California city tries to fight income inequality by giving away free money

By Peter S. Goodman, New York Times News Service

Saturday, June 2, 2018 | 2 a.m.

STOCKTON, Calif. — This town in California’s Central Valley has long functioned as a display case for wrenching troubles afflicting American life: The housing bust that turned Stockton into an epicenter of a national foreclosure disaster and plunged the city into bankruptcy. The homeless people clustered in tents along the railroad tracks. Boarded-up storefronts on cracked sidewalks. Gang violence.

Now, Stockton hopes to make itself an exhibition ground for elevated fortunes through a simple yet unorthodox experiment. It is readying plans to deliver $500 a month in donated cash to perhaps 100 local families, no strings attached. The trial could start as soon as the fall and continue for about two years.

As the first U.S. city to test so-called universal basic income, Stockton will watch what happens next. So will governments and social scientists around the world as they explore how to share the bounty of capitalism more broadly at a time of rising economic inequality.

Will single mothers use their cash to pay for child care so they can attend college? Will people confronting choices between buying school supplies or paying their electric bills gain a measure of security? Will families add healthier food to their diets?

Basic income is a term that gets thrown around loosely, but the gist is that the government distributes cash universally. As the logic runs, if everyone gets money — rich and poor, the employed and the jobless — it removes the stigma of traditional welfare schemes while ensuring sustenance for all.

That a city in California has made itself a venue for the idea seems no accident. The state has long tried fresh approaches to governance. Ahead of the state’s political primaries, much of the conversation has centered on concerns about economic inequality.

The concept of basic income has been gaining adherents from Europe to Africa to North America as a potential stabilizer in the face of a populist insurrection tearing at the post-World War II liberal economic order. It is being embraced by social thinkers seeking to reimagine capitalism to more justly distribute its gains, and by technologists concerned about the job-destroying power of their creations.

In various guises, the idea has captivated activists and intellectuals for centuries. In the 1500s, Thomas More’s novel “Utopia” advanced the suggestion that thieves would be better deterred by public assistance than fear of a death sentence.

In more modern times, Milton Friedman, darling of laissez-faire economics, embraced the idea of negative income taxes that put cash in the hands of the poorest people. The Rev. Martin Luther King Jr. advocated “the guaranteed income.”

King’s legacy has currency in Stockton, which is now led by a history-making mayor, Michael Tubbs. At 27, he is the youngest mayor of a sizable U.S. city, and the first African-American to hold the job here.

Tubbs grew up in South Stockton, where payday lenders and pawnshops exploit the desperation of working poor people. His father was in prison for gang-related crime. His mother worked in medical customer service and struggled to pay bills, relying on welfare and food stamps.

His mother kept him inside, his nose in his school books, fearful of the pitfalls beyond the door.

He recalls standing at the mailbox tearing open a college acceptance letter while police cars massed down the block, lights flashing, as a neighbor’s son was arrested for dealing drugs.

Many of the adults around him were juggling multiple jobs, yet still living under the tyranny of unpaid bills.

“People were working themselves to death,” Tubbs said. “Not working to live a good life, but working just to survive.”

He enrolled at Stanford University. In his high school yearbook, friends scribbled congratulations for his having “made it from here.”

He was an intern in President Barack Obama’s White House. After graduating from college in 2012, he taught ethnic studies, government and society at a charter high school while serving on the Stockton City Council.

On the same day that President Donald Trump was elected, voters in this city of 300,000 people put Tubbs in charge.

Working but struggling

Forged as a supply hub during the Gold Rush of the 19th century, Stockton evolved into a center for migrant workers who toil on the fruit and vegetable farms of California’s Central Valley.

By the new millennium, it had become a bedroom community offering affordable homes for people who worked in unaffordable places like San Francisco and Silicon Valley, as far as two hours away.

The crash in housing prices played out savagely here. The local unemployment rate reached 19 percent in early 2011. Stockton descended into bankruptcy.

As Tubbs took office, nearly 1 in 4 local residents was officially poor. The median household income was about $46,000 — roughly one-fourth below the national level. Only 17 percent of adults 25 and older had graduated from college. People were perpetually vulnerable to mundane calamities like auto troubles that kept them from getting to work.

“Poverty is the biggest issue,” the mayor said. “Everything we deal with stems from that. There’s so many people working incredibly hard, and if life happens, there’s no bottom.”

Once he took office, his staff recommended basic income as a potential means of attacking poverty, one that was starting to gain traction around the world.

