Previously published on March 21, 2022 in
By Milton Ezrati, Chief Economist at Vested
Today’s geopolitical emergency has driven domestic policy proposals off the front pages. In time, however, they’ll reemerge.
One idea that’s sure to see the light of day is the notion of a universal basic income (UBI), in which the government gives every citizen a regular cash handout, regardless of need.
Like a bad penny, UBI proposals have emerged with regularity over time—from journalists, tech barons, politicians, and academics. Each proposal differs slightly from the last, but all are wrongheaded.
Advocates of UBI exist in quarters of society. On the left, a deep if often misguided effort to help the disadvantaged prompts academics and journalists to advocate for the handout. Tech barons, including Mark Zuckerberg, Elon Musk, and Sir Richard Branson see a UBI as the only way to avoid social unrest as artificial intelligence, they predict, brings on mass unemployment.
Libertarians and others on the right, including the likes of Milton Friedman, would relieve the economy of government interference by using UBI as a substitute for welfare, Social Security, and other intrusive support programs. The dollar amounts differ, as do the details, but all are essentially alike—and flawed.
At the very least, all would impose an unconscionable expense on the taxpayer. The Commerce Department has conservatively estimated that a national UBI would increase already bloated federal spending by roughly 50 percent, about 15 percent of the country’s gross domestic product. And this is far from the only problem.
If, as many suggest, a UBI were to substitute for some or all federal support programs, the effort would pit one group in society against another and consequently create tremendous political problems. For example, were UBI to substitute for Social Security and Medicare, it would effectively transfer some available funds from the old to the young.
Using UBI as a substitute for disability insurance would amount to a transfer from the disabled to the able-bodied. A broad distribution in place of welfare or unemployment insurance would replace a program aimed at those in need with one aimed at everyone. Of course, the nation could simply add a UBI on top of these more targeted programs, but that would add astronomically to the cost.
The vulnerabilities of the disadvantaged would make UBI a poor substitute for family support. These programs currently include demands such as drug tests and home visits because their recipients often have trouble managing their lives, much less their finances. Noteworthy in this regard are Census Bureau estimates that 11 million American adults barely have basic literacy skills and about 30 million have difficulty completing basic financial forms.
Without the guidance and strictures of present arrangements, many of the less fortunate recipients of these stipends would find themselves either bilked out of them or would spend them too quickly. Surely, even dyed-in-the-wool libertarians would balk at telling financial incompetents who have spent their monthly allowance too fast to tighten their collective belts and simply await the next check.
If these considerations weren’t reason enough to reject UBI, compelling evidence has emerged from various trials. A Labor Department study of people on unemployment discovered that they spent more time in front of the television and sleeping than—as some UBI proponents insist they would—upgrading their working skills. A similar study on disability recipients revealed the same patterns. So did the results of four federal pilot programs on negative income tax, a variant of UBI.
Implemented between 1968 and 1980 and involving thousands of people across six states, these pilot programs found that hours of work by all recipients fell roughly 9 percent below those outside the program, about 20 percent for married women and 25 percent among single women heads of household. Desired work among single men fell roughly 43 percent below nonrecipients. If those receiving the negative income tax lost their jobs, the spell of unemployment lasted two months longer on average than with nonrecipients and 12 months longer for married women.
Beyond these undeniable problems is one other, which is hard to quantify but may be the most important. Simply giving people the means to acquire necessities and the material pleasures of life would effectively make every citizen a ward of the state. That’s fine for children. But in adults, it would undermine the sense of independence and self-reliance that fosters self-respect. It would create a nation of sheep and do considerable harm to people—perhaps even destroy them.