5 Arguments Against UBI
Why do we have to work so hard for money trickling down from the top? Instead of government’s printing money and distributing it through the banks, why not give everyone some, and then let the markets decide what happens to it?
Universal basic income (UBI) would put money in people’s hands through direct payments, reducing poverty and boosting economic activity, while cutting welfare bureaucracies. Opponents raise five valid-sounding arguments against UBI, but they all turn out wrong on closer examination.
As we know, government already gives money directly to old and disabled people with social security. This works; along with Medicare, social security