B --- Federal UBI --- funded by tax increases OR deficit spending causes SUSTAINED INFLATION and collapses the economy

UBI is expensive. Very expensive. As an add on, without simultaneously trimming government programs, it would require a significant tax increase.

Following the Finnish study results, Kari Hamalainen, chief researcher at the VATT Institute for Economic Research, said implementing a universal basic income for all citizens “would be expensive. If we had a universal basic income, we’d have to incorporate taxation”, and based on these results, “it would be unsustainable.”

Bridgewater Associates conducted a study in 2018, which found the cost of a $1,000/mo stipend to every adult in the U.S. would run approximately $3.81 trillion per year. This amount represented 21% of US GDP or 78% of tax revenue in 2018. (Source: CNBC) Yes, the stipend would help to make people feel more financially secure, but as the Finnish study proved, it would not meaningfully increase employment or production. It would merely be an enormous expense, one that would likely cripple [destroy] the U.S. economy.

A UBI program will require a massive tax overhaul and an in-depth evaluation of existing social programs. Some believe the cost would be partially offset by the removal of other social programs and the diminished administration costs that come from running a program without a “means test.” This would be a concept that requires program administrators to ensure recipients meet specific qualification standards. While in the pure UBI, the payment goes to all citizens.

DISADVANTAGES OF UBI

Naval Ravikant, co-founder, chairman, and former CEO of AngelList outlines other reasons we should be avoiding Universal Basic Income. He believes that those who are down on their luck don’t want handouts.

“The moment I start giving money to you, I’ve lowered your status. I’ve made you a second-class citizen.”

Naval Ravikant

Naval believes that it is better to help lower-income individuals gain meaningful lives through education and success. “You have to teach a man to fish, not basically throw your rod and leftover carcasses at him and tell him ‘here, eat the scraps,'” he continues.

Others believe that there are better uses of government funds than the “handouts” of UBI. In a recent Financial Times article, Ian Goldin, a professor of globalization and development at the University of Oxford, claims that “Individuals gain not only income but also meaning, status, skills, networks, and friendships through work. Delinking income and work, while rewarding people for staying at home, is what lies behind social decay.”

Joseph Stiglitz, Nobel laureate in economics, professor at the Columbia Business School, and Chief Economist at the Roosevelt Institute believes that people have a desire to work and gain dignity from doing so.

This previous statements strike a chord with me. Self-sufficiency is an essential aspect of well-being. Steve Taylor, Ph.D., says, “Self-sufficiency is the quality of feeling secure and content with oneself, a deep-rooted sense of inner completeness and stability.” What would be the knockoff effects if we take this away from an entire populace? Will we see a drop in production? Would there be higher levels of unhappiness and self-worth?

WILL REDUCE PAY

While some economists argue that UBI could drive up wages, others believe it will drive them down. Why would an employer pay more if UBI gives citizens enough money to live on? They will most likely try to get away with paying them less, as these individuals have another source of income.

What is happening in the gig economy is proof enough that this can be the case. Many gig workers are willing to work for low wages as they have other sources of income.

AUTOMATION WILL NOT REDUCE JOBS

As stated earlier, Andrew Yang believes that robots and automation will purge America of countless jobs. Will automation replace some jobs? Yes. It is almost guaranteed that some jobs will be phased out. But other, more meaningful jobs will be created in its place. This has been the case since the rise of humanity.

Automation is not a new concept. Since the earliest times, tools and machines have been invented to make a task easier. In 1722, the lathe was invented, a tool designed to hold a section of material to be carved, cut, or shaped. The lathe is credited with being the first machine tool that led to the invention of all subsequent machine tools.

Universal Basic Income Is A Bad Idea

Think of the invention of the automobile (an automated mobile). The need for relying on horses to do the heavy lifting of daily work, pulling trolleys, carriages, delivery carts, etc., severely diminished with the rise of the automobile. Many industries collapsed as a result: streetcar operators, carriage manufacturers, blacksmiths, horse breeders, stable keepers, etc. However, the number of new jobs created because of the rise of the automobile more than made up for this. Workers were needed for assembly lines, road construction, oil and steel industries (including vulcanized rubber), and even motels for long trips.

Today, there is little need for blacksmiths, cobblers, VCR repair shops, or milk truck delivery drivers. Yet jobs for computer programmers, online security specialists, plumbers, and HVAC repair workers continue. Although retraining may be needed in certain fields to counteract the changing economy, implementing a UBI is like a societal band-aid, perhaps a drag, and not a viable solution to economic disparity.

Societal and economic change is constant, and allocating free money to the public won’t change this fact.

INCREASES TAXES OR FEDERAL DEFICIT?

In the U.S., the Roosevelt Institute think tank says that a $1,000 a month payment would grow the economy by $2.5 trillion by 2025 if paid for by increasing the federal deficit. On the other hand, if the UBI were paid for with taxes, there would be no net benefit to the economy.

However, net wealth is not created by simply redistributing money from one class of people to another. Wealth is created by increased labor, trade, and innovation. As such, I have difficulty believing that UBI could grow the economy by $2.5T.

As stated earlier, Bridgewater Associates conducted a study in 2018, which found the cost of a $1,000/mo stipend to every adult in the U.S. would run approximately $3.81T per year. The simple math of taxing Americans $3.8T annually to gain zero economic boost does not add up.

PESKY INFLATION

If UBi were to be financed by increasing the federal deficit, it would most undoubtedly fuel inflation. As a reminder, inflation is caused by a more rapid increase in the quantity of money than the quantity of goods or services produced during the same time period.

In other words, if the nation’s printing press produces money at a greater rate than its economy can produce, the result will be higher inflation levels. Printing an extra $3.8T yearly will surely cause inflation to roar. If our irresponsible fiscal spending habits during 2020 and 2021 taught us anything, it is that handing out money to anybody and everybody does not contribute to low inflation levels.