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Trading  | June 5, 2018

Back in January, we introduced you to Michael Tubbs – the new mayor of Stockton, California (and the youngest mayor in American history of a city with a population of at least 100,000, according to his staff).

As a reminder, in 2013, Stockton became the most populous US municipality to ever declare bankruptcy. Since then, while the city has struggled through a painful Chapter 9 restructuring, its primarily agriculture-based economy remains mired in poverty.

Tubbs was campaigning during his final year ahead of graduation from Stanford University and upon his victory, he “felt almost a moral responsibility” to take risks and pursue unorthodox policies to help Stockton’s residents, and so, as we noted in January, the pervasive poverty in his city is what led Tubbs to announce the city would soon begin an interesting social experiment.

At the time, reports stated that a random sample of 300,000 Stockton residents will receive $500 every month with no strings attached. The program was set to become the US’s largest experiment with a policy that has become a favorite topic of Mark Zuckerberg and his Silicon Valley peers: Universal Basic Income.

Proponents argue that:

  • The lack of expensive means-testing leads to a higher proportion of the budget going to recipients. This would be more efficient

  • The transparency of universal payments would drastically reduce the need to detect benefits fraud

  • One scheme could replace the current complex arrangement of government benefits, rebates and tax rebates

  • Work will always benefit recipients of this welfare, rather than the ‘benefits trap’ that leaves part-time workers

Critics argue that:

  • Universal income may be inflationary and, in attempting to move all individuals out of poverty, it may simply raise the level of the poverty line

  • It may reduce the incentive to work and studies have found some evidence to support this.

  • A reduction in taxable income would reduce the government’s ability to cover other expenses, such as healthcare

The universal basic income, in theory, combats poverty by doling out a fixed amount of cash per month to low-income or unemployed residents to create a guaranteed safety net, but after running a two-year trial, giving 2,000 unemployed residents about $685 a month, Finland recently abandoned its Universal Basic Income experiment (with the Finnish government imposing stricter benefits plans, introducing legislation making some benefits for unemployed people contingent on taking training or working at least 18 hours in three months).

However, despite Finland’s recent cessation, Tubbs is moving ahead with his plan… but on a considerably smaller scale than planned for in January.

As The Daily Caller reports, Stockton will be choosing 100 of its own residents to receive $500 a month in private funds to approximate the effects of a universal basic income.

The Economic Security Project (ESP) is funding the 18-month project, spending $1 million to conduct the test and monitor how the hand-picked residents spend the extra cash each month. ESP is partnering with Stockton Mayor Michael Tubbs, who says there will be “no strings” for accepting the payments.

“And then, maybe, in two or three years, we can have a much more informed discussion about the social safety net, the income floor people deserve and the best way to do it because we’ll have more data and research,” Tubbs told Reuters.

Facebook co-founder Chris Hughes, who also worked on former- President Barack Obama’s campaign, co-chairs ESP.

In the past, Hughes has proposed instituting a basic income of $500 for every American making under $50,000 a year. He proposed raising the income and capital gains taxes to 50 percent to pay for the program, according to Reuters.

Libertarian economist Charles Murray has championed the universal basic income as a viable and better alternative to welfare in the U.S., describing it in 2016 as “the least damaging way for the government to transfer wealth from some citizens to others.”

The Heritage Foundation’s Robert Rector, an expert on welfare policy, disagreed with Murray’s analysis in a 2018 report, saying welfare reform is a better vehicle for a social safety net.

“The premise of universal basic income has a known track record of failure that hurts recipients and increases dependence on government,” Rector writes.

“Policymakers seeking to reform the welfare state should focus instead on policies proven to work.”

Growing up in Stockton, where one in four residents live in poverty, Tubbs’ family relied on government assistance to meet their basic needs.

“My mom was on welfare for the first five, six years of my life,” he said. “You’d get food stamps, but that’s not cash, and maybe food’s not the biggest need … So this gives people more agency to kind of make the best decision.”

And remains convinced the UBI experiment will show that Stockton’s best bet is to invest in its own people.

But, as we noted previously, not everybody agrees.

In what he describes as a “radical critique of Universal Basic Income”, Charles Hugh Smith explained in a post we published back in June how UBI – far from staving off widening income inequality – would instead lead to de facto “serfdom”.

But a radical critique must go much, much further, and ask: is UBI the best that we can do? If we provide the basics of material security – the bottom level of Maslow’s hierarchy of human needs – what about all the higher needs for positive social roles, meaningful work, and the opportunity to build capital?

This critique reveals the unintended consequences of UBI: rather than deliver a Utopia, UBI institutionalizes serfdom and a two-class neofeudalism in which the bottom 95% scrape by on UBI while the top 5% hoard what every human wants and needs: positive social roles in our community, meaningful work that makes us feel needed, and the opportunity to build capital in all its manifestations.

UBI is the last gasp of a broken, dying system, a “solution” that institutionalizes all the injustices of serfdom under the guise of aiding those left behind by automation. We can do better–we must do better–and I lay out how to do so in this book.

A radical critique must also examine the widely accepted assumption that automation will destroy most jobs. Is this assumption valid? It turns out this assumption rests on a completely false understanding of the nature of work, the economics of automation and the presumed stability of an unsustainable global economy.

Community organizer Trina Turner, a pastor who deals with economically disadvantaged people, hopes the experiment will change the way people see Stockton, which declared bankruptcy in 2012 and has high rates of crime and homelessness.

“I think it will begin to shift the narrative about Stockton,” she said. “Instead of being the miserable city, we’ll be the city that people are waiting to come to for all of the right reasons.”

Of course, the experiment could just encourage more freeloaders and discourage actual taxpayers in the city… but then that’s probably racist, or sexist, or poorist, so we would never say that.


A revolutionary initiative is helping average Americans find quick and lasting stock market success.

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