A UBI would dramatically increase spending – even if it cut welfare programs, it would still overwhelm the budget

Assume, as Zwolinski advocates, that such a program would displace all 126 federal antipoverty programs and all state and local government antipoverty programs. Later, I challenge that assumption, but for now imagine that it is true. Notice what would happen. A $2.068 trillion program would replace programs whose total expenditures in 2012 were $952 billion. Even rounding up the $952 billion to $1 trillion, the program that Zwolinski advocates is more than twice as costly in budgetary terms as current antipoverty programs. How would such a program be funded? Let's grant for now Zwolinski's assumption that all other antipoverty programs would be eliminated. How would the federal government obtain the additional $1.068 trillion?2 Before considering that question, let's put the number in perspective. Federal government spending for fiscal year 2014 will come in at about $3.576 trillion (U.S. Joint Economic Committee and Council of Economic Advisers 2014, 32). So if the federal government were to implement a $10,000 BIG today, spending by the federal government would increase by 30 percent. This amount is actually an underestimate. I am assuming that Zwolinski would want the BIG to be a federal program. So the $284 billion that he estimates would be saved by state and local governments would not be automatically remitted to the federal government. Rounding up the $668 billion spent by the feds in 2012 to $700 billion, I conclude that the federal government would spend not an additional $1.068 trillion, but rather an additional $1.368 trillion.3 This would be a whopping 38 percent increase in federal spending. How would Zwolinski fund this major increase in federal spending? If his goal were to keep the already bloated half-trillion-dollar federal deficit constant rather than increasing it, he would need to have the federal government increase taxes from their estimated $2.993 trillion to $4.361 trillion, an increase of 45.7 percent. One of the most well-established facts in the economics literature on govern ment finance is that raising a tax rate by x percent raises the revenue from that tax by less than x percent.4 The reason for this relationship is that the higher tax rate discourages the activity being taxed, so the tax base on which the tax is levied is smaller than otherwise. So if the federal government were to raise all tax rates by the same percentage to generate the revenue needed, it would have to raise all tax rates by more than 45.7 percent and probably substantially more.