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Milton Ezrati, Economics and investment strategy consultant, serves as chief economist for the NY-based communications firm, and senior contributor to Forbes Magazine, “Universal Basic Income: A Thoroughly Wrongheaded Idea” January 15, 2019 dmr

Though UBI proposals come in many shapes and sizes, all share certain justifications. Prominent among them, not surprisingly, are claims that it would reduce poverty. Proponents have made an easy calculation from government statistics to show that a generous stipend of $3,000 a month for each adult in the country would cut the nation’s poverty rate in half. A stipend of $250 a month for each child would reduce child poverty some 40%. UBI, proponents claim, would break the cycle of dependency among the disadvantaged, giving them time and money at last to seek the training and higher education they need to climb the economic ladder. Some of the more starry eyed among those Silicon Valley billionaires behind the proposal add that UBI would help bring on a cultural revolution by allowing people time from toil to “contemplate the meaning of life." Matters, however, are far from as straightforward as these arguments suggest. Cost is an obvious consideration. The most quoted schemes today would, according calculations from Commerce Department data, cost the federal government between $2 and 4 trillion a year, amounting to a 50% increase in current federal outlays or more than 10% of last year’s gross domestic product (GDP). Such a draw on the economy would 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 also preclude other government priorities, such as infrastructure refurbishment, including the building of hospitals and the construction of affordable housing. Both effects would undermine productive incentives and otherwise constrain both public and private investment in the economy. Economic activity and growth potentials would suffer accordingly, not the least because UBI payouts would do little to invest in the future except if recipients really do use the funds for education and training. Not surprisingly, several UBI proponents suggest ways the country might finance the entitlement. These, though sometimes imaginative, would hardly lift the associated economic burdens. 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 the proposers describe as a huge, ongoing entitlement. In any case, such an answer would surely provoke intense resistance from the green lobby. Other UBI proponents suggest a tax on the market capitalization of public companies. One proposal calls for an initial 3% levy on all corporations followed by a lower ongoing tax. Some would add a 5% levy on initial public offerings and a 3% tax on mergers. A carbon tax occasionally makes it into the mix. 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 as well as investing and hence on growth prospects generally.

At a conceptual level, the universal basic income represents a radical departure from long-standing US welfare policy. This policy has required recipients to undertake efforts to improve their station in life as a condition of receiving aid. Although such requirements often carry a stigma, they have most often been designed to prevent individuals from becoming dependent. The UBI’s provision of unconditional aid departs sharply from this policy. Given the breadth of UBI’s assistance, the UBI carries a risk of making large segments of the population dependent.

UBI supporters acknowledge this departure and counter that a UBI will improve work incentives and redistribute income to achieve a more equitable income distribution. Our economic analysis has cast serious doubt on these claims. While a UBI can improve work incentives among recipients of the transfer programs it replaces, a UBI worsens work incentives among UBI recipients who are not beneficiaries of these programs. In our analysis of a UBI that has no phasedown provision, aggregate labor supply increases slightly. But such a plan dramatically worsens the distribution of income by redistributing government transfer payments from lowerto higher-income households. In our analysis of UBI plans that have phase-down provisions, work incentives are reduced and, as a result, these plans would all significantly reduce aggregate US labor supply and, thereby, US economic output. These plans show little improvement in the distribution of income.

Of course, many practical issues remain. This report examines the desirability of a UBI, but also attempts to match it to feasibility. So, at what rate should weekly payments be set? Could a scheme be phased in over time, starting with a low weekly payment? How much would such a scheme cost, and what offsetting savings would accrue?

As a UBI scheme would aim to replace a range of current benefits, is it possible to ensure that it could be introduced without unacceptable losses to households receiving such benefits? With such a scheme involving big changes in people’s individual incomes, who would win and who would lose? Is it possible to set the payment at a level that provides enough for an acceptable standard of living? Or would a UBI only be able to meet a portion of basic living costs, as with Child Benefit at the moment? If the latter, some additional means-tested support would need to be preserved, thus retaining some of the complexities of the existing system.

It should be mentioned at this point that the definition of UBI provided above masks a great deal of potential variation in the actual design of UBI schemes (De Wispelaere, 2015). UBI schemes differ crucially with respect to the level of ‘generosity’ they offer, and the extent to which they are expected or intended to cover basic needs; the way in which they are intended to interact with other benefits (i.e. whether the scheme in question is intended to replace, or run concurrently with, them); and the method by which they should be financed, including any changes to the tax system they necessitate. The implications of varying these design features are explored in the models we examine in this paper.

