UBI (universal basic income) — the policy in which the government pays every resident a monthly stipend — is in the news again. 

The idea had risen to the forefront of policy discussion in 2017 and 2018 but faded last year and early this year as unemployment rates fell to historic lows.  Now, with the economic hardships imposed by the pandemic and recent protests highlighting the plight of the country’s least advantaged, UBI has once again risen on public radar screens.  Feelings have become so strong that several private sources with very deep pockets have put up funds to finance experiments with the program, prominent among them the Twitter billionaire Jack Dorsey.  Though I feel a great temptation to choose sides in this debate, I will resist and instead simply lay out the idea’s origins and identify the main arguments pro and con.

Though seemingly on the cutting edge of policy thought, the idea of a universal basic income is hardly new.  It actually has rather ancient roots.  The deeply religious Sir Thomas More proposed a universal stipend in his 1516 bestseller, Utopia.  Not too long after, an English village implemented a UBI for its residents, but in a relatively short time abandoned the practice.  According to what documentation exists, the program proved more costly than anticipated, not the least because the village became a magnet for outsiders who deeply loved the idea of a monthly stipend.  Thomas Paine, the late eighteenth century enthusiast for revolutions – both the American and the French – also proposed a UBI, but no party in power – either in the United States or France — picked up on his suggestion.  UBI had a brief life among communist enthusiasts during the late nineteenth century, but their support died when Karl Marx nixed the idea.  He worried that it would enable employers to pay a lower wage.  In the 1960s, the free-market advocate, Milton Friedman, proposed a UBI in the form of a negative income tax. President Richard Nixon embraced the idea but could not get it through Congress.

Not all modern proponents of UBI share the same objectives.

Some, like the journalist Annie Lowrey, simply want to help deprived people.  She and others like her see a regular cash gift as the simplest way to help while lifting the indignities imposed by the welfare system’s income, health, and childcare checks.  Some on the political left, such as Philippe Van Parijs and Yannick Vanderborght, want to pressure employers to offer higher wages by having a UBI sufficiently generous to allow people to refuse work.  Andy Stern, former head of the huge Service Employees International Union (SEIU), sees UBI as the only way to compensate for the capitalist system’s tendency to widen income inequalities. Libertarians promote UBI as a way to reduce government interference in people’s lives. Charles Murray, for example, would use a generous UBI as a substitute for welfare, unemployment and disability insurance, as well as Social Security, Medicaid, and Medicare.  Socially active billionaires, like Mr. Dorsey, such as Elon Musk, Mark Zuckerberg, Sam Altman of Y Combinator, and Sir Richard Branson, offer all sorts of justifications but seem to cluster around concerns that artificial intelligence (AI) will soon destroy an enormous proportion of the nation’s jobs and look to UBI as an answer to the social discord that would otherwise ensue.

Whatever their specific UBI objectives, all UBI proponents claim poverty reduction as a virtue of the program.  They make an easy calculation from government statistics to show that a stipend of $3,000 a month for each adult would cut the nation’s poverty rate in half.  A stipend of $250 a month for each child would reduce child poverty some 40 percent.  They further claim that the cash transfer would break the cycle of dependency among the disadvantaged, giving them at last the time and money to seek the training and higher education they need to climb the economic ladder.  The scheme would not, of course, require them to do so.

UBI opposition clusters around the costs involved. 

The most quoted schemes today would, according Commerce Department calculations, cost the federal government between $2 and 4 trillion a year, amounting to about a 50 percent increase in current federal outlays or some 10 percent of last year’s gross domestic product (GDP).  Such a draw on the economy would, these skeptics claim, markedly burden taxpayers and increase government debt with all the associated economic ills. At the same time, such a huge draw on federal financial resources would, they argue, preclude other government priorities, such as infrastructure refurbishment, the building of hospitals, investments in aspects of the “Green New Deal,” and the construction of affordable housing.  The burden of these costs would, they argue, otherwise undermine productive incentives and constrain investment in the private economy.

In answer to such concerns, several UBI proponents have made suggestions on how the country might finance the benefit.  Some would sell off government land.  That could certainly raise a lot of money initially, perhaps even enough to finance the giveaway for a while.  As the government disposed of the land, however, this source of revenue would dwindle and fail to support what would remain a huge, ongoing entitlement.  In any case, such an answer would surely provoke intense green lobby resistance.  Other UBI proponents suggest a tax on the market capitalization of public companies.  One proposal calls for an initial 3 percent levy on all corporations followed by an ongoing tax of smaller size.  Some would add a 5 percent levy on initial public offerings and a 3 percent tax on mergers.  A carbon tax occasionally makes it into the mix.  Skeptics argue that even if these financing options could balance the accountant’s books, and that is doubtful, they, like other taxes, would still have ill effects on economic incentives, investing, and growth generally.

