Universal Basic Income. Free Money: Who Would Say No?

Nothing in this world is Free. For everything there is a cost. Take away personal responsibility and let the government keep you? An analysis of UBI for your perusal. MH

Henry Makow – March 12, 2021

Pros and Cons of Universal Basic Income

The snapshot below shows some of the program’s many pros and cons that exist for countries who wish to implement a basic income.

Pros

• Workers could afford to wait for a better job or better wages
• People would have the freedom to return to school or stay home to care for a relative
• May help remove the “poverty trap” from traditional welfare programs
• Citizens could have simple, straightforward financial assistance that minimizes bureaucracy
• The government would spend less to administer the program than with traditional welfare
• Young couples would have more money to start families in countries with low birth rates
• The payments could help stabilize the economy during recessionary periods

Cons

• Inflation could be triggered because of the increase in demand for goods and services
• There won’t be an increased standard of living in the long run because of inflated prices
• A reduced program with smaller payments won’t make a real difference to poverty-stricken families
• Free income may not incentivize people to get jobs, and could make work seem optional
• Free income could perpetuate the falling labor force participation rate
• There are many opposed to handouts for the unemployed

Advantages Explained

An unconditional basic income would enable workers to wait for a better job or negotiate better wages. They could improve their marketability by going back to school. They could even quit their job to care for a relative.⁷

It would remove the problem with existing welfare programs that keep people below the poverty line. If welfare recipients make too much, they lose food stamps, free medical care, and housing vouchers.⁸ This is a form of structural inequality that prevents the poor from building their wealth to better their lives.

A simple cash payment could cut down on bureaucracy.

Current welfare programs are also complicated for administrators and recipients. A universal income would replace housing vouchers, food stamps, and other programs.

The simplicity of the program means it would also cost governments less. Cash payments that went to everyone would eliminate costly income-verification paperwork. Only applicants with low incomes qualify for means-tested programs. Conservative Utah Senator Mike Lee told the Heritage Foundation, “There’s no reason the federal government should maintain 79 different means-tested programs.”⁹

Some countries are concerned about falling birth rates. A guaranteed income would give young couples the confidence they need to start a family.¹⁰ It would also provide workers the confidence to bid up wages. From a macro viewpoint, it would give society a much-needed ballast during a recession.

Disadvantages Explained

If everyone suddenly received a basic income, it would create inflation. Most would immediately spend the extra cash, driving up demand. Retailers would order more, and manufacturers would try to produce more. But if they couldn’t increase supply, they would raise prices.

Higher prices would soon make the basics unaffordable to those at the bottom of the income pyramid. In the long run, a guaranteed income would not raise their standard of living.

Oren Cass, a Senior Fellow at the Manhattan Institute, says it would make work seem optional.¹¹ Many recipients might prefer to live on the free income rather than get a job. They would not acquire work skills or a good resume. It could prevent them from ever getting a good job in a competitive environment. It could reduce an already-falling labor force participation rate.

How Much Would It Cost the U.S.?

Universal basic income would add trillions to the deficit. For example, in 2012, there were 179 million working-age adults.¹² It would cost $2.14 trillion to pay each of them $11,945 (the poverty level) each year. But it would replace existing welfare programs that cost $1 trillion a year. So it would add $1.2 trillion to the deficit, or 7.5% of the total economic output that year.

To save money, some programs would not pay as much. But research shows that payments of a few hundred dollars aren’t enough to make a real difference in the lives of the poverty-stricken.

A guaranteed income that’s enough to eliminate poverty would be too expensive...READ MORE

UBI in NZ: The proposal:

How it works

A UBI would be paid to all New Zealand citizens and permanent residents over the age of 18. It replaces all benefits of a lesser value (e.g. Supported Living Payments and the Jobseeker benefit). People on higher benefits would be no worse off. A child UBI would be paid to the parent(s) of all children under the age of 18. This would replace Working For Families of lesser value, those receiving higher rates would be no worse off.

All income would be taxed at a flat rate of 33% – a significant simplification of the current tax system. Progressiveness would still be achieved because the UBI creates a net 0% tax rate at around $39,000 per annum, with negative tax rates below and positive tax rates above. Companies, trusts and Portfolio Investment Entities (PIEs) would also face the 33% tax on profits, this would be an increase from 28% for companies and PIEs.

TOP has conservatively costed these changes, which end up broadly tax neutral overall. In particular, a UBI would significantly reduce the bureaucracy within government departments and the paperwork for many Kiwis. These changes would also achieve savings in other government transfers that are less generous than the UBI.,,READ MORE

Martin comments: Personally I’m all for the flat tax rate for a number of reasons. UBI has, as you can see above, its pros and cons. “If it looks too good to be true it probably is”. To repeat the header I wrote: Nothing is free. Weigh up the pros and cons, and think for yourself.

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