Much of the microsimulation literature relates to concerns about UBI’s financial and administrative feasibility. As noted by Torry (2016b), financial feasibility involves two separate issues: fiscal feasibility, pertaining to the impacts ofpotential reforms on government finances4; and household financial feasibility, pertaining to the gains and losses experienced by households as a result of reforms. Torry (2016a) and others (Reed and Lansley, 2016) have used microsimulation in order to design UBI schemes which strike an acceptable balance between these two types of feasibility.

Basic income — the idea of just giving everyone in a given country a regular, guaranteed cash payment, no strings attached — is still pretty far from being adopted in the US. But it’s been gaining steam as an idea for a while now, most recently garnering praise from Facebook CEO Mark Zuckerberg in his widely viewed Harvard commencement speech last week. But no one quite agrees on what the term “basic income” means.

And in particular, no one agrees on how such a plan would be funded. Conservative and libertarian proponents tend to want to pay for it by eliminating the entire welfare state, including health programs like Medicare and Medicaid and social insurance programs such as Social Security. More cautious center-left or moderate libertarian proponents — who are loath to cut those aspects of the safety net, endanger people’s retirements, and let uninsured sick people die in the streets — tend to only propose funding through eliminating means-tested programs like food stamps and the earned income tax credit, as well as tax benefits such as the health care exclusion and mortgage interest deduction. The most ambitious lefty proponents want to finance the program entirely through new tax revenue.

Interest in universal basic income is on the rise in the U.S. and other advanced countries. Decades of wage stagnation and concerns about automation, robots, and job destruction, as well as discontent with the current social safety net, provide the foundation for interest in this area. Support for UBIs has led to several pilot programs and policy proposals in the U.S., Canada, Finland and Switzerland. Despite all of this, there is a lack of clarity on what makes a UBI, what problem it is meant to solve, whether the social safety net can or is providing these benefits, and what (if anything) can be learned from the pilot programs that we don’t already know from the decades of existing research on individual and household responses to the social safety net, and wages and income opportunities more broadly. Our paper seeks to fill this gap. A “pure” UBI (providing a set benefit to all regardless of income, age, etc.) funded to meet basic needs for a household without earnings would be extremely expensive, about twice the cost of all existing transfers in the U.S. Funding this would require substantial new revenue. The source of the new funds is a first order issue, and will have substantial impacts on the distributional effects of the policy and its ability to target those most in need of assistance. In particular, replacing existing anti-poverty programs with a UBI would be highly regressive, unless substantial additional funds were put in. Much about the effects of a UBI, on labor supply, income and family wellbeing, can be gleaned from the existing research, which we briefly review here. We identify a few outstanding questions, such as the impact of a truly universal program (presumably without stigma) as well as the effects on human capital and, hence, labor supply in the longer run.

Speaking at Harvard’s commencement ceremony last week, Facebook founder and CEO Mark Zuckerberg became the latest titan of Silicon Valley to muse about the potential merits of a universal basic income program as a solution to hypothetical future joblessness induced by technology change. Elon Musk, Bill Gates, Andrew Ng, Sam Altman, and many others in the industry have also spoken favorably about the idea, which is essentially flat checks from the government that would go out to everyone.

It’s an interesting conversation. And it’s dangerously detached from today’s policy fights.

Universal Basic Income (UBI) would be an unaffordable way to undermine our social safety net’s successes. UBI would transfer money away from those who need it most, change the distinctly American relationship between citizen and government, and sharply raise taxes or the national debt (or both). And critically, it would fail to improve upon our current safety net’s biggest weakness: UBI would destroy – not improve – incentives to work.

The first problem is the money. A truly universal payment of $10,000 to every citizen every year adds up to a new expense of about $3 trillion, well more than we spend on our social safety net now, and close to the entirety of the tax revenue currently collected by the federal government.

