In case you've been living under a rock and have totally missed the universal basic income discussions that have sprung up over the last few years, it's an idea where everybody in a particular place gets a guaranteed income every month with no qualifications on who gets the money as well as no restrictions on what the recipient can spend the money on. Basically it's "free money" sent to you every month. Like anything, there are different flavors being proposed. Some have only adults receiving payment. Some have every man, woman, and child receiving their basic income. The amounts proposed also vary widely.
The basic idea is to use UBI instead of the welfare programs we already have. Critics of the current welfare system point out a few problems with it:
- There is a lot of fraud of people trying to get extra payments out of the means-tested programs that they may not qualify for. For example, how many people try to find undocumented work for cash payments so they don't lose their unemployment benefits?
- Even without the fraud there is a huge amount of "waste" on administering the programs. Those people who review applications, do investigations, handle the payments, etc all have to be paid.
- The "welfare cliff" phenomenon is an enormous disincentive to work. In many cases when someone on a particular welfare program goes and actually gets the job that society says to do, that person loses more in benefits than gains in wages. So why go to work if it will end up costing you money?
So I've been looking at the idea of universal basic income for a while now.
Proponents claims that if everyone gets a basic wage that will essentially cover a minimal standard of living that people will be free to quit jobs they hate, work on the things that they love, and everyone will be happier, healthier, and in the end, wealthier. They also say that the coming wave of automation with advances in computer technology, robotics, and general artificial intelligence coming to be that we won't have a choice in the matter since nobody is actually going to be working in the same sense that we now think of the concept.
Detractors say that being given something for nothing kills the human spirit and will create an enormous group of people consuming and not producing that will in turn wreck the entire economy.
Personally, I tend to think the detractors are right, but that's not what this article is about.
The Math
What I want to do here is look at the math behind what a realistic UBI program would look like. These numbers are based on a 2011 report I found from the Senate Budget Committee. 2018 numbers would be a bit different, but we'll be in the same ballpark.
According to the report, there was 1.03 trillion USD spent by the federal and state governments on various welfare programs. This includes everything from Indian Education to Medicaid to SNAP to Title I Migrant Education. Importantly it does not include Social Security and Medicare spending.
The federal portion made up about 746 billion USD with the rest coming from various state programs.
So this is money that is already being spent with all kinds of strings attached.
Let's do some easy math to see what this would look like.
In 2011, the population of the US was 313,232,000 according to the Census Department.
If we take 1,030,000,000,000 USD and spread it evenly among 313,232,000 people you come out to 3,288 USD per person per year. Most likely the payments to minors would be given to their custodial parents similar to how the SSI program works.
Is It Enough?
That's... not a lot given the cost of living in the ole US of A. But it's not nothing either. A family of 4 would bring in 13,153 USD per year. That's over half the federal poverty line for a family of 4 (22,350 USD) for 2011. Obviously the US is a big place with lots of variance in the costs of living. 13k in rural Arkansas will get you a lot further than 13k in Los Angeles. And maybe that will be an incentive for people to move.
One thing that I think the proponents of UBI have right is that it very well might reduce health costs. Human beings are not designed for chronic stress, but that's a large part of modern life. Poor sleep and high cortisol levels make for enormous health problems over time. In fact I was just listening to Joe Rogan's podcast episode with Matthew Walker, a neuroscientist who studies sleep, and Walker made the point that just a simple thing like drowsy driving is responsible for thousands of deaths every year.
One thing that I think the proponents have wrong is trying to calculate that GDP will grow by some percentage and that the growth effectively reduces the cost of the UBI. Studies forecasting the effects of major structural changes are always wrong. The economists and others who put together these figures seem to think they have human nature all figured out, but they are dis-proven every time. But nobody cares what was said 6 months or a year ago, so they just keep believing the experts and talking heads on TV.
In the 3,288 USD per person per year calculation we are not assuming any major changes to how everything works in our society. It's revenue neutral compared to where we are now. Like I said, this money is already being spent, but in all kinds of programs that reward some, punish others, and come with all sorts of administrative waste and conditions. With the simplification of administration, there will be some cost savings. Of course that means those government workers will find their positions eliminated, and they might be relying on their UBI a bit more than they expected.
Can It Be Done?
This kind of low-level UBI is 100% doable today. This is without creating a negative income tax or restructuring the minimum wage.
Politically it would be difficult to enact though. Even if UBI supporters get elected, there will be losers who are getting more than 3,288 in benefits today. Section 8 housing vouchers, for example, could be over 1,000 USD per month for a family. That could go past 3,288 per person in a hurry. These people might see their social safety net be eroded a little or even a lot.
Will It Be Done?
Not any time soon. The politicians who are seriously proposing these kinds of programs are still on the fringe of the political landscape. We might see this change over the next 10 to 20 years though.
Resources:
https://www.budget.senate.gov/imo/media/doc/CRS%20Report%20-%20Welfare%20Spending%20The%20Largest%20Item%20In%20The%20Federal%20Budget.pdf
Federal Budget
https://www.census.gov/prod/2011pubs/11statab/pop.pdf
https://aspe.hhs.gov/2011-poverty-guidelines-federal-register-notice
http://podcasts.joerogan.net/podcasts/matthew-walker