In contrast to government programs that stipulate how money must be spent, basic income is supposed to deliver regular payments without restrictions. It amounts to a bet that poor people know the most appropriate use for a dollar better than bureaucrats. Rather than filling out forms and waiting to see case workers, people can devote their effort to looking for work, gaining skills or spending time with their children.

On the other side of the world, Finland was starting a pilot project. Just down the freeway in Oakland, the startup incubator Y Combinator was conducting a trial. The Canadian province of Ontario was preparing for an experiment. A nonprofit organization, GiveDirectly, was giving cash grants to poor people in rural Kenya.

All of these trials confronted various forms of skepticism, bringing warnings that unconditional cash would replace paychecks with the dole. Finland recently opted not to expand its basic income experiment.

In the United States, a program supplying $10,000 a year to every American would cost $3 trillion. Even some proponents of expanding the social safety net oppose the idea, fearing it would siphon money from existing programs.

Still, as the traditional promise of work breaks down, unconventional ideas are emerging from the political margins to gain a serious airing.

At a conference in San Francisco last spring, Tubbs was introduced to Natalie Foster, a co-founder of the Economic Security Project, an advocacy group formed to advance the concept of universal basic income. The project included Chris Hughes, a Facebook co-founder.

Within the Silicon Valley crowd, basic income had become a fashionable idea for addressing collective angst over the social consequences of technology. The masters of innovation were becoming stupendously rich via creations poised to make working people poor, replacing human labor with robots. Basic income was posited as compensation.

The Economic Security Project was keen to demonstrate another aspect of basic income — its potential to help communities facing problems in the here and now. It was shopping for a city that could serve as staging ground.

“It’s important that people see this as possible,” Foster said. “Cities are laboratories of democracy.”

Stockton was diverse, with more than 40 percent of its residents Hispanic, some 20 percent Asian, and 14 percent black. More than half of the working-age people in surrounding San Joaquin County earned the minimum wage. The city was in the hands of a social media-savvy mayor who could help spread the word.

Foster’s group agreed to deliver $1 million for a new project — SEED, for Stockton Economic Empowerment Demonstration.

The sum was nowhere near enough to finance universal anything. It would not cover the basics of any critical need.

Still, it could produce a glimpse of what a guaranteed cash program might look like.

The city commissioned artists to paint murals in the center of town, celebrating basic income as the next phase of the civil rights struggle advanced by King.

Who deserves a hand?

As city leaders formulate the details of the project, they are wrestling with a foundational question: Are they running a legitimate social science experiment or engineering a demonstration of basic income’s virtues?

The answer directs how they distribute the cash.

If it is primarily a display, then only the most responsible people should be given cash. But if it is about science, the money must be dispensed more randomly, with the likelihood that some people will waste it on drugs.

At a meeting at City Hall, SEED project manager Lori Ospina urged that the program be designed to yield valid scientific data. That involves choosing participants on the basis of narrow demographic criteria — perhaps their age, their race, their income.

But that approach could expose the city to charges that the program is not inclusive enough. “The trolls I’ve been dealing with on social media and in real life have very racialized views of how this is going to work,” Tubbs said. “As the first black mayor of this city, it would be very dangerous if the only people to get this were black.”

He wants to select participants who are most likely to spend their money wisely, generating stories of working poor people lifted by extra cash.

People like Shay Holliman.

As a child, her mother was incarcerated. She was raised by her grandmother, along with nine other children. They crammed into apartments full of cockroaches, moving from state to state to stay ahead of the bill collectors.

She had a baby. She worked at McDonald’s, but she lacked reliable child care, making the job impossible. She could not pay rent on her $600-a-month welfare check.

One night, she found herself walking the Stockton streets, her infant daughter in a carrier against her chest, pulling two suitcases full of everything she owned.

Taking shelter with a sister consumed by drug addiction, she fell into a vortex of violence. She served 11 years in prison for killing a man who she said had attacked her sister.

She emerged with a problem that confronts many people in Stockton: She was eager to work, yet she was vulnerable to criminal background checks that deny jobs to felons.

She worked inside commercial freezers and as a driver. Recently, she took a job at a nonprofit that helps people released from prison set up lives on the outside.

“I’m finally living my dream,” she said.

In some quarters, the basic income experiment has provoked talk that free money will prompt people to ditch work.

“Oh, my,” said Holliman, who still carries credit card debt of more than $500 and does not earn enough money to regularly buy fresh fruit. “When you’re struggling, you’re going to rush and pay your bills.”

Stockton’s trial is meant to deliver examples of that sentiment, challenging the notion that people needing help have not tried hard enough.

“It’s about changing the narrative around who’s deserving,” the mayor said.