In Defense of UBI

Last year, federal, state, and local governments spent roughly $1 trillion to fund more than 100 separate anti-poverty programs. These programs do a moderately successful job of reducing poverty rates and ameliorating the worst aspects of material deprivation. However, both left and right agree that we have fallen far short of enabling people to permanently escape poverty, become self-sufficient, and take control of their own lives.

At the same time, there is growing concern that the economic disruption accompanying globalization and automation can leave millions of workers insecure. The “creative destruction” of free-market capitalism ultimately lifts most, if not quite all, boats, there will be losers as well as winners, especially in the short term. The benefits are not equally distributed, and individual workers or even segments of society can be left behind. And our existing safety net may prove inadequate to the changing economic environment.

As a result, there is a growing interest in changes or alternatives to the way we deliver welfare assistance today. Many of these are little more than tweaks to the existing system, but there are bigger ideas out there. And among the biggest, attracting attention from across the political spectrum, is the Universal Basic Income (UBI).

The concept of a universal basic income is simplicity itself. It calls for a cash grant from the government to every American without any strings attached. The same check would be available to rich or poor, working or not.

In theory, a UBI offers numerous advantages over the current welfare system. It would obviously be simpler and far more transparent than the hodgepodge of existing anti-poverty programs. With different, often contradictory, eligibility levels, work requirements and other restrictions, our current welfare system is a nightmare of unaccountability that rewards an ability to navigate the bureaucracy more than targeting need.

Perhaps most importantly, a UBI or NIT would provide far better incentives when it comes to work, marriage, and savings. As noted above, because current welfare benefits are phased out as income increases, they create high marginal tax rates that can discourage work or marriage.

Depending upon the form it takes, a universal basic income, unrelated to other income, could reduce or even eliminate this bias against work. For example, a universal basic income, unrelated to other income, would by definition not penalize individuals for earning additional income. While some may choose not to work simply because they will have the guaranteed national income, many others may choose to work, or increase the amount they work, because they no longer will be penalized for doing so. In a British pilot project, for example, recipients of the cash payment were more likely to look for work and believed that the program offered a better reward for even small amounts of work.

UBI is far less paternalistic than existing welfare programs which often treat the poor like 10 year-olds receiving an allowance.

It might seem like common sense that people are poor because they lack money, but the vast majority of our anti-poverty programs today do not provide the poor with cash. Rather, we dole out a variety of specialized benefits, such as food, housing, health care, and so on. Government decides how the poor should budget and spend – not the poor themselves. A UBI would provide the poor with cash, rather than these “in-kind” benefits, and expect them to make the same types of choices as other responsible adults.

Historically, a UBI has drawn interest from such diverse supporters as Daniel Patrick Moynihan, Richard Nixon, and Milton Friedman. Today, UBI backers include Democratic presidential candidate Andrew Yang, liberal activists like Robert Reisch, labor leaders such as Andrew Stern, but also business leaders like Mark Zuckerberg, and conservative scholars such as Charles Murray.

Yet, while UBI has much to recommend it in theory, there are many questions yet to be answered before it can be thought of as a legitimate policy option.

Would a UBI be a replacement for the current welfare system or an add-on?:

The breadth of interest in a UBI noted above disguises a very deep divide ideological divide over the nature and intent of such a program. Most conservative UBI supporters see the UBI as replacing most or all existing welfare benefits. Some, like Murray, would even replace Social Security and Medicare as part of a UBI. However, most liberal UBI supporters see it as an additional benefit on top of traditional welfare programs. This is an important difference, and one that means that bipartisan support is not as widespread as it appears.

How would a UBI be paid for?:

There are roughly 252 million adult Americans, and another 74 million children. If we were to provide every adult with a UBI equal to the poverty level, and roughly half of that for children, it would cost more than $4.5 trillion. That’s real money even by Washington terms. Some of this cost might be offset through reductions in existing social welfare programs, but there’s little doubt that federal spending will increase. The question is how to pay for it.

UBI supporters have suggested a variety of funding mechanisms: carbon taxes, stock transaction taxes, penalties for automation, higher income taxes (especially on the wealthy), value added taxes (VAT), and so on. But tax increases do not come without consequences. You cannot redistribute wealth that doesn’t exist. If the taxes needed to pay for a UBI undermine economic growth, they would be self-defeating.

