that $20 billion a year would effect a guaranteed income, which he describes as “not much more than we will spend the next fiscal year to rescue freedom and democracy and religious liberty as these are defined by ‘experts’ in Vietnam.”

Dr. King was not the only leader who proposed the guaranteed annual income. President Richard Nixon’s legacy was tarnished by the paranoia, which led to Watergate. People often forget that no one is perfect and even deeply flawed people can accomplish some good things. PBS has a Nixon background report

Nixon supported the concept of the guaranteed annual income, although he and Daniel Moynihan differed about details. Back in the day, people from different parties could actually work together. Peter Pessell and Leonard Ross reviewed Moynihan’s book The Politics of the Guaranteed Annual Income in the New York Times.

But that proved to be the end of the line. In the summer of 1970 conservatives on the Senate Finance committee riddled H.E.W. Secretary Robert Finch with hostile questions and helped force his resignation. The Administration revised the bill and began losing the liberals. The decisive defeat, on a Finance committee vote of 10-6, united Oklahoma New Populist Fred Harris and liberals Eugene McCarthy, Albert Gore and Clinton Anderson with the most mossy-backed of the reactionaries. For two more years the Administration kept moving the plan to the right at the expense of support from the left. Currently F.A.P. reposes in a state best described as malign neglect.

What went wrong? Most of Moynihan’s eloquent, polemical book is devoted to an exhaustively researched attack on the liberal opposition. To be sure, he does not spare the right (and is impressively blunt in recounting Nixon’s own self-defeating partisanship in 1970–the year of Carswell, Cambodia, Scammon and Wattenberg). But the intriguing question–for the reader as for Moynihan–is why the left helped kill the guaranteed income.

Part of the answer is that it wasn’t much of an income: $1,600 for a family of four plus $800 in food stamps. This was more than a handful of states gave their poor, but much less than 1970 welfare levels in the big Northern states. On the other hand, states would have been able to supplement the F.A.P. minimum payments with the Federal Government picking up part of the tab. A “grandmother” clause would have assured current welfare recipients no reduction in benefits. F.A.P. supporters argued that states traditionally generous would remain so. Liberal opponents feared the outcome of putting the whole system up for grabs at a time of inflation, rising taxes and free-floating disgruntlement.

Aside from money, controversy centered on work requirements and work incentives. Until the mid- sixties, welfare recipients stood to lose at least a dollar of benefits for every dollar they earned working; even more, if they happened go be unlucky enough to just miss the income cutoff for public housing. Welfare legislation in 1967 reduced the direct take-back to two dollars in three, but left in much of the perverse incentive to shun work. A family might still inch its way over a bureaucratically defined poverty line, and thereby lose a thousand dollars in Medicaid benefits.

There were several possible ways of correcting the problem. The Government could lower the rate at which it penalized welfare recipients’ earnings. This would cost money, and would make large numbers of the working poor eligible for the dole–a strategy with political costs as well as advantages, as George McGovern later discovered. Or the law could simply force welfare recipients to work, incentives or no. The difficulty here was that there were very few jobs–especially in an economy with steeply rising unemployment–for untrained welfare mothers. Alternatively, one could create jobs. Congress tried that in 1967 with the “Work Incentive Program” (cheerfully abbreviated as WIN).But by September 1969, only 13,000 welfare recipients had been put to work. Neither local agencies nor Congress has shown much enthusiasm for paying an annual $1,000 or $2,000 per child for day care facilities so that mothers could work off their welfare payments on $3,000-a-year jobs.

Faced with these uncomfortable alternatives, the Nixon Administration chose a bit of each. F.A.P. would cut the penalty rate from two-thirds to one-half of every extra dollar earned by the poor while on welfare; all welfare recipients would be required to register with the United States Employment services for work and would be docked $500 if they refused. New WIN jobs and day-care facilities would be promised.

No one expected the work requirement to work, least of all the President. “I don’t care a damn about the work requirement,” he told Moynihan, “This is the price of getting $1,600.” Again, as McGovern belatedly found out, the only way to promote welfare changes was to call them workfare.

But the price Nixon paid for a vague and unstructured work requirement was to exacerbate liberal fears. Mothers of small children, it was argued, might be ordered to work regardless of the adequacy of day-care facilities or the appropriateness of the job. To make matters worse, hard-won rights of judicial review for welfare recipients would have been curtailed by the Nixon bill.

Evaluating these fears is a problematic task, which Moynihan does not systematically attempt. In a thick, complicated book he finds little space for the detailed arguments raised by the liberal opposition. His focus, instead, is on motives. The liberals, he charges, could not permit fundamental change in the welfare system for they were too beholden to their constituencies of social workers, self-seeking spokesmen for the underprivileged and existing welfare recipients in high-payment states.

A more sympathetic phrasing could be constructed on the same evidence. F.A.P. offered epochal gains for the Southern poor at the price of a change in the rules with uncertain consequences for the mothers and children on welfare in the North. Liberals chose to be strategically conservative.

