The Morality of Universal Income Credit | Walter I Baltzley

ABSTRACT

This paper discusses the moral nature of Universal Income. It explains how Universal Income fulfills the principles of Just Government and Honest Currency, and at the same time encourages industry while punishing laziness—on both the individual and national level.

Universal Income Credit
and the Principles of Just Government

INTRODUCTION

In a previous article we discuss the benefits and challenges of instituting a Universal Income. We explain how the system would operate, and the problems that it would solve. However, we do NOT discuss the moral implications of Universal Income—whether or not it is ethical for the government to implement such a system. However, to answer this question we must first answer the question: “What is just government, what is it allowed to do, and what is it NOT allowed to do?”

Just Government

People establish governments to safeguard their rights and protect their property. A just government derives it power from the individuals it governs. Citizens delegate authority to the government to carry out actions in their name. For example, they authorize the government to use violence to fend against enemies, both foreign and domestic. This saves them the trouble of organizing and fighting off the enemies themselves should the need arise. However, the people cannot rightfully delegate authority to government that they themselves DO NOT HAVE.

Individuals do not have the authority to take the property of one person and give it to someone else against their will—that would be theft. Thus, neither can the government. The government has no right to “redistribute” wealth by taxing one group of people to give to another. It simply is NOT JUST.

If this is the case, then how can the government provide Universal Income? Individuals don’t have the right to create money out of thin air, so why should the government? Well, this is only partially true. TODAY we don’t have the ability to create money—because we have delegated that authority to the government—but at one time individuals DID create their own money.

Colonial Scrip

Before the American Revolution—before there was a Federal Government—colonists had developed a very unique monetary system called “colonial scrip”. Let us say that an aspiring farmer needed several bushels of seed to plant his crop, but he did not have gold with which to pay for it. He would go to the granary and ask for an extension of CREDIT, a loan, in the form of several bushels of grain.

The grainer would look at the man’s property, and seeing that it was indeed good for the growing of grain, would agree to give him the seed in exchange for a certain number of bushels of wheat come harvest time. The two would go to a NOTARY who would finalize the agreement on paper—called a NOTE, “scrip”, or BILL of credit—and this became a binding contract between the two parties.

Now the grainer might have need of some labor, but all his grain has been lent out to farmers to sow their fields. How would he pay the workman? He would explain that he had no grain, but he had NOTES (bills, or scrips) for grain due at the end of season. They would go down to the NOTARY, and either create a new note between the grainer and the workman, or they would BREAK the original note into two pieces—allowing the workman to collect his fee directly from the farmer who issued the note to the gainer in the first place. The workman could then take this note to a store, and the process would begin all over again.

Federal Notes

Fast forward to today. Colonial Scrip is no longer in use—why?—partly due to FRAUD. When you have millions of people issuing bills of credit every day, it becomes difficult to track them all, making it very easy to issue notes that can never be repaid—kind of like writing a bad check. A farmer might issue more notes than he has grain to cover at the end of season. Anyone left holding the bad note at the end of the season would lose whatever value they had exchanged for it. However, fraud was actually quite rare. The main reason for the abandonment of Colonial Scrip was COUNTERFEITING. During the Revolution, Britain created bundles of notes from imaginary people for things that simply did not exist, causing the entire system of self-issued credit to collapse.

After the revolution, rather than return to Colonial Scrip, under the Articles of Confederation, the states decided that it would be more effective to institute a system of STATE issued credit. This would allow each state to create a GENERIC note—backed by the ability of that state to collect taxes (in gold)—that could be used to settle ANY debt. This made bills of credit (notes) as “good as gold”, and paper CURRENCY began to be referred to as MONEY. This simplified transactions, and gave the state a monopoly on the printing of currency—thus making counterfeiting more difficult.

However, at the Constitutional Congress it was decided that having THIRTEEN different currencies was still too complicated, and so the authority to issue currency was further concentrated into the hands of the FEDERAL government. The states could still issue money, but only in the form of gold and silver COINS. Only the federal government would be allowed to issue bills of credit (notes)—and thus the DOLLAR BILL, or FEDERAL NOTE was born.