Rachel Minogue Economic Fellow @ The Third Way, “Five Problems with Universal Basic Income” May 24, 2018 dmr

Poor families could be left more vulnerable If significant tax hikes aren’t viable, then the question remains: what gets cut in order to fund UBI? Under this scenario, UBI becomes stingy and punitive, as a vast amount of important government programs would be on the chopping block. Murray, the conservative UBI proponent, recommends that a $13,000 annual basic income replace all social assistance programs. Consider the value of the benefits people would lose: Medicaid, Medicare, Disability Insurance, the Children’s Health Insurance Program, Social Security, Supplemental Security Income, Unemployment Insurance, SNAP, Section 8 housing vouchers, Pell Grants, the Earned Income Tax Credit, Temporary Assistance to Needy Families. As Dylan Matthews writes, “$13,000 a year doesn’t mean much if you lose insurance that was paying $60,000 a year on chemotherapy.”15 Even a UBI that retains much of the existing social safety net could hit the disadvantaged harder, depending on which tax credits and government assistance programs get cut. Stern listed the Supplemental Nutrition Assistance Program (SNAP), the Earned Income Tax Credit (EITC), and housing assistance as potential policies to end in favor of UBI. But consider one example. In Queens, New York, a single, low-income working parent with three children can receive up to $31,100 worth of benefits annually from SNAP, the EITC, and Section 8 housing vouchers alone, and for good reason.16 Replacing those benefits with a $12,000 UBI for the parent would reduce the family’s income and benefits by $19,100. A fundamental motivation for UBI is to eliminate poverty, but the tradeoffs necessary for funding would likely cause harm to vulnerable populations. This begs the question: If the main difference between UBI and our current safety net is that UBI gives relatively more to people who don’t need help, what would make UBI worthwhile? Some proponents have suggested UBI could be restricted to certain populations in need, but that would defy the universality at the idea’s core. At this point, what they are really proposing is an expansion of the existing safety net. That’s a worthwhile conversation to have, but it’s not about a universal basic income. The idea has been scarcely tested There are a handful of past and ongoing experiments with UBI. Unfortunately, the experiments have been flawed or are too small to effectively prove that UBI could live up to some of its proponents’ claims: Finland’s national social insurance institute, Kela, launched a UBI trial experiment in 2017, with 2,000 Finns aged 25 to 58 receiving approximately $645 per month. A year into its implementation, the Finnish government refused to continue its funding in April 2018, choosing instead to pursue alternative social welfare projects.17 The Alaska Permanent Fund provides an annual cash dividend to all Alaskan residents from oil reserve royalties. The grant’s amount, in recent years roughly $2,000 per person, is far too small to be a livable income and thus has minimal effects on the labor market and is a poor comparison to popular UBI proposals.18 An experiment in Kenya launched by Give Directly in late 2017 compares different UBI methods across 120 villages. According to Business Insider, residents of 40 villages receive $270 annually for 12 years, “effectively doubling most people’s income,” while 80 villages receive the same amount for 2 years.19 While this experiment could produce more compelling evidence than prior trials, Kenya’s economy is at a very different stage of development compared to the US which limits the study’s relevance. Silicon Valley startup accelerator Y Combinator in 2017 began a five-year experiment in giving 1,000 people $1,000 per month and 2,000 people $50 a month, aiming to assess changes to the labor force and quality of life.20 This evaluation could yield important results given its similarities to leading proposals but is still early in the experiment. It will be interesting to see what comes out of future studies and experiments. But policymakers should be wary of studies that simulate the upside of UBI (a monthly income) without simulating its downsides, namely sweeping benefit cuts or tax increases. Conclusion The motivation behind most universal basic income proposals is admirable: reduce widespread poverty and provide lifelong income security to all. But a UBI in reality would likely fall far short of eliminating poverty while imposing large economic costs and ignoring future opportunities for work. It also ignores that American life is rooted in a civic tradition of earning. Seventy-three percent of Americans believe working hard is “very important to getting ahead in life.”21 That’s the highest among advanced economies, with the United Kingdom second at 60% and Germany (49%), Japan (42%), South Korea (34%), and France (25%) far behind.22 Instead of pinning all hopes to UBI, policymakers should focus instead on designing ambitious policies that address the need that Americans have to earn a good life.

Some economists and policymakers argue that, although there was strong 3.4 percent growth in gross domestic product (GDP) in 2019 and low rates of unemployment, those numbers conceal the fact that many families are struggling financially. Wage growth remains stagnant, and nearly 1 in 10 employed adults work as contractors with limited job security and therefore employment benefits such as health insurance and long-term financial security. Moreover, the novel coronavirus (COVID-19) pandemic is severely exacerbating these health and economic issues. There have been more than 48 million jobless claims in the US since March. At the time this report was written, about 31.8 million people are receiving unemployment benefits, which equates to about 1 in 5 individuals in the workforce. Simultaneously, the US continues to set record numbers of COVID19 cases with cases trending upward in 39 states. In light of the pandemic, the International Monetary Fund projects that growth in the US will fall 8 percent in 2020 and overall worldwide output will fall 4.9 percent.

