Time to Take UBI Seriously?
Americans sure like checks from the government. Roughly three quarters approve of President Joe Biden’s COVID-19 relief package, not because they’re policy wonks who’ve diligently combed through the finer points and carefully considered the long-term macroeconomic effects but because they’re thrilled to receive $1,400. This is the third time in a year that the government has sent money to people whether they, strictly speaking, need it or not. And while three payments during a world-historical catastrophe hardly qualifies as a universal basic income (UBI), it does feel a bit like an appetizer.
A UBI—where the government cuts monthly checks to every living citizen, from vagrants to billionaires—got a prime-time public hearing in late 2019 and early 2020 during Andrew Yang’s Democratic primary campaign, but it didn’t entirely fade after Biden cleared the field. Nor is the idea likely to fade after the pandemic subsides. People don’t like losing benefits they’ve gotten a taste of. And problems like income inequality, the long-term hollowing-out of the blue-collar middle class, rising health care and housing costs, rural areas decimated by economic abandonment, the generational chasm separating comfy Boomers from rent-burdened Millennials are not going away when we return to whatever version of normal awaits us.
The UBI is appealing because it’s not a compromise between the Bernie Sanders wing of the Democratic Party that wants the government to pay for virtually everything and the Mitch McConnell wing of the Republican Party that thinks the government should do as close to nothing as possible. It is an idea that scrambles ideological imperatives and existing coalitions—and with the right champions it might finally cleave our ideological Gordian Knot.
A UBI is hardly a new idea, nor are its advocates confined to the left. Libertarian economists Milton Friedman and Friedrich Hayek advocated their own versions of it decades ago. Charles Murray joined them recently with a book and a Wall Street Journal op-ed. Thomas Paine hoped to implement a UBI as far back as the American Revolution. It’s one of the few big public policy ideas with champions on the left, on the right, and in the center—amazing, frankly, at a time when our hyperpolarized citizenry can’t even count on unanimous support for the earth being a sphere anymore. Polls before the pandemic pegged support at roughly 50–50, with those for and against on both sides of the political spectrum. When it comes to a UBI, the tired debate between big versus limited government has been scrambled.
Progressives like it because it provides a shot in the arm for the working poor, the unemployed, the disabled, the retired, college students, and the struggling middle class generally. Conservatives and libertarians like it because it eschews central planning, the choosing of winners and losers, and the arrogant assumption that a distant bureaucracy knows how to spend money better than individuals do. Centrists have reason to hope that by reducing economic anxiety, populist rage on both the left and the right might at least be mitigated if not eliminated. Small businesses with razor-thin profit margins would benefit from there being less pressure to raise the minimum wage, while employees who earn the minimum wage would get a much-needed cushion.
Yang dismissed concerns that a basic income is socialist: “This is capitalism where income doesn’t start at zero.” Indeed, it’s entirely contrary to a command economy’s answer to hunger and privation: a ration card that can redeemed for basic goods at government “stores.” In the Soviet Union, Cuba, and Vietnam, virtually everybody, not just the poor, was forced into this kind of imbecilic and tyrannical system. The United States responded by giving struggling people food stamps, the equivalent of a cash payment, that can be spent at the same grocery stores everyone else uses, thus preserving the market economy, leaving the middle class unmolested, and ensuring that nobody starved to death.
Unlike traditional welfare payments, a basic income wouldn’t infringe on personal freedom any more than food stamps do. “People who get on welfare lose their human independence,” Friedman said. “They become subjects of the dictates and whims of their welfare supervisors who tell them whether they can live here or there and tell them what they can do with their lives. They’re treated like children.”
Nor would a UBI discourage work like much of our ailing safety net does. Let’s say you get $500 or $1,000 a month from the government. You can’t live on it. You still need a job. And if you have a job, you can still collect your $500 or $1,000 a month. You’ll have every incentive in the world to find employment, and you won’t be punished even a little bit for it. But with the safety net we have now, benefits evaporate the moment somebody hires you. Why work a stupid job if you can “earn” a similar amount of money playing games at home on your phone?
