Can you point out the economic errors this article?

To students of The Freedom School:

Can you point out the numerous economic errors in this article?  Hint:  Pull out your book Economics in One Lesson by Henry Hazlitt.

Martin Luther King Jr. focused on ending poverty
‘Guaranteed income’ plan finds support

By Bartholomew Sullivan
The Commercial Appeal
Posted January 18, 2010 at midnight

WASHINGTON — Dr. Martin Luther King Jr. had another dream: the guaranteed income.

Those careful about his legacy say the $120 million monument to him that’s finally nearing construction on the National Mall is all well and good. But as the nation commemorates King’s 81st birthday today, they say he should best be remembered for his career-long focus on the poor.

A year before his 1968 death in Memphis, in his “Where Do We Go From Here: Chaos or Community,” King wrote: “I am now convinced that the simplest solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”

The idea was to guarantee that no one lived in poverty by having the government provide a financial floor, pegged to median — not low — incomes, beneath which no one could fall. King talked about the psychological benefits of a widespread sense of “economic security.”

Economists John Kenneth Galbraith, Paul Samuelson and Milton Friedman endorsed the idea of guaranteed incomes, as did Lyndon Johnson’s Labor Secretary and later New York Sen. Daniel P. Moynihan. Advocating the proposal was the official debate resolution for public high schools in 1973. It was a mainstream idea that has since faded from view.

But a movement to spur a guaranteed income plan is reawakening in academic and anti-poverty circles as the nation looks at 15.3 million people seeking work and the prospect of large-scale and long-term unemployment.

The Basic Income Guarantee movement (USBIG.net) is based on the belief that increased mechanization and labor efficiencies, coupled with the export of industrial and manufacturing jobs to low-wage countries, means there just isn’t enough work available. Once robots can understand speech, even more jobs in the service industries will disappear, they say.

And yet people will still need to live even without work. Advocates say a redistribution of some anti-poverty program funding for direct subsidization of adequate incomes would solve the poverty problem while stimulating consumption.

University of Tennessee-Knoxville sociology professor Harry F. Dahms, a member of the U.S. Basic Income Guarantee Network, said when he talks about the idea in the South “audiences seem rather baffled, first, that such an idea even exists.” Their second response is surprise “that some people would entertain it seriously.”

In a class on social justice and public policy, Dahms, originally from Germany, discusses guaranteed incomes as a way for the work force to take advantage of growing efficiencies by having more people work fewer hours.

In Memphis, efforts to enact a living wage for Shelby County and city employees and contractors were a step in the direction of raising the income bar. But Rebekah Jordan Gienapp, director of the Workers Interfaith Network, said King called for raising the minimum wage to a level that could raise working people out of poverty. She noted that, adjusted for inflation, it’s lower now than in 1968.

Tennessee and Mississippi don’t have state minimum wage laws and the minimum in Arkansas is lower than the current federal minimum wage of $7.25 per hour.

“What does that tell us about how we’ve really, in a lot of ways, moved backwards since the civil rights movement in some of these economic ways?” she asks.

“Particularly on Dr. King’s birthday, he tends to be held up as just someone who advocated diversity or integration, but his message was much broader and more radical than that …”

Supporters of a guaranteed income acknowledge the solution sounds radical but point to the subsidy every citizen of Alaska receives each year from the state’s oil revenue. The share-the-wealth program in one of the most Republican-leaning states is so popular that efforts to repeal it have failed.

Congress actually considered a slimmed-down variant of a guaranteed income plan when U.S. Rep. Bob Filner, D-Calif., proposed the Tax Cuts for the Rest of Us Act in 2006 in response to Bush tax cuts for upper-income taxpayers. It would have made the standard income tax deduction into a refundable tax credit.

Memorial progress

Fundraising is still pressing on for the Martin Luther King Jr. Memorial to be located between the Lincoln and Jefferson memorials in Washington. The Martin Luther King Jr. Memorial Foundation (mlkmemorial.org) has raised $108 million of the $120 million goal. But 38 months after a ceremonial groundbreaking, preliminary soil erosion work near the Tidal Basin finally got under way late last month. A perimeter fence should go up in the weeks ahead, and the project is expected to take 20 months, said executive architect Ed Jackson Jr.

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3 responses to “Can you point out the economic errors this article?

  1. Can you spell SOCIALISM? As Hazlitt would say, you have to look at not only the short term but the long term, and not just one or a few groups that will benefit but all groups. Then you can see the unintended consequences of these proposals.

    As a model, you can look at the minimum wage law and how it affects unemployment of youth, low skilled workers and minorities. Since its passage, it has progressively increased unemployment in most of these groups.
    As for guaranteed incomes, this is just one more ponzi scheme of transferring wealth from the haves/producers to the havenots/nonproducers at the point of a gun.
    All attempts to guarantee wages/incomes like unemployment comp with tends to prolong the time a person is unemployed.
    I read an estimate recently which indicated that the percentage of people now receiving some government benefit now exceeds 50%. Think of the vote getting this will generate.
    In the one year since Obama and company have taken over, we have seen the nationalization of banks, insurance and auto manufacturers. This is a progressive move to complete Socialism.

  2. David Mitchell

    Oh now, Les, take it easy. All we have to do is have every person work according to his or her ability and take only according to his or her needs. I think the Democratic Congress is gearing up to pass legislation that will change human nature so that none of us selfishly want keep the fruits of our labors.

  3. It is really quite simple:

    Wealth is not created by arbitrary wishes. It is created by the actual production of real consumable goods.

    If I’m the government, I can decree that everyone is forthwith, instantly, a millionaire (in dollars). But what will those dollars actually be worth in terms of real goods that they may then be traded for? Not much, to say the least!

    But.. If we could get the robots to do all our real productive work.. and then make sure everyone is let in on the resulting franchise.
    Well, that might be something worth doing! Apparently, we are not yet at such a point of technological singularity.

    But more government, if anything, would likely mess even that last thing up, too!