No UBI Link – Carbon Tax Solves

Greenstein 19, was Administrator of the Food and Nutrition Service at the U.S. Department of Agriculture under President Carter, where he directed the agency that operates the federal food assistance programs, such as the food stamp and school lunch programs, and helped design the landmark Food Stamp Act of 1977, generally regarded as the Carter Administration’s principal anti-poverty achievement. He was appointed by President Clinton in 1994 to serve on the Bipartisan Commission on Entitlement and Tax Reform and headed the federal budget policy component of the transition team for President Obama. He is a graduate of Harvard College and has received honorary doctorates from Tufts University, Occidental College, and Haverford College (Rob, “Commentary: Universal Basic Income May Sound Attractive But, If It Occurred, Would Likelier Increase Poverty Than Reduce It,” CBPP, ) dmr

Universal vs. Means-Tested Programs

Some UBI supporters stress that it would be universal. One often hears that means-tested programs eventually get crushed politically while universal programs do well. But the evidence doesn’t support that belief. While cash aid for poor people who aren’t working has fared poorly politically, means-tested programs as a whole have done well. Recent decades have witnessed large expansions of SNAP, Medicaid, the EITC, and other programs.

If anything, means-tested programs have fared somewhat better than universal programs in the last several decades. Since 1980, policymakers in Washington and in a number of states have cut unemployment insurance, contributing to a substantial decline in the share of jobless Americans — now below 30 percent — who receive unemployment benefits. In addition, the 1983 Social Security deal raised the program’s retirement age from 65 to 67, ultimately generating a 14 percent benefit cut for all beneficiaries, regardless of the age at which someone begins drawing benefits. Meanwhile, means-tested benefits overall have substantially expanded despite periodic attacks from the right. The most recent expansion occurred in December of 2015 when policymakers made permanent significant expansions of the EITC and the low-income part of the Child Tax Credit that were due to expire after 2017.

In recent decades, conservatives generally have been more willing to accept expansions of means-tested programs than universal ones, largely due to the substantially lower costs they carry (which means they put less pressure on total government spending and taxes).

The record of recent decades thus points to an alternative course — pushing for steady incremental gains through available mechanisms, including means-tested programs, to provide as much of a floor as possible for Americans of lesser means. In 1967, the safety net lifted out of poverty only 5 percent of Americans who would otherwise be poor. Fifty years later, in 2017, it lifted 44 percent of such people out of poverty, with programs like SNAP and the EITC playing crucial roles alongside Social Security. A multi-pronged strategy — making the Child Tax Credit fully refundable so that children benefit from it fully regardless of how low their families’ income and earnings are, substantially raising the minimum wage and strengthening the Earned Income Tax Credit, extending affordable child care and rental assistance to millions more families, enlarging SNAP benefits (as a Hamilton Project paper proposes), and strengthening Social Security benefits for low-income workers — would substantially strengthen the income floors. It would do so in ways that are far likelier than UBI to succeed politically and much less fraught with danger to the very people we most want to help.

Will the politics change radically?

While some UBI proponents argue that continued pressure on the middle class will make UBI politically feasible, I’m skeptical. Economic pressure on the middle class will not alter UBI’s daunting financing challenges. In fact, more such pressure will likelier increase middle-class resistance to the massive tax increases required to secure UBI without increasing poverty. And we shouldn’t think that we can just get the resources solely or primarily by hitting people at the top. Will we really tax the top 1 percent or top several percent enough to finance most or all of UBI — on top of the higher taxes we’ll want the same group to pay to shoulder a substantial share of the burden of restoring Social Security solvency, repairing the infrastructure, and meeting other critical needs? Increased pressure on the middle class is more likely to put UBI farther out of reach, unless it’s financed heavily — as UBI supporters on the right favor — by shifting income and resources away from the poor.

To be sure, there is a possible exception: a carbon tax that returns its proceeds to the public via a universal payment. For a carbon tax to have any chance of enactment in the not-too-distant future, however, it almost certainly will have to allocate a substantial part of its proceeds to uses that are necessary to get the votes to enact it in the first place, such as relief for coal-producing states or regions. There’s also a powerful case for using some of the proceeds to greatly expand and accelerate research into alternative energy technologies; a carbon tax likely won’t be sufficient by itself to arrest global warming.

Thus, the proceeds available from a carbon tax to finance universal payments would likely be significantly constrained. If a carbon tax could pass, we might need to focus the proceeds available for these payments on low- and moderate-income families — so the payments would be adequate to offset the higher energy costs these families would face as a result of the tax — rather than extending the payments all the way up the income scale in universal fashion.