This would not work, of course, with a large UBI. The government can’t pay everybody a middle-class salary just for being alive. The incentive to work would be obliterated, and inflation would go supernova. That doesn’t even address the biggest question: how to pay for it. A UBI has to be small.
Finland gave it a test run in 2017 by paying jobless people €560 ($654) a month for two years. They reported being happier during the study, but they were no more likely to find work than a control group. We could chalk that up as a failure, but those who received money weren’t less likely to find work, so at least the payments weren’t disincentives. And besides, reducing unemployment would not be a UBI’s purpose. The point is to reduce poverty for those on the bottom and to relieve economic stress on those in the middle.
A more recent study just concluded in Stockton, California, where 125 people making less than the median income were given $500 a month for two years, paid for by private donations. The results were more encouraging than Finland’s. At the start, 28 percent had full-time jobs. A year later (one month before the COVID-19 pandemic wreaked havoc on the economy), 40 percent had full-time jobs, a 12 percent increase. A control group started with 32 percent full employment and ended with only 37 percent full employment, a mere 5 percent increase. Those who received the $500 payments reported improvements in their mental health and a reduction of debt in addition to a heavier work schedule.
Some potential problems are foreseeable now. Drug addicts will spend their money on meth and opioids. If a UBI is paid for with a national sales tax (though it doesn’t have to be), it would be de facto inflationary, at least for basic goods. But the biggest concern is that the downsides aren’t knowable in advance. If we do ever implement a UBI, we’ll almost certainly have to adjust it. We might even scrap it, though campaigning on a platform to make everybody poorer wouldn’t poll much better than Cuba’s maximum wage of $20 a month.
Perhaps the best case for a UBI, even if it does turn out to be flawed, is that it’s unlikely to be as shot through with problems as our current antipoverty programs. The United States spends more than $1 trillion each year fighting poverty, but the problem remains as intractable as it has been for decades. Traditional antipoverty programs also tend to grate on the middle class, especially those in the lower middle class who work their tails off, pay taxes, and nevertheless struggle. When they ask what’s in an antipoverty program for them, the government had better not answer with nothing, especially if taxes go up.
Critics of the UBI exist on both sides of the aisle, same as supporters. Neera Tanden, Biden’s doomed pick to head the Office of Management and Budget, tweeted in 2017 that “a 40k job is more satisfying to humans than a 25k check.” No doubt that’s true. But who says the government needs to send checks for $25,000 a year? If Andrew Yang had his druthers, we’d only get half that—hardly enough to live on. We’d all still need jobs. And $52,000 a year beats $40,000 every time without detracting from life satisfaction by an iota.
Milton Ezrati at Forbes insists that we can’t afford it. He walks through various possible funding schemes (selling government land, taxing corporations, taxing carbon) and finds all of them wanting. But a UBI could just as easily be financed through regular income taxes in such a way that everyone making less than, say, $150,000 a year comes out ahead while everyone above the break-even point pays more into it than they draw out of it.
It certainly wouldn’t herald utopia. In Ending Poverty, published in 2008 just as the economy was entering the Great Recession, conservative economist Joseph V. Kennedy argued in favor of a UBI but warned that it’s no panacea:
The biblical observation that the poor will always be with us is likely to prove true. But poverty is caused by many different factors, and a wealthy society can eliminate many of those factors through well-designed programs that provide individuals with the proper incentives to do those things that experience shows are strongly correlated with personal success. Other factors, such as drug addiction, crime, teenage pregnancy, and the arrival of new immigrants with little education and few skills, will continue to cause a base level of poverty that is more resistant to social policy.
No government policy can end poverty, full-stop. But UBI could introduce something new and interesting into our stale debates about taxation and spending, and reduce partisan angst by creating entirely new coalitions. Perhaps it’s time to give it a shot.