UBI is one method that is being suggested as having the potential to address current income inequality and to mitigate the loss of jobs caused by technological advances and COVID-19. UBI is an economic support mechanism typically intended to reach all or a large portion of the population. It is particularly noteworthy and contrasted with current US welfare programs in that receipt of UBI comes with no or minimal conditions. According to the International Monetary Fund, in formulating a UBI plan, policymakers generally grapple with three primary considerations: who is eligible, the generosity of the UBI transfers, and the fiscal cost.Some UBI proposals are universal while others are targeted to lower-income populations. Additionally, policymakers must weigh the incentives and disincentives of the generosity of transfers. For example, they must determine how UBI will affect decisions to enter the workforce and the number of hours worked. Finally, and perhaps most importantly, policymakers must determine the fiscal cost of implementing UBI to governments in an environment of limited financial resources.

Mike Konczal is a fellow at the Roosevelt Institute, where he focuses on financial regulation, inequality and unemployment. He writes a weekly column for Wonkblog. “Thinking Utopian: How about a universal basic income?,” May 11, 2013 https://www.washingtonpost.com/news/wonk/wp/2013/05/11/thinking-utopian-how-about-a-universal-basic-income/dmr

Meanwhile, a few conservatives have advocated a form of basic income for a different set of reasons. The right likes basic income because it would allow for the removal of many overlapping and piecemeal government programs, such as food stamps and unemployment insurance, as well as programs the government directly runs. Charles Murray has advocated a universal basic income of $10,000 for every person, and paying for it by ending Social Security, Medicare, Medicaid, virtually all transfer programs and certain tax breaks. Also, if you squint really hard, you could see a libertarian argument that a basic income compensates for the private appropriation of common, natural resources.

Today, it’s rare for progressives and conservatives in the US to agree on much of anything. But the idea of a universal basic income (UBI) has historically resonated across the political spectrum. On the right, UBI has been endorsed by the likes of economist Milton Friedman, former president Richard Nixon, and libertarian pundit Charles Murray. On the left, Martin Luther King, Jr., former Democratic politician George McGovern, and the Green Party have all championed the idea of the government giving each citizen a certain amount of money on a regular basis—no strings attached.

Yet while UBI boasts cross-ideological appeal, conservatives and progressives tend to have very different ideas about how a basic income would work. That’s why some of today’s leading liberal economists and public policy analysts are turning against the idea of UBI—and their concerns are well justified.

The primary answer is that universal programs cost considerably more than targeted programs, and strong political opposition to raising taxes makes it extremely difficult to generate the federal taxes needed to support a mostly or fully universal strategy. As a result, were policymakers to pursue a largely or entirely universal approach to social programs, they could risk squeezing the funding available for people in greater need, as well as funding for other essential government endeavors outside of benefit programs (e.g., addressing climate change and expanding the stock of affordable housing).

Proposals to create a Universal Basic Income (UBI) help illustrate some of these trade-offs. Economists Hilary Hoynes and Jesse Rothstein (2019) note that a “truly universal UBI would be enormously expensive,” with the mostdiscussed kinds of UBIs costing “nearly double current total spending on the ‘big three’ programs (Social Security, Medicare, and Medicaid)” (2). A CRS analysis of two prominent UBI proposals found they would cost $2 trillion to $3 trillion a year, or $20 trillion to $30 trillion over a decade (CRS 2018),72 representing roughly half of all current federal noninterest spending. Nor would taxing UBI benefits reduce the cost to manageable levels; according to the Tax Policy Center (2022), in 2019 nearly three-quarters (72 percent) of Americans were in the 0 percent, 10 percent, or 12 percent income tax brackets, so taxing UBI payments would lower UBI’s cost only modestly. Hoynes and Rothstein also note that “replacing existing anti-poverty programs with a UBI would be highly regressive unless substantial additional funds were put in (24), because policymakers would be redistributing—to higher-income households—some income and other benefits that social programs now provide to people with low or modest incomes.

Daron Acemoğlu, Professor of Economics @ MIT, “Is Basic Income the Safety Net of the Future?” MAY 19TH, 2021 dmr

We need a better and stronger social safety net. We need ways of combating inequality. We need to create a fairer society. Why not, then, sign up for Universal Basic Income (UBI), which would give a basic income to all citizens who are all adults, for example, $1000 a month for every adult American?