The most quoted schemes today would, according Commerce Department calculations, cost the federal government between $2 and 4 trillion a year, amounting to about a 50 percent increase in current federal outlays or some 10 percent of last year’s gross domestic product (GDP). 

Such a draw on the economy would, these skeptics claim, markedly burden taxpayers and increase government debt with all the associated economic ills. At the same time, such a huge draw on federal financial resources would, they argue, preclude other government priorities, such as infrastructure refurbishment, the building of hospitals, investments in aspects of the “Green New Deal,” and the construction of affordable housing.  The burden of these costs would, they argue, otherwise undermine productive incentives and constrain investment in the private economy.

In answer to such concerns, several UBI proponents have made suggestions on how the country might finance the benefit.  Some would sell off government land.  That could certainly raise a lot of money initially, perhaps even enough to finance the giveaway for a while.  As the government disposed of the land, however, this source of revenue would dwindle and fail to support what would remain a huge, ongoing entitlement.  In any case, such an answer would surely provoke intense green lobby resistance.  Other UBI proponents suggest a tax on the market capitalization of public companies.  One proposal calls for an initial 3 percent levy on all corporations followed by an ongoing tax of smaller size.  Some would add a 5 percent levy on initial public offerings and a 3 percent tax on mergers.  A carbon tax occasionally makes it into the mix.  Skeptics argue that even if these financing options could balance the accountant’s books, and that is doubtful, they, like other taxes, would still have ill effects on economic incentives, investing, and growth generally.

Libertarians sidestep the financing question entirely, explaining that UBI would substitute for the already costly entitlements of welfare, unemployment and disability insurance, Social Security, Medicare, and Medicaid.  Since these entitlements presently absorb more than half the federal budget, a switch of this sort could probably answer UBI financing needs.  Whatever this solution’s accounting virtues, it nonetheless ignores certain other facts of life.  It would certainly encounter political resistance.  Because UBI would have a broad distribution, using it as a substitute for welfare, unemployment insurance and Medicaid would, relative to current arrangements, constitute a transfer from those in need to everyone, many of whom are quite comfortable.   In the same way, using UBI as a substitute for Social Security and Medicare would constitute a transfer from the old to the young, and using it as a substitute for disability insurance would constitute a transfer from the disabled to the able bodied.

The vulnerabilities of the disadvantaged further complicate the argument.  Welfare includes demands such as drug tests and home visits because its recipients often have trouble managing their lives, mush less their finances.  The predominance of payday loan operations in poor neighborhoods, along with furniture leasing outlets, car title loan facilities, and the like, speaks not only to the cash-short nature of the residents, but also to their susceptibility to hucksters.  Noteworthy in this regard are Census Bureau statistics that estimate how 11 million American adults barely have basic literacy skills and some 30 million have difficulty completing basic financial forms.  Without the guidance and strictures of present arrangements, many less fortunate recipients of these stipends would find themselves either bilked out of them or would spend them too quickly.  Surely, even a Libertarian like Charles Murray would balk at telling financial incompetents who have spent their monthly allowance too fast to tighten their collective belts and await the next check.  And keeping guidance and support in place would otherwise retain the government intrusion, add to costs, and upset any careful accounting balance between UBI and other entitlements expenses.

Making the decision that much harder is the inconclusive mix of available evidence.  A pilot program in Canada said something positive. There, payments of the benefit did little to make people government dependent.  Privately arranged experiments in Africa seemed to work well.  On the negative side, Finland had to abandon its experiment with UBI.  Also on the negative side is a Bureau of Labor Statistics study of people on unemployment.  It discovered that beneficiaries spent more time in front of the television and sleeping rather than, as many UBI enthusiasts surmise, upgrading their working skills.  A similar study on disability recipients revealed similar patterns.  Statistics from earlier federal pilot programs on negative income tax involving thousands across six states found that hours of work desired by all recipients fell some 9 percent below to those not in the program and that the spell of unemployment for those in the program lasted two months longer on average than with those not in the program.

As is always the case with economic policy, things are never clear-cut.  This article has studiously avoided making a case pro or con on UBI.  It tries only to explain the origins of the idea, the motivations of the proposers, and the inevitable complications and stumbling blocks.  Ultimately, the fate of the idea will rest on public favor, and that at base will rest on the resilience of job markets as the economy claws its way back from the ill effects of the quarantines and lockdowns.