The proverb “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime” is well known in our cultural lexicon, despite most people’s general ambivalence towards seafood. However, what if you gave this poor, hungry man an unlimited supply of fish? This is the premise behind Universal Basic Income. A basic income would seek to eliminate poverty simply by giving everybody money. Of course, in a society defined by scarcity and resource allocation, giving everybody ‘free money’ just seems impractical. Working for a living is weaved into our nation’s origins, with figures such as John Smith of Jamestown proclaiming that those who do not work will not be fed. Social Darwinism, the idea that natural selection applies to society, embodied this idea in the 19th and 20th centuries, Since the germination of modern American society, the concept of work has been preeminent. What place, then, does a basic income have in our society?
Philosophically, a basic income has appeal towards libertarians and progressives alike. A basic income eliminates much bureaucracy within government, as it reduces the need for welfare programs and administrations. Unemployment benefits, Social Security, family assistance, among others, are government programs which run independently of each other. Overseeing these programs makes for a challenging administrative role, since monitoring the constant turnover of people applying for benefits, and trying to prevent people from gaming the system is costly and time-consuming. Implementing basic income could reduce administrative costs, as only one department would be needed, rather than several. On the left, a basic income would be the culmination of Johnson’s War On Poverty from the late 60’s. A basic income, alongside the Medicare and Medicaid programs, would hopefully prevent any American from living in abject poverty. There have been basic income pilot programs across cities in the US, Canada and Europe. In fact, Finland is currently conducting a large scale multi year study on basic income. These efforts have me wondering: is universal basic income a good idea? If so, is it feasible within the US? This post will be an attempt to answer these two questions. Before I begin, I would like to make clear that I’m not an expert in this field, my work is not Ph.D level material, and I may not arrive at accurate conclusions with data. I would love engagement with this post! Feel free to post rebuttals, suggestions, corrections, etc. I want this exercise to be a two way street.
So without further ado, is universal basic income a good idea? To frame this question, some history is in order. The idea of a universal basic income, or UBI for short, was first fleshed out in the mid 1800’s, gained ground throughout the 20th century, and constituted a large part of public conversation in the 1960’s. In fact, Nixon’s administration proposed a variant on UBI in their Family Assistance Plan, unveiled in 1968. This Plan resembled a negative income tax for households with families. While not quite a basic income, it legitimized the ideas behind UBI, and would have been an interesting prototype to study. Sadly, Nixon’s plan stalled in the Senate. Lawmakers opposed it, some on the grounds that it was too expansive, and others because it was too limited. Partisanship probably also played a role in its defeat, as Democrats would have wanted the credit for such a plan. After Nixon’s ouster, a basic income fell out of the national conversation. In Canada, there was actually a study that lasted for four years, in the town of Dauphin, Manitoba . This study involved about 3000 people, larger than Finland’s current study. However, UBI has failed to see results following these studies, be it due to political inertia, lack of analysis, or public disinterest.
The studies that have been conducted aren’t perfect, but many of their results does seem somewhat promising! They point to higher graduation rates, increased economic activity, increased government efficiency, and of course, reduced poverty. These results have resulting in an renewed interest in UBI. The concept already draws fans from the left and right of the political spectrum, and now many Silicon Valley entrepreneurs have thrown their support behind this idea as well. To better understand why, let’s look more closely at the promises of a universal basic income and assess their validity. I’ll also explore some of the common detractions to see if they hold water.
- Cuts Welfare and Government Paternalism
Many on the political right say that a basic income addresses the many issues perpetuated by the welfare system. Currently, our welfare setup results in an inefficient bureaucracy system to communicate between various levels of government. In addition, a lot of money is wasted to ensure that the government has all types of solutions for different peoples. People in different situations need different solutions, from types of food stamps to insurances to education assistance. The vast amount of help the government provides also adds to its weight. Libertarians would argue that the government can never know the needs of each individual. In that case, the best option would just be to give individuals in need the money with no strings attached. This would allow each person to use the money to their benefit, while also cutting down administrative costs. While this would also require large sums of money, it would be much better spent.