The main challenge for UBI advocates is defining just what such a program would look like on a large scale. “UBI proposals tend not to be fully baked,” observed liberal economist Max Sawicky. That was in 2013. Some four years later, it’s still true. Some projects are operating under the radar, including the Oakland project, on which Y Combinator’s Altman declined to comment.

Indeed, one reason UBI attracts adherents across the ideological spectrum is that it can be so variously conceived. It’s a bit like the story of the blind men and the elephant, with every promoter visualizing the totality based on the features he or she considers most important.

There are two differing visions for UBI. The first, more common, sees the UBI as a replacement for other social welfare programs. Michael Tanner, a senior fellow at Cato Institute, notes that prominent libertarians have endorsed a UBI and that it would provide an “intriguing alternative to our current dysfunctional welfare state.”Footnote49 That is, instead of receiving food stamps, housing allowance, Medicaid, and unemployment insurance payments, those unemployed would receive a monthly check, roughly of the same value. This may or may not make them feel less controlled and able to freely spend their money as they wish. They may use it wisely or for controlled substances, opioids, and liquor. However, it will do little to overcome the income losses due to lack of jobs. Robert Greenstein of the Center on Budget and Policy Priorities suggests that a UBI that replaced existing social welfare programs would actually increase poverty if it was not means-tested: “If you take the dollars targeted on people in the bottom fifth or two-fifths of the population and convert them to universal payments to people all the way up the income scale, you’re redistributing income upward.”Footnote50 Moreover, the difference in cost-of-living highlights another problem with UBI as a replacement for current safety net programs: it would almost certainly have to be accompanied by some sort of public housing guarantee, as even a UBI that put recipients above the poverty level might still be insufficient to afford housing in many cities.

If the minimum wage isn’t enough for working families to cover their basics, and many state and federal benefits remain difficult to access, how can we better support residents struggling to make ends meet? Some have suggested giving families money directly to meet their basic needs. There are several possible approaches:

Universal basic income, where everyone gets a payment regardless of private income or assets

Eligibility for work support benefits is typically based on income, so as their earnings increase, families lose eligibility for supports. A benefit cliff occurs when just a small increase in income leads to the complete termination of a benefit. The result is that parents can work and earn more, while their families end up worse off than they were before.8

Returning to the example of a single parent living in Denver County with two children (one preschool-aged and one school-aged), Figure 3 illustrates the impact of benefit losses on the family’s efforts to get ahead. It shows how the family’s net resources—that is, resources after subtracting the cost of basic expenses—change as wages gradually increase from $6.85 to $20 an hour. In practice, workers may only experience a subset of this wage range.

In the U.S., we’re left with a patchwork benefits system, an indecipherable alphabet soup of programs: SNAP, TANF, CHIP, Section 8, EITC, WIC, SSDI. The U.S. government spends nearly $1 trillion across dozens of separate programs at the state and federal level,2 as this byzantine diagram from the House Ways and Means Committee shows. This all requires enormous administrative oversight on the part of the government, and it requires the ability to navigate multiple agencies on the part of recipients.

The problems with this system go beyond its complicated structure. Because eligibility for most social assistance is based on income (or is “means-tested”), recipients lose their benefits as they earn more income — this is often labeled the “welfare trap” or “poverty trap.” For example: A family of four can’t qualify for food stamps if it earns more than $31,536. These benefit phase-outs, or “cliffs,” essentially create steep marginal tax rates on the poor.

“Means-tested” safety net benefits are those that determine eligibility based on recipients’ income or other available resources. Guaranteed income policies can negatively impact some recipients’ eligibility for these types of programs when the added income raises them above benefit qualification thresholds. A 2020 article covering the Magnolia Mothers Trust documented this effect:

“Though the payments have made her life more comfortable, [one recipient] said there are some downsides. An increase of $12,000 a year to some women’s incomes could mean that they no longer qualify for food stamps or Medicaid. ‘In reality the caps are so low that the moment you get something like Magnolia Mother’s Trust, it makes all of those resources that sometimes are needed unavailable,’ she said. [The recipient] said she has not been hurt by the payments, but other women in the program have told her that it’s made their lives more difficult. ‘Some mentioned that they would rather not have the $1,000 because of the headache,’ she said. [Aisha] Nyandoro said there is a reduction in benefits for some mothers, averaging $300 to $400 each month, because of the ‘punitive aspect of the social safety net.’”