What lesson is to be learned? Moynihan, though defeated in this instance, draws a happy conclusion. Quoting W.H. Auden, his epigraph states the theme: “In the prison of his days/Teach the free man how to praise.” His opening and closing chapters offer praise for the American political system, which can broach (and, Moynihan trusts, one day accomplish) “fundamental reform” such as the substitution of F.A.P. for welfare. That a Republican President could offer F.A.P. and carry with him a fair portion of conservatives, Moynihan contends, testifies to the system’s remarkable capacity for change. That liberals could help shoot it down is but a regrettable example of the frustration and delay inherent in any great project of revision.  [Emphasis Added]

Microcredit and microlending are proven vehicles to raise communities out of poverty. The new struggle is for economic self-sufficiency. This country is in a wrenching moment in history because credit crunch weasels through maneuvers that a skilled Vegas high roller would have avoided, have put this country deep in debt and indebted to others. One can only speculate, but had Dr. King survived he would have probably been leading the fight for jobs, preserving the middle class, and helping more of the poor into the middle class.  The new struggle is economic so that people have a roof over their head and can afford a choice of where to live. 

Robert J. Samuelson, the economist, wrote an opinion piece which appeared in the Washington Post, which questions the value of credit crunch weasels to this economy and this society. In A Wall Street Pay Puzzle Samuelson says the following:

Why does Wall Street make the big bucks? A nation with 10 percent unemployment is understandably puzzled and outraged when the very people at the center of the financial crisis seem to be the first to recover and are pulling down fabulous pay packages. At Goldman Sachs, the average pay for 2009 has been estimated at nearly $600,000; at J.P. Morgan Chase’s investment bank, it’s been reckoned at slightly below $400,000. These averages conceal multimillion-dollar bonuses for top traders and investment bankers; underlings get smaller sums. Are Wall Street’s leaders that much smarter and more industrious than everyone else?

By their own admission, they’re not. Testifying last week to a congressionally created commission, Wall Street chief executives conceded that their errors directly contributed to the crisis. Wall Street money moguls may be bright and diligent, but they’re not unique. It’s where they work — not who they are — that’s so enriching. A study of Harvard graduates found that those who went into finance “earned three times the income of other graduates with the same grade point average, demographics and college major,” reports Harvard economist Lawrence Katz, the study’s co-author.

Is it possible that what Wall Street does is three times more valuable to society than other well-paid occupations? That’s hard to believe. It’s not that Wall Street is just the vast casino of popular imagination. It helps allocate capital, which — done well — promotes a vibrant economy. In 2007, Wall Street firms enabled businesses to raise $2.7 trillion from the sale of stocks, bonds and other securities. But Wall Street sometimes misallocates capital, as the 1990s “tech bubble” and today’s crisis painfully remind. The huge social costs (high unemployment, lost income) refute the notion that Wall Street consistently creates exceptional economic value that justifies exceptional compensation….

All this provides context to today’s pay controversies. Wall Street may be greedy — who isn’t? — but the explanation for its high compensation is its economic base (wealth, not production). That’s why it’s so hard to control or regulate. Since the 1960s, the industry has changed dramatically. Then, revenue came mainly from commissions on buying stocks and bonds for others. In 1966, commissions were 62 percent of revenue. Now, firms mostly make and manage investments for themselves and others. In 2007, commissions provided only 8 percent of revenue.

The transformation has made Wall Street a greater source of potential economic instability. Some compensation packages exacerbated the crisis by offering big bonuses if big risks paid off. Because government provided a safety net for the whole system, it’s justified in taxing the industry — as President Obama proposed last week — to cover the costs, as Douglas Elliott, a former investment banker now at the Brookings Institution, correctly argues.

A larger issue is: How much should society concentrate on existing wealth as opposed to creating new wealth? Wall Street’s lavish pay packages may attract too many of America’s best and brightest. “It’s bad for the rest of the economy,” says economist Thomas Philippon of New York University, a student of the financial sector. “We also need smart brains outside finance.” If that somehow happens, the crisis may yet have a silver lining.

Hopefully, the pols will take this moment in time to make the structural changes to the economic system, which are necessary to preserve true competition, yet provide true economic stimulus to all parts of the society. Right now, the only people with a guaranteed annual income are credit crunch weasels.

The fight for the dignity of the person continues.

John Newton (1725-1807)
Stanza 6 anon.

Amazing Grace, how sweet the sound,
That saved a wretch like me.
I once was lost but now am found,
Was blind, but now I see.

T’was Grace that taught my heart to fear.
And Grace, my fears relieved.
How precious did that Grace appear
The hour I first believed.

Through many dangers, toils and snares
I have already come;
‘Tis Grace that brought me safe thus far
and Grace will lead me home.

The Lord has promised good to me.
His word my hope secures.
He will my shield and portion be,
As long as life endures.

Yea, when this flesh and heart shall fail,
And mortal life shall cease,
I shall possess within the veil,
A life of joy and peace.

When we’ve been here ten thousand years
Bright shining as the sun.
We’ve no less days to sing God’s praise
Than when we’ve first begun

Amazing Grace, how sweet the sound,
That saved a wretch like me.
I once was lost but now am found,
Was blind, but now I see.

http://constitution.org/col/amazing_grace.htm

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