Noted capitalist Bill Gross wants the Federal Reserve to print money and just hand it out to ordinary citizens, regardless of whether they are productive members of society or drug-addled bums.
That's right, in his latest investment outlook the bond king has endorsed a radical proposal that is being embraced in some circles on both the left and the right, called universal basic income. UBI is the simple idea that the government should provide a basic income floor to all citizens, sort of like a "social security for all" plan.
Liberals like UBI because it provides a mechanism for wealth redistribution, boosting the incomes of the middle lower classes. But conservatives have latched onto UBI as a means to simplify and constrain the welfare state. That was libertarian political scientist Charles Murray's thinking for proposing a UBI to replace "Social Security, Medicare, Medicaid, welfare programmes, social service programmes, agricultural subsidies, and corporate welfare," back in 2006. If we simply gave Americans $10,000 per year, Murray reasoned, we could fulfill our moral responsibility to the poor without being needlessly paternalistic or supporting a massive bureaucracy.
Of late, it's been tech-sector intellectuals who have glommed on to UBI, as they can easily see a near future that is dominated by so much automation that it causes mass unemployment and serious social dislocation. UBI could sooth the anger caused by technological change and job loss, and thus allow Silicon Valley's project of revolutionizing the world through technology to continue apace.
This is the basic logic that has got Gross excited about the idea. He writes:
If income goes to technological robots whatever the form, instead of human beings, our culture will change and if so policies must adapt to those changes . . . 78% of the eligible workforce between 25 and 54 years old is now working as opposed to 82% at the peak in 2000. That seems small but it’s really huge. We’re talking 6 million fewer jobs. Do you think it’s because Millennials just like to live with their parents and play video games all day? I think not. Technology and robotization are changing the world for the better but those trends are not creating many quality jobs. Our new age economy – especially that of developed nations with aging demographics – is gradually putting more and more people out of work.
Gross argues that while job retraining programs and education reform are worthwhile ideas for counteracting this decline in labor force participation, he doubts it will be enough. He continues:
Four years of college for everyone might better prepare them to be a contestant on Jeopardy, but I doubt it’ll create more growth; for the Universities perhaps, but not many good jobs for the students. Instead we should spend money where it’s needed most – our collapsing infrastructure for instance, health care for an aging generation and perhaps on a revolutionary new idea called UBI – Universal Basic Income. If more and more workers are going to be displaced by robots, then they will need money to live on, will they not? And if that strikes you as a form of socialism, I would suggest we get used to it. Even Donald Trump claims he won’t leave anyone out on the street – a liberal Republican thought if there ever was one. And they are on the street you know. Check out any major downtown in the U.S. if you want to see our future culture. Not the stadiums with the box seats; the streets with the tents and grocery carts.
Not only is Gross for a radical reimagining and expanding the welfare state, but he argues that we should use monetary policy to pay for it. He goes on to write that because central banks are fighting to raise inflation anyway, and have been using their monetary firepower to raise asset prices owned by the rich, there's no reason not to use those tools to directly raise the incomes of ordinary Americans.
"Money for free! Well not exactly," he writes. "The Piper that has to be paid will likely be paid for in the form of higher inflation, but that of course is what the central banks claim they want."
This is pretty surprising stuff coming from a guy who bet the farm back in 2010 on the idea that Federal Reserve bond buying would spark excessive inflation and cause interest rates to soar. Gross was wrong, and now, I guess, he's admitting that his economic framework was flawed.
And he should be commended for changing his mind as the evidence changes, as he should be commended for looking outside the box for solutions to anger that the 2016 election cycle has clearly showed are festering just beneath the surface of middle-class America.
This is in stark contrast to what many of the experts who spoke at this week's Milken Institute Global Conference were saying. At the conference, which draws the elite of the world of finance as well as many politicians, many seemed to be in denial, dismissing the idea that 2016 presidential primaries say anything about the problems ordinary Americans are facing.
Of course, the chances of something like UBI passing in a political climate like we have today aren't all that great. UBI boosters like to say that it's an idea that both sides of the aisle can get behind, but the reasons why they can get behind it are so diametrically opposed as to make this agreement moot.
The Democratic Party is getting pulled to the left on issues of entitlement spending and the minimum wage. The Republican Party (outside of Donald Trump) believes that we must cut or at least cap transfer spending. And neither party seems particularly interested in compromising, which makes the idea that they will set aside their differences to focus instead on the delivery method of these transfer payments a bit far fetched.
Wonks like to talk about issues like UBI, because it allows them to discuss policy without taking political stand on what level of redistribution is fair. But politicians and voters care much more about big moral issues like what level of wealth inequality is just. And Congress isn't going to waste the political capital on a major reform that may be palatable for everyone but doesn't address these larger questions.