Intuitively, this argument sits well with many people. The idea that the government knows what’s best for us does indeed seem blasphemous. But it’s not necessarily untrue. There are many examples of families (not just impoverished ones) that do not make sound financial decisions for themselves. From food choices to education, many parents fail to put themselves and their children in desirable positions. In many instances, restricting welfare assistance to certain choices is indeed the best practice. This, in turn, implies that many welfare programs cannot simply be gutted, because they help people in ways that lump sums of money can’t. - Increases Public Activism
This is another popular side effect of UBI espoused by its proponents. The argument here is that a basic income will free people from demanding jobs (or at least allow more free time) and empower them to find more rewarding ways of making money, which would in turn result in an increase in involvement in the arts, political activism, and other less-profitable ventures. It follows from this argument that a UBI would lead to a flourishment of the arts, foster community involvement, and increase political participation. While I would agree that economic security will become less tied to holding a job, I’m not sure if this would lead to vibrant activity in other hubs. In my opinion, middle class workers do feel pressed for time, especially those with families. A UBI might cause people to reduce their working hours, but I would assume that extra time, for the most part, will be used to relax, spend time with family, or vacation (not at all bad things). Community involvement and political activism are draining efforts that require intentionality and dedication. People who get involved generally really care about certain issues, and have to make time to stay involved in today’s society. Even with a basic income, people that aren’t currently involved might find that it takes too much effort to make an impact on those fronts. - Maintains Work Productivity
One of the major findings of the various basic income pilots has been that workers have just gone and quit their jobs! While the amount of hours worked per person does go down slightly, it’s not nearly as high as critics had thought. For the most part, the decrease in hours is due to events like paternity/maternity leave, leaving early on Friday, or spending more time with family. These findings are touted as a big deal, as it seems to serve as confirmation that our productive society won’t stop functioning with this implementation. Yet this conclusion does not follow from the data, despite the evidence of these pilot programs, none of which have lasted for over a decade. Of course people that have been conditioned to work won’t stop being productive! These pilot programs, through no fault except for funding, do not speak to long term shifts.
These pilot programs do not address possible long term shifts brought on by the advent of a basic income. After such a program has been in existence for 60,70 years, will people see working as we see it today? I would imagine that people then might feel as if work is no longer necessary, or that many types of work are demeaning, not worth pursuing. I worry that long term shifts in thought will result in a much less productive workforce and a stratified social structure, with a few lucrative jobs, rewarding certain skill sets, with most people living at a subsistence level. We see this stratification in a milder sense today, with the tremendous growth of the computer science field bringing massive amounts of wealth to an emerging class of people, while wages across many other industries have stagnated, bringing a decline in many households’ quality of life. - Addresses Living Pressures
Another reason for supporting a basic income is that as economic security becomes less tied to jobs and opportunity, people aren’t limited to staying in a city, which will have the overall effect of increased affordability of housing. As people are empowered to find better housing, rents will remain under control, because tenants have an increased ability to move. In this case, I think that many people apply broad general economic rules to housing, which is an atypical market.
Housing supply is relatively fixed, taking years to change appreciably. Because the supply of housing cannot change very quickly, having the government partially guarantee costs may result in higher rents. This situation would be analogous to the increase in college tuition over the last 30 years. As the government decided to help everyone pay for college, the corresponding number of universities did not increase. Due to the influx of cash, the cost of college has skyrocketed. In addition, people are somewhat inelastic when it comes to living locations. This is partly due to the opportunity in certain places (the Bay Area with tech jobs), which will be ameliorated somewhat with a basic income. But inelasticity also stems from people’s attachment to cities. Because many people refuse to change apartments, move to suburbs, or upend their life to relocate hundreds of miles away, the cost of living (especially in cities) may not fall as expected, which would indeed negate many of the benefits of a basic income. Perhaps a UBI would force people out of cities, which are the places with most opportunity. - Combats Rise of AI
Silicon Valley titans proclaim automation as the next big revolution. Google, Uber and other companies promise to shatter entire industries. For example, the transportation industry, whose doom is most impending, employs at least 5 million people. Even the service industry is threatened by robots that can perform the jobs of maids, janitors, IT techs, cooks, and more. Even the medical field isn’t safe! Figures such as Steve Waldman and Marc Andreessen have discussed at length the potential effects of artificial intelligence in our society. In a world dominated by automation, such figures laud UBI as the best way to preserve human dignity.
This argument is the one I have the most trouble rebutting, possibly because I am tangentially a part of this field. I view generalized artificial intelligence as more of a ‘when’ than an ‘if’. If anything, I would point out that AI has been up and coming since the days of Alan Turing. Time and time again, we’ve realized that there’s much more to be done to achieve appreciable human like intelligence. This would imply that AGI could be several decades away. In fact, even if such a revolution were on the cusp of happening, our non-readiness as a society would surely delay full automation by a few years, thanks to a slow moving government. However, the rise of AI does add credence to the basic income movement.
Under scrutiny, a basic income looks like it will fail to live up to its messianic promise. But before using my shaky reasoning as grounds to dismiss UBI, note that many reasons to oppose it seem flimsy at best.
