Maintaining a BI necessitates compromises and revisions – rolling back the safety net will inevitably be one

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.

Our economic analysis also finds that while a national UBI plan with a goal of eliminating poverty can be financed within current federal budget expenditures, this can only be accomplished if the UBI replaces all federal income transfer programs, including Social Security, Medicare, and Medicaid. A UBI plan with the same goal that retains these programs will sharply increase federal spending, necessitating a substantial increase in taxes or in government borrowing. Three additional caveats regarding analyses of UBI plans are warranted. A common mistake in policy analysis is to compare an ideally designed new program with the reality of existing programs. Each existing program is a product of inevitable compromises made in Congress to enact the program and a patchwork of revisions to the initial program made over several years. In the case of the UBI, the inevitable compromises and revisions would invariably entail unintended inequities that would be different, but no less problematic, than those in the system it is replacing. One obvious example would result from regional and urbanrural cost-of-living differences. UBI proponents often regard these differences as minor, an issue to be dealt with later. But unless these cost-of-living differences are taken into account in the plan, significant inequalities among similarly situated people will arise. These differences played a significant role when Congress considered President Nixon’s plan. New York representatives objected to the plan’s income guarantee as too low for northern industrial states and too lavish for southern rural states. Conceptually, the inequity could be addressed by the adoption of suitable regional and urban-rural cost-of-living indexes. But to date, the United States has not developed such satisfactory indexes despite glaring inequities in tax assessments, the distribution of federal grants, and the distribution of transfer payments across states and regions of the country.

Another potential inequity arises when the UBI replaces only a part of the existing system. Partial replacement can result in individuals who receive UBI enjoying a higher disposable income than individuals who do not receive UBI assistance. This inequity would be particularly pronounced because under the UBI the taxes paid by the latter group finance the assistance provided to the former group. An example of this can be seen in our prototype plan. Since the plan does not replace Medicaid, some UBI recipients would receive health care subsidies that are not available to individuals not receiving UBI aid. For a typical household of four, the Medicaid assistance can easily have a market value of more than $10,000. Ironically, one of the initial motivations for President Nixon’s plan was that welfare recipients often had a higher income, factoring in welfare assistance, than the individuals who were paying taxes to finance welfare payments. The Nixon plan foundered partly on its inability to fix this problem.