UBI, the Unknown Ideal

A new book on universal basic income argues for us to "give people money." Sounds good. But a lot of old questions about how to do it are still left unanswered.

A “shotgun house” in Baton Rouge, Louisiana. (Darrell Miller / Flickr)

“Give People Money,” proclaims the title of a new book by Annie Lowrey touting the merits of Universal Basic Income (UBI). I couldn’t agree more. I’ve been writing in this vein myself for some time.

The question of how still looms, however. And like other UBI appeals, Lowrey’s book doesn’t provide good answers.

The burden of the argument for Left proponents of UBI is to demonstrate why a UBI is the best way to pursue a national income guarantee. The idea that there should be some kind of guarantee is, within the Left, not in question. The key tenets of UBI’s claim to supremacy are:

  • Because it is universal, a UBI evades the political stigma usually associated with anti-poverty programs;
  • Because it is a fixed, unconditional payment, the UBI carries no disincentives to work;
  • Because it is cash, UBI is a more efficient form of aid than “in-kind” benefits such as food stamps. It affords maximum flexibility to the beneficiary and minimizes the administrative cost of an aid program;
  • As employment gives way to automation, a UBI will be the only source of income for masses of people;
  • Because of its efficiency, a UBI could beneficially replace a gamut of existing aid programs.

Nobody on the left is likely to object to income guarantees. The benefits of cash assistance for millions, not least in a rich country, aren’t in doubt. But the UBI is a specific type of assistance, where a broadly-defined constituency is guaranteed a regular, fixed, unconditional payment. In this context, generic arguments for the merits of income guarantees in general, which typically dominate UBI appeals such as Lowrey’s book, are beside the point. From that point of view, a number of tenets of UBI advocacy, including most of those enumerated above, are a distraction.

If we limit ourselves only to those virtues of a UBI that distinguish it from other types of cash assistance, we’re left with the first two benefits listed above, both of which are founded on the advantages of universality and unconditionality. Unfortunately, the fact is that a UBI, despite its name, is neither universal nor unconditional. It can’t be.

The UBI’s original claim to fame was its purported advantages over a negative income tax (NIT). In contrast to a fixed payment that’s identical for everyone, an NIT provides some level of aid that gradually scales down as the recipient’s income from other sources rises. The scaling down, or phasing out, has the same implications as a progressive tax on income: the more money you make, the larger the percentage taken back by the government. For this reason, the NIT is seen as creating a disincentive to work.

Under a UBI, we are told, that doesn’t happen. And yet, in practice, this claim is incorrect.The reason is simple: the government will be obliged to recapture most of a UBI in taxes. (A modest UBI of, say, $10,000 per person annually would cost over $3 trillion, basically doubling the budget of the federal government.) And because most or all of the UBI will be recovered in taxes, it cannot be truly universal: the more money you make, the more your taxes will be increased by the UBI program, a fact that is not likely to escape middle- and higher-income taxpayers. This understanding would detract from the social solidarity envisioned in idealized portraits of a “universal” UBI regime.

The need to recover much of the UBI in taxes also dashes the hopes for a program with no work disincentives. In one way or another, the higher taxes are likely to imply some type of disincentive.

The problem of work disincentives has been addressed by researchers through various real-life UBI “experiments.” These demonstrations occupy a great deal of UBI advocacy, including Lowrey’s. Now, truth be told, work disincentives have never been a great concern for the Left, including this writer. But beyond that, you have to wonder about the political impact of such advocacy: we are testing the poor to see how they respond to a bit of cash assistance. Do they work more, or less? What do they spend the money on? What’s in their refrigerators?

This is a toxic policy narrative. The literature is contested, of course, but from most any left standpoint, decades of research and experience show that giving people money is a good idea, not to mention morally compelling.

Fine Print

A good part of the book follows the author to impoverished places in Africa and South Asia, where a number of UBI tests have been conducted. Cash aid is contrasted favorably to misguided liberal efforts to dig wells and provide mosquito nets or farm animals: the wells fall into disrepair; the animals get eaten. These are serious issues, but the most urgent need for poor nations is higher total national income. Any discussions of a UBI should be considered in that context. That would be a different book.

Moreover, while a UBI might make some sense for a place with virtually no anti-poverty programs, in the US there is a wide range of income guarantees, some in the form of means-tested benefits (in other words, NITs of some form or other), others in the form of social insurance. The notion of sweeping them all aside, suggested timidly by Lowrey but fervently embraced by assorted libertarians, is utter madness. In other words, it’s a mistake to merge the question of income guarantees for the residents of rural Kenya and for those of rural Alabama.

The real gaps in our system of income guarantees are where UBI energies would most profitably be focused. One is the hole left by the misbegotten welfare reform of 1996. Its replacement, Temporary Assistance for Needy Families (TANF), has been a vehicle for eliminating cash assistance for able-bodied, usually single mothers with children. Like other writers, Lowrey dwells on welfare reform’s defects (especially its work requirements), contrasting them unfavorably with UBI’s unconditionality. There’s no doubt that a UBI would constitute an improvement for current or potential beneficiaries of TANF. But TANF recipients are fewer than one percent of the US population, while a UBI benefit is received by everyone; it’s like using an atomic bomb to destroy an anthill.

Alaska’s famous “permanent fund” — which gives every citizen an unconditional annual payment, financed by the state’s oil revenue — is often touted as evidence that a UBI could stand politically. But the revenues that finance the Alaska program come from oil deposits that were gifted to the state of Alaska by the federal government when it joined the union in 1959. As such, the program doesn’t need to be financed by income taxes, nor do the benefits themselves need to be taxed. There is no comparable source of wealth available to finance the bulk of a national UBI.

Beyond the question of whether UBI is the best type of income guarantee, some of Lowrey’s arguments for income guarantees in general are problematic. The most widely circulated one is the ancient delusion that employment is being eliminated altogether by automation. This has been a prediction since the 1930s, if not earlier. To be sure, automation destroys jobs, but others replace them. Moreover, the government can boost employment through the use of deficit spending and money creation, though it often chooses not to out of reactionary political considerations.

There is no doubt that what economists casually describe as “adjustment costs” for workers displaced by automation can be life-altering, and not in a good way. But that’s a different problem than a continuous, absolute decline in employment. Focusing on technology has been demonstrated to be dead wrong, and it serves as a gross political distraction.

Another mistaken view of the labor market sees it transforming into an army of jobs with non-standard work arrangements – part-time, part-year, with irregular hours, no benefits, and no job security. But the scope of the “gig economy” is prone to overstatement, not to say hype. And while it’s often claimed that a UBI (and implicitly, any income guarantee) makes it easier for workers to survive in this hellscape, we could also ask whether such income support might facilitate the proliferation of such terms of employment.

Lowrey’s most important, well-taken thread is the salience of a UBI (and implicitly, any income guarantee) for the working class. Such a guarantee affords the worker an escape hatch from wage labor (or gig labor), one that may generate some pressure on employers to be more forthcoming with pay, benefits, and security. Combined with a commitment to tight labor markets from the commanding heights of government, another world for the working class will be possible. So by all means, let’s give people money. But let’s send it where it will do the most good.

My preference is for a new negative income tax combined with a job guarantee. But it would be a mistake to think that the “work” side of this combination makes it politically feasible. The US political economy, from Clinton to Trump, favors a high labor surplus regime. While official policy does not favor mass employment, it does favor minimal labor compensation — which requires a large, desperate, gigged-out reserve army of the unemployed. The struggle is with that, not with technology.