Cons
- Societal Leeches
A popular argument against UBI is that underserving people will get money without having earned it, that lazy people will take advantage of hard earned money and live with no regard for others. Obviously, this is an argument applied to the current welfare system as well. People swear to me that moochers claim unemployment benefits in several states, and routinely make trips to cash in on society’s goodwill. This argument concludes that some poor people will always be poor, a basic income validates their life choices, and they will drain our great country’s resources in a vain attempt to prop up these ‘takers’.
I have two main issues with this argument, one philosophical and another practical:
- Unfortunately, our secular worldview lacks a mechanism to support or to act on a visceral empathy towards those in pain. Whether or not people are poor of their own doing, suffering is suffering. To say that somebody has ‘earned’ their suffering, and therefore shouldn’t be treated with dignity is an utterly alien concept to me. Compassion towards the less fortunate is what should drive our society. A popular political figure in our time, Bernie Sanders, has questioned the need for poverty in such a wealthy, affluent country. Despite the fact that no welfare system is perfect, we are morally obligated to ease the pain of those who suffer, especially when we have the means to do so.
- It is true that every system has those who will take advantage of it. That’s something biologically wired into our nature. The question when setting up a society then becomes: how can we minimize that opportunity while still helping those who need help? A UBI will decrease the ability for somebody to exploit our safety net, by eliminate large chunks of the welfare system. This reduces the number of exploitable loopholes while still providing for the less fortunate. This argument distracts from the reality that there are many more people who are not blatantly living off the system, who’ve ve been forced into welfare by their environment, unfortunate events, or by the welfare trap. These people, the vast majority of those who would benefit from a basic income, deserve an infrastructure that can respect their dignity and put them in a better position to succeed. Such a system would be far better for our society over the long term.
- Inflation
This fear is similar to my comments about the housing market, but applied more broadly: Wouldn’t giving everyone money just raise the cost of everything? Eventually, everything would, once again, become unaffordable! This argument, to me, is a little silly. For one thing, most people already have the means to purchase goods, so a UBI wouldn’t add a huge influx of willing buyers into any given market. Secondly, we wouldn’t just be printing free money to give everyone. UBI works through interactions with government, such as the economy as a whole, taxes, banks, etc. UBI, in a closed system, doesn’t create or destroy money, and therefore does not cause inflation by itself. Granted, there are certain markets that could see rising prices, be it housing, insurance, or education. These are industries with a relatively fixed supply, so more money to spend on them could cause prices to increase. However, these are problems that we face in our current economic environment, and won’t be drastically affected by a basic income. - Undermines Welfare
This is a fear tossed out by those on the political left, who claim that a UBI will endanger the very real gains that the working class has made over the past 150 years, such as a minimum wage, and right to bargain/unions. In some sense, this fear is valid: with a basic income, upholding a minimum wage becomes less urgent, and the power of unions decreases as people are less invested in their professions. However, it’s important to ask: what problems are these policies trying to solve? I would say, the exploitation of workers! If there were a system in place that prevents such behavior, then the solutions of a minimum wage or unionization become less appealing.
Don’t forget that unions have been in decline for the last thirty years, with no hint of reversing course. If people aren’t bound to their jobs, employers will need to find ways to retain employees. There is still, therefore, a place for collective bargaining, but a UBI gives people more individual power when dealing with employers. Similarly, a basic income implies that a minimum wage doesn’t need to exist at the national level, and can be decided at more locally. Companies paying lower wages will increase the number of jobs supplied, and workers should still have ample money. UBI ensures, to some extent, that people don’t have to worry as much about keeping a job, since they’ll have a flow of money regardless. So despite a lower wage, companies will have to ensure that their jobs aren’t demeaning or abusive. Worrying about such programs for their own sake is like putting the cart before the horse. The government must continue to ensure a certain quality of life for its citizens, but opportunities to improve efficiency and improve performance should be taken.
The arguments I’ve countered above constitute most of the critiques of basic income I’ve encountered, and for the most part, such concerns, in my opinion, are unfounded.
While all of the above criticisms of basic income are fairly common, I’ve been ignoring the elephant in this room: even if we as a society wanted it, how could we afford such a program?? Is it possible to pay for something this vast? The feasibility, or lack thereof, of such a program has made this conversation a non-starter for hundreds of years. It also makes for a hard sell to skeptics, much to my vexation. Sadly, despite the growing popularity of UBI, I have yet to see any implementation schemes in a US context. To have no plan but to say that it’s a great idea is akin to rhetoric surrounding the repeal and replacement of the Affordable Care Act. So to avoid promising things that I can’t back up with proposals, I decided to come up with a plan myself. Granted, I’m no policy analyst, so what I’ve come up with is somewhat superficial, and serves more as a proof of concept than a detailed plan. Nonetheless, doing the digging does make clear clear to me that a universal basic income is definitely within our grasp.
