The Universal Basic Income Dream: A Steep Hill to Climb
The concept of Universal Basic Income (UBI) has gained significant traction in recent years, fueled by anxieties about automation, income inequality, and the future of work. The core idea is simple: a regular, unconditional cash payment to every citizen, regardless of their income or employment status. Proponents tout UBI as a potential solution to poverty, a safety net in an era of technological disruption, and a means to empower individuals. However, the practicalities of implementing a national UBI program are complex and fraught with challenges, ranging from astronomical costs to deep political divides.
Three years ago, OpenAI CEO Sam Altman envisioned a world reshaped by artificial intelligence, where robots and software would handle most basic tasks, freeing humans to pursue more fulfilling endeavors. Altman saw UBI as a crucial component of this future, a way to mitigate the economic disruption caused by widespread automation and ensure that everyone benefits from technological progress. His vision aligns with a growing chorus of tech executives and futurists who believe that UBI is not just desirable but necessary to address the looming wave of job displacement.
The appeal of UBI is evident in the proliferation of pilot programs across the United States. Since 2017, over 120 such initiatives, primarily at the local level, have tested the waters of providing unconditional cash payments to residents. These pilots generally demonstrate the potential to alleviate economic anxiety and improve living standards for recipients, fueling hopes that UBI could be scaled up to a national level.
However, the jump from small-scale experiments to a national program is a monumental leap. The sheer cost of providing a basic income to every American is a major hurdle. With roughly 330 million people in the country, even a modest UBI payment quickly adds up to trillions of dollars annually. Critics argue that such a price tag is simply unsustainable.
Robert Greenstein, a visiting fellow at the Brookings Institute, estimated that providing every American with $10,000 a year would cost over $3 trillion annually, or $30-40 trillion over a decade. Economist Melissa Kearney similarly calculated that a $10,000 UBI for every US adult would require about $2.5 trillion annually, roughly 75% of the U.S. government’s 2018 revenues.
Even UBI proponents acknowledge the daunting cost. Sean Kline, former director of Stanford University’s Basic Income Lab, admits that the calculation depends on the specifics of the program and whether it replaces existing welfare benefits. However, he argues that critics often misrepresent the true cost by failing to account for the impact of taxes.
Economist Karl Widerquist contends that the widely cited cost projections are flawed because they conflate the gross cost of UBI with the net cost to the government. He argues that much of the money distributed through UBI would be recaptured through the tax system, reducing the actual amount of new revenue needed. Widerquist estimates that the net cost of a national UBI system could be as low as $539 billion, or roughly 3% of GDP. This revenue, he suggests, could be generated by taxing the wealthiest Americans.
The debate over cost underscores the fundamental question of funding. A national UBI system would undoubtedly require new taxes, but the specifics of those taxes remain a subject of intense debate. Sam Altman proposed taxes on land holdings and the assets of large corporations. Others have suggested taxes on inheritances. Widerquist advocates for a tiered system that primarily targets the wealthiest families.
Widerquist envisions a UBI system where 70% of Americans are net beneficiaries, with the bottom third benefiting significantly. The upper middle class would largely break even, while the top 10% would pay significantly more in taxes, with the top 1% bearing the brunt of the burden. He argues that such a system would resemble classic anti-poverty programs, transferring wealth from the rich to the poor.
Despite the potential benefits, UBI is unlikely to provide a complete replacement for traditional employment. Even ardent supporters acknowledge that UBI payments would likely be supplementary rather than sufficient to cover all living expenses. Scott Santens, a longtime UBI advocate, estimates that a normative UBI payment would be around $1300 a month.
A recent UBI study funded by Sam Altman, which provided $1,000 a month to low-income participants, found that the money primarily went towards basic needs like food, rent, and transportation. It did not significantly improve job prospects, healthcare access, or investments in human capital. The study suggests that UBI, while helpful, may not be transformative.
Beyond the financial challenges, UBI faces significant political obstacles. The current political climate in the United States is highly polarized, making it difficult to achieve consensus on any major new entitlement program. The Republican Party’s emphasis on curbing government spending, particularly on entitlements, further complicates the prospects for UBI.
Wendell Primus, a visiting economics fellow at the Brookings Institute and former senior policy advisor to Nancy Pelosi, believes that the likelihood of a federal basic income program being enacted anytime soon is virtually zero. He argues that Democrats should focus on strengthening existing welfare programs, such as the child tax credit.
While some remain optimistic about UBI’s long-term prospects, they acknowledge that it will require a significant shift in political will and public perception. They point to historical examples like Social Security, which faced similar skepticism in its early days but eventually became a cornerstone of the American social safety net.
One of the major challenges in advocating for UBI is the lack of a clear consensus on what such a system would look like. Both conservatives and liberals have expressed interest in UBI, but for vastly different reasons. Some libertarians see UBI as a way to streamline the welfare system by replacing existing programs with a single cash payment, potentially reducing overall government spending. Progressives, on the other hand, view UBI as a means to expand the social safety net and address income inequality.
Critics like Anna Coote argue that UBI is an inefficient and individualistic approach to poverty reduction. She advocates for universal basic services, arguing that providing affordable housing, transportation, and education is more effective than simply giving people cash. With the cost of these basic services rising rapidly, a modest UBI payment may not make a significant difference in people’s lives.
Despite the disagreements over the best approach, there is a broad consensus that income inequality is a pressing issue that needs to be addressed. While UBI may not be a panacea, it has sparked a vital conversation about the future of work, the role of government, and the need for a more equitable distribution of wealth. The path to a national UBI system is undoubtedly a steep hill to climb, but the potential rewards of a more just and prosperous society may be worth the effort.
The article analyzes the proposal for a Universal Basic Income (UBI) in the United States. It examines the potential benefits of UBI, such as alleviating poverty and providing a safety net in an era of automation. It also highlights the significant challenges to implementing a national UBI program, including the enormous cost and the political obstacles to gaining support for such a large-scale initiative. The article presents different perspectives on UBI, including those of economists, policymakers, and advocates, exploring the potential funding mechanisms and the debate over whether UBI should supplement or replace existing welfare programs. Ultimately, the article suggests that while UBI is a promising concept, it faces considerable hurdles in becoming a reality.