A Measure of Faith

Because Federal Notes are GENERIC, they represent ALL forms of value—products, services, or resources—that exist or CAN BE CREATED in the regions that use it. This is the “FAITH and CREDIT of the United States” mentioned in the Constitution. When a new Dollar Bill is put into circulation, the Federal Government is making a promise that SOMETHING of value will be created, and that it can be purchased using this bill—Just like Colonial Scrip represented goods and services that did not yet exist.

When the Federal Government issues new currency, it is expressing FAITH that new value will be created to match it. It is essentially extending CREDIT to the nation and its trading partners, trusting that they will be productive and add an equal amount of products and services to the economy. Thus, by printing money, and investing it properly, the government can create new wealth.

Unfortunately, the government does not always make the best choices. Sometimes the government over-estimates the value to be created and prints too much money—INFLATION results as goods and services become scarce and people bid up the price. On the other hand, the government can under-estimate the productivity of the people and produce too little money—in which case there will either be DEFLATION, or a RECESSION. People will not have enough money to buy that which is produced, forcing companies to either reduce their prices, or reduce production to serve only those who can afford to pay for their products and services.

Honest Currency

The purpose of a currency is to represent the nation’s ability to provide value at any given time. It is to empower the economy to generate goods and services to meet the needs of the people. Honest currency neither over-states nor under-states this ability—nor does it transfer wealth from one group of people to another. It facilitates trade, but does not manipulate the markets.

An honest currency represents the means and the will of the nation to produce value. It ensures that everyone who wants to create value can do so, and that society as a whole can obtain that value once it is created. In short, honest currency rewards the creation of new wealth and discourages idleness.

The final feature of honest currency is IMPARTIALITY. When currency is created by government for the benefit of the nation, it should benefit ALL its citizens equally. This is because it represents the government’s faith in THE NATION to create value. Just like Colonial Scrip was a note issued against an individual’s future production, Federal Notes are bills of credit issued against the future productivity of EVERY citizen—and thus every citizen has a right to benefit from it.

Universal Income

One way to maintain the principles of Honest Currency and Just Government is through Universal Income—to create (coin) new money and distribute it evenly to every citizen. This becomes an extension of credit to the nation. In return, the citizens use that money to purchase the things they need and create value for the nation.

Some citizens will create more value than others, and the free market will reward their efforts with increased wealth and/or income. Those who do not create value will spend their income, but have no such increase. Thus the system rewards hard work and not laziness. In addition, what is true for the INDIVIDUAL also holds for the NATION.

If the nation produces more value than the money is worth, then prices will decline. This increases the purchasing power of money, and rewards the productive even more. However, if the nation produces less than the money is worth, then prices will rise. This in turn decreases purchasing power, and punishes the lazy. Deflation becomes a REWARD for national industry, and inflation becomes a TAX on laziness. Thus, not only does Universal Income maintain the Principles of Just Government and Honest Currency, but it also encourages INDUSTRY.

 CONCLUSION

For Universal Income to be moral, it must operate under the principles of Just Government and Honest Currency. Government derives its ability to print currency from the people. Before the government existed, SPECIFIC individuals could issue “Bills of Credit”, “Promissory Notes”, or “Scrips” against their FUTURE productivity. This power was delegated to the government, allowing them to create GENERIC “Federal Notes”, or “Dollar Bills” against the future productivity of THE NATION.

This power to print money, if used properly, results in an honest currency—one that facilitates trade and accurately represents the ability of the nation to produce goods and services. Print too much and we have inflation, too little and we suffer a depression. According to the US Constitution, Article 1, Section 8, It is the duty of government “to coin money, [and] regulate the value thereof…”, or in other words to maintain an honest currency.

Universal Income allows the government to maintain an honest currency in an environment where productivity is soaring, but employment opportunities are dwindling. However, more importantly, it allows it to do so in an IMPARTIAL manner. Because Universal Income is distributed equally to all citizens, it avoids the problem of “redistribution” while caring for the poor and fueling economic growth. It is a JUST, HONEST, and EQUITABLE solution to the financial challenges of our time.

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