All the numbers that I’ll be using have been taken from the 2010 census. Looking at that data, we had 308 million citizens of the US, 234 million over the age of 18. We can parse the data a bit differently, using the government’s definition of households. A household consists of some number of people who share living space. There were 117 million households back in 2010, comprising of about 300 million people. Only ~8 million individuals are not classified as being in a household. The current definition of households covers roommates and families. If only people over the age of eighteen receive a full basic income, families are at a disadvantage, since children wouldn’t add to their sum. Therefore, using households seems to be the natural metric upon which a payment plan can be devised. This isn’t perfect, since roommates would then receive money together, rather than separately. If a basic income plan were to be enacted, we would need a more discerning differentiation between types of households, but for these purposes, I’ll use households as a baseline.
The government sets federal poverty levels yearly, using these numbers to determine how to distribute welfare. There are different poverty levels for different sized households, so for a starting point, we can give each household an annual payment equal to the poverty line applicable to them. For example, a household of 2 will receive payments totalling $15,930. In my plan, I’ll cap the yearly payout at $22,050, as I don’t want to incentivize having large families.
Using these numbers, we can see that the yearly cost of a basic income comes out to almost 2 trillion dollars annually. If we add a yearly stipend of $3000 to kids aged 16 and 17, this cost goes up to about 2.25 trillion. What a sum! Of course, the 100 richest US citizens could finance the project (for a year) if they wished, but somehow I doubt money works that way. To put this 2.25 trillion into context, we can look at the spending of our government, or federal outlays. The federal outlays of the US in 2010 was about 3.5 trillion dollars, which immediately shows us that our economy is indeed productive enough to provide for every citizen.
At the same time, it is sobering to see that more than half of our spending would be used up by a UBI. It would be the single largest program ever enacted. However, a closer look at our country’s expenses shows that about 2 trillion dollars is already allocated towards our welfare system!
Our society already devotes a lot of energy in its poor, so practically, the shift in focus is fairly subtle. Gutting all welfare would be unrealistic and unwise; large portions of it go towards programs such as Medicaid, which clearly shouldn’t be scrapped. However, unemployment benefits, Social Security, family assistance, consist of much of the spending. Because of that, I feel comfortable converting most welfare money, save Medicaid, to see how this would work. This way, we can move most of the current welfare money, while still leaving a sizable percentage intact, so as to not erase all of it. This directs 1.65 trillion dollars towards a UBI.
Where can we get the remaining 600 billion dollars? Of course, taxes are the easiest way to generate extra revenue, so that’s where we’ll start. The Bush tax cuts were made permanent by Obama for those making less than $400,000 ($450,000 for couples), and bringing those taxes back would raise about 350 billion a year, more than half the revenue needed. To cover the remaining 250 billion, I would propose a number of plans, which include a carbon tax, reduced military spending, reducing or eliminating certain subsidies, or even instituting a land value tax over a property tax. Policies such as a carbon tax or eliminating wasteful military programs can raise hundreds of billions of dollars each. Using some combination of these methods would definitely raise the necessary funds to provide for a UBI.
A few caveats: some welfare programs are incredibly useful, and can’t be totally cut. In addition to this, the Affordable Care Act did not factor into 2010’s budget, and I imagine that would probably make the logistics more difficult. And of course, such a program would be a huge political battle, which makes this idea extremely unlikely to pass within the next few years. Lastly, federal poverty levels are generally not sufficient in determining an individuals economic health. Different states and cities have different costs of living, which are reflected in more local poverty levels. In NYC, or Ithaca for that matter, an annual income of $11000 is not nearly enough to survive. However, my goal was to show that a universal basic income is demonstrably feasible, that it’s not a logistical impossibility. My quick overview of our government spending illustrates that we are in the right ballpark to enact such measures. Yes, more specific proposals are needed, which would iron out plenty of the nuance that my cursory analysis misses. Given the time, I would like to follow up this plan with a more detailed proposal in the future.
Conclusions
Having come up with a general plan for UBI, the question remains: is this a good idea? Due to the lack of truly long term studies, the effects of a basic income on a population are still a mystery. I, personally, am wary of a basic income, and do not fully trust that all it’s theoretical benefits will come to full fruition. Over the long run, a basic income might result lead to an unproductive society more quickly than automation can handle. Nevertheless, I would consider myself cautiously optimistic about the idea, and I hope that current UBI studies are accurately modeled and yield favorable results. The not too distant future could look very different than today, and UBI could make sure that difference is for the better.
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