It is essential that UBI advocates discuss the costs honestly and come to grips with the trade-offs involved.

UBI, NIT, EITC, or something else?:

If a full-fledged UBI is unaffordable, what about something short of “universal.” In fact, many UBI advocates favor something closer to a Negative Income Tax (NIT), which would effectively means-test the program by taxing back benefits once incomes rise to a certain level. This would significantly reduce the program’s cost, while targeting it toward those most in need. However, it would also introduce all the complexity and obscurity of the tax code into what is supposed to be an elegantly simple proposition. Moreover, the phase out of net benefits under the NIT may reintroduce the work disincentives that plague existing welfare programs. As a result, some advocates would link benefits to work, explicitly or implicitly expanding the existing Earned Income Tax Credit (EITC). But even an expanded EITC leaves open the question of what would be done for people who can’t work or can’t find work. Would we end up with a two track welfare system?

UBI is a serious proposal that deserves serious debate, but there are serious and difficult questions that must be answered before the idea can move into the mainstream of political discourse. Hopefully, the discussion in the pages of this publication can attempt to answer some of those questions.

Katherine Revello (Classic Liberalism)


Michael Tanner (Neoliberalism)

In his article, Michael Tanner writes “if the taxes needed to pay for a UBI undermine economic growth, they would be self-defeating.”

As government is not a creator, deriving the majority of its revenue from taxation, it is difficult to see how this would fail to be the case. Taxation, regardless of its form, represents a cap upon the individual’s productive capacity. Money sent to the Internal Revenue Service as part of an income tax return is money a family cannot spend in pursuance of the ends they believe will further their own happiness. It is money a business cannot reinvest. The purchasing power of consumers and producers is capped in proportion to the percentage of assets appropriated, however justly, by the government.

Fear of the centralism implicit in the taxing power can be traced back to the founding of the American republic. Anti-Federalists feared the power to tax, granted to Congress by the Constitution, represented a nearly-unlimited ability to compel the American citizenry. As Samuel Bryan noted in The Dissent of the Pennsylvania Minority:

“By virtue of their power of taxation, Congress may command the whole, or any part of the property, of the people. They may impose what imposts upon commerce; they may impose what land taxes, poll taxes, excesses, duties on all written instruments, and duties on every other article that they may judge proper; in short, every species of taxation, whether of an internal or external nature.”

And, indeed, time has borne out these fears. The taxing power is not only an assault on economic productive capacity, but on the ability of individuals to be secure in their property. If property, such as income, can be directly taxed, it is not truly owned by the individual who earned it. Failure to hand over the slice of wealth government lays claim to will inevitably land one in conflict with the legal system.

The power to tax is the power to compel. It is not only that the iron-fist of government is extended outwards to private actors, demanding its cut of the action, but that the tax code can be used as a weapon to repudiate groups disliked by those in power.

A UBI would further cement the idea that government has a right to regulate and control income. Furthermore, UBI represents a direct threat to economic growth because it confirms the idea that government, so long as it is catalyzed by the noble pursuit of the nation’s welfare, has the right to intrude into traditionally private sectors. Many proponents of UBI cite the threat to employment that comes from automation as justification for the policy. Automation stands poised to wipe out entire industries, leading many to question whether someone looking for work in the future will be able to find it. UBI, supposedly, will at least provide a subsistence living for such people.

But this policy endorses the idea that imbalances and changes to the economy require external control and regulation. It suggests government must step in to fix what markets cannot if left to their own accord.

This attitude represents a radical transformation in the relationship between government and the private sector; it effectively expands governmental powers to the point of quasi-omniscience. The concepts of sovereignty and privacy now innately possessed by individual actors would be wiped away by the centralizing power implicit within the concept of UBI.

It is difficult to see how economic growth would not be curtailed by this upending of the traditional order. And this is the real problem with UBI: there is a convincing economic case to be made for UBI, which the author lays out succinctly, but it would require a radical remaking of society. One which necessarily promotes government power at the expense of individual sovereignty.

© 2018 by Zink Publishing Inc.

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