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Less-than-universal basic income

Ten years ago, almost no one in the United States had heard of Universal Basic Income (UBI). Today, chances are that the average college graduate has not only heard of the idea, but probably holds a very strong opinion about it. From Silicon Valley elites to futurists to policy wonks, UBI is igniting passions and dividing opinions across the political spectrum.

Much of the credit for this is due to Andrew Yang, whose 2016 presidential campaign took a centuries-old academic idea and transformed it into a focal point for conversations about poverty, inequality, and the future of work in an age of increasing technological automation.

Since then, the idea of UBI has taken off. The organization Mayors for a Guaranteed Income reports that it has sponsored almost 60 pilot programs in various cities across the United States, and the results of these pilots have been largely encouraging. In Stockton, California, a guaranteed income program not only reduced income volatility and mental anxiety, but significantly boosted full-time employment among recipients—by 12 percentage points, compared to a mere 5-point increase in the control group over the same period. A more recent experiment in St. Paul, Minnesota, showed similar increases in employment as well as improvements in housing and psychological wellbeing.

And yet, for all its popularity, the idea of UBI seems stuck at the level of a temporary experiment. No government has yet to implement UBI as a permanent, large-scale policy, and none seems likely to do so in the near-term future.

The UBI That Almost Was: Nixon’s Family Assistance Plan

After all, we’ve been here before. Back in the 1960s, a similar wave of enthusiasm for UBI (or “guaranteed income,” as it was called at the time) swept the United States. Milton Friedman popularized the idea in 1962 with his proposal for a Negative Income Tax. In 1968, a letter supporting a guaranteed income garnered over 1,000 signatures from academic economists and received front-page coverage in the New York Times. Finally, by 1969, Richard Nixon proposed his “Family Assistance Plan,” which would have provided a federally guaranteed income to families with children. Between growing bipartisan support and extreme public dissatisfaction with traditional welfare, it looked like the timing might be just right for the idea to actually become a reality.

Except, it didn’t. After months of struggle and compromises that left no one happy, the Family Assistance Plan ultimately failed to make it through Congress. The full story of its defeat is a complicated one, well-documented in Brian Steensland’s masterful book, The Failed Welfare Revolution. But, in essence, its failure came down to the same two objections that always bedevil guaranteed income programs: cost and fairness.

The Two Main Objections to UBI: Cost and Fairness

The issue of cost is a serious challenge for advocates of UBI. A grant of $1,000 per month would be close to enough to bring a single individual with no other income up to the poverty level. But a fully universal grant of $1,000 per month to all the roughly 330 million people living in the United States would cost almost 4 trillion dollars – more than half the entire federal budget for 2024! A smaller grant would cost less money, but the smaller the grant, the less effective it will be at lifting people out of poverty. Fiscal constraints thus create a dilemma that is difficult to escape.

The other problem is, if anything, even more difficult to manage. One of the defining features of UBI is its universality, meaning, in this context, that everyone is eligible to receive the grant, whether they are working or not. But it is precisely this universality that strikes many people as morally unfair. It’s one thing, the argument goes, to help people who are trying to support themselves but can’t. It’s quite another thing to declare that everybody is entitled to live off the federal dole, whether they’re able and willing to work or not. The old Victorian distinction between the deserving and the undeserving poor resonates deeply with a sizable majority of the American public, liberals, and conservatives alike.

It might be time to consider an alternative approach to UBI—one that avoids the main objections to the policy while retaining much of what makes it so attractive in the first place.

Of course, UBI advocates have responses to both objections. The cost of a UBI can be mitigated by imposing modest new taxes, consolidating existing welfare programs, or both. And claims of unfairness can be met by pointing out that just because full-time parents, artists, and caretakers aren’t working, this doesn’t make them free-riders. There are other ways of making a positive contribution to one’s community beyond participation in the paid labor market.

These responses are serious enough to merit more attention than I can devote to them here. But so far, at least, they have failed to persuade a majority of the American public. This doesn’t necessarily mean that they should give up. But it does suggest, perhaps, that it might be time to consider an alternative approach to UBI—one that avoids the main objections to the policy while retaining much of what makes it so attractive in the first place.

The Child Tax Credit as an Alternative to the UBI

We don’t have to stretch our imaginations to conceive of what such an alternative might look like. We’ve already tried it—at least briefly. In 2021, responding to the economic crisis caused by COVID-19, the United States made its Child Tax Credit (CTC) fully refundable. This meant that families whose income was too low to owe any taxes received cash payments from the government, the size of which depended on how many children they had. The results of this experiment were impressive. Childhood poverty levels fell to their lowest level on record—5.2%. When the expansion ended in 2022, child poverty more than doubled almost immediately, skyrocketing to 12.4%.

So far, efforts to make the expansion permanent have been unsuccessful. But its demonstrated success and relative popularity suggest that it might be the viable path forward for enacting a policy of large scale, no-strings-attached cash transfers.

First, because the CTC is limited to families with dependent children, its scope is far narrower than a fully universal UBI. Only about 40% of US households have children under the age of 18, so even keeping the size of the grant constant, a CTC cuts the cost of UBI by more than half.

Second, and perhaps more importantly, because the CTC is focused on families with children, it is much less vulnerable to the kind of worries about unfairness that plague UBI. Even if you think that there’s something morally objectionable about able-bodied adults being dependent on government support, surely that objection doesn’t apply to children. Children aren’t responsible for putting themselves in poverty. And they aren’t capable of getting themselves out of it. If anyone deserves a helping hand, it is children.

As Josh McCabe has recently noted, other countries such as Canada, Australia, New Zealand, and the United Kingdom all have child tax credits that are at least partially refundable. The United States not only lacks such a policy, but spends less on cash transfers to children than any other country in the Organization for Economic Cooperation and Development (OECD). No surprise, then, that the US also has the highest post-tax, post-transfer child poverty rates of any other country in the developed world.

For many of UBI’s supporters, its universality is one of its strongest appeals. And yet the objections about cost and fairness show that it might also be one of its greatest political liabilities. A permanent expansion of the Child Tax Credit has the potential to realize much of the promise of permanent, broad-based, unconditional cash transfers, while simultaneously avoiding the biggest pitfalls of UBI. In bridging ambition with practicality, expanding the Child Tax Credit could be the key to transforming the ideal of universal financial support into a sustainable reality.

Feature image by Andre Taissin via Unsplash.

Recent Comments

  1. Constantinos Ragazas

    In my view, a progressive UMI should be best looked at in terms of Economic Theory! As it recognizes that in any Economy, “Consumption” plays an essential role. Without Consumption there can be no Economy!

    UMI has the potential of creating an Economy that runs optimally and smoothly and predictably. An Economy that can eliminate recessions/inflations and business cycles, which are so destructive.

    Along with a couple of other major overhalls to our current system. Like having a government Revenue Collection System (RCS) that is seamless and automatic and adjustable and innocuous in peoples lives. As, for example, (TFs) transaction fees in place of taxes. As now charged by credit card companies for every economic activity by anybody in the economy. And totally eliminating income tax filling and the dreaded IRS!

    This and a Government Accounting System that looks “backwards” at what was spend, instead of “forwards” to what can only be spend! Which often is unpredictable! And totally eliminating crippling Debt Ceiling stalemates and Government Shutdowns!

    In an Age of Automation, we have the Technologies to do this. We need a 21st Century Economy and Government to go with our 21st Century lives.

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