One of the most audacious ideas currently gaining favor among American progressives is the idea of a Universal Basic Income (UBI). UBI is a guarantee of money to every citizen in a population – no-strings attached.
The only UBI that exists in its purest form is in Alaska, where it is known as the Permanent Fund Dividend. In 1976, the State of Alaska began investing oil royalties into a rainy day fund. In 1980, the Alaska Legislature approved an annual dividend to all Alaskans from the earnings off of that fund, which continues to this day. There are no requirements, other than residency requirements, for receiving the dividend. Make six-figures? No problem, you get a dividend. Criminal record? Money for you too!
And who in Alaska defends this Universal Basic Income most vociferously? Moral and fiscal conservatives.
In 2015, facing a budget shortfall of a more than three billion dollars, then Independent Governor Bill Walker prudently capped the dividend payout, leaving the remainder of the dividend in the permanent fund. Alaska is the only state in the union with no state sales tax, no state income tax, no local income tax, and no state property tax. For years, ninety percent of the State’s government revenue came from oil royalties. This over-reliance on oil revenues, and thus oil prices, lead to wild swings in the State’s finances, with surpluses in some years and stark deficits in others.
By restricting the dividend payout, Governor Walker essentially ended his political career. The unrestricted payout of the dividend was the sacred cow in Alaska politics, and while Governor Walker did not kill it, he just milked it a little, but that was enough to cause a backlash.
During the 2018 election cycle, facing impossible odds and a scandal that caused his Lieutenant Governor Byron Mallott to resign, Governor Walker pulled out of the race. Dunleavy, the far-right Christian conservative, ran on a platform of budget cuts and full dividends PLUS the missing money that had been capped from previous years. He won with a 7% margin over his Democratic rival, Mark Begich, former US Senator and Anchorage mayor. Dunleavy won with 51% of the vote, the same amount Trump won in Alaska back in 2016.
So how does a mostly conservative state like Alaska embrace one of the most progressive policies of the Democratic Party’s left wing?
In previous efforts, testing the benefits of the Universal Basic Income in countries like Finland and Canada, and parts of California, the money has always been treated as a gift. Intentionally, there was no notion that the UBI must be earned. One day, there is free money.
The major difference with these experiments and the Alaska Permanent Fund Dividend is that Alaskans believe that the Dividend is owed to them. Unlike previous UBI experiments, Alaskans, like owners of stock in a corporation, believe they own a piece of Alaska, and the Dividend is their annual shareholder payout. This belief is rooted in both Alaska society and Alaska law; the Alaska Constitution declares that resources on State land shall be developed “for the maximum benefit of its people.”
And how do Alaskans earn those benefits? Simply by living there!
Loss Aversion & Ownership
In cognitive psychology, people will work harder to avoid losses than to acquire equivalent gains. Loss aversion is an important concept encapsulated in the expression “losses loom larger than gains” (Kahneman & Tversky, 1979). It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.
In previous Universal Basic Income experiments, the money distributed was viewed as a gain. But in Alaska, the Dividend is framed as something Alaskans OWN. Shifting payments towards government services was seen by some as not just a loss, but as theft, plain and simple.
Internally, Alaska is joked to be a redneck socialist state by many. The reason that Alaskan politicians can often run on a political contradiction is because of “loss aversion.”
Governor Dunleavy wants a full dividend payout of $3,000 for 2019 PLUS over $3,600, spread out over three years, to pay back the previous years reduced dividends. The proposed 2019 dividend payout creates around a $1.6 billion deficit for the next fiscal year.
Alaska is the only state in the union with no state sales tax, no state income tax, no local income tax, and no state property tax. For the first time in decades, there is now a chorus of calls for a state income tax. Mind you, Alaska still has a $60+ billion Permanent Fund, which theoretically could continue to fund a good portion of State government off of earnings alone for the foreseeable future. But instead of milking the sacred cow to pay for government services, more Alaskans would rather pay taxes.
To have a Universal Basic Income adopted across the political spectrum, every American needs to be told that they OWN a piece of the United States and that they deserve a percentage of profits earned by businesses on that land. Suddenly, Americans will not just be residents, but owners. If Alaska has illustrated anything, it has shown that if a UBI becomes institutionalized in terms of property, citizens across the political spectrum will argue as to why they are entitled to it – no holds barred.
If progressives are serious about a Universal Basic Income, it needs to be framed in terms of ownership just like it is in Alaska, otherwise, the policy will never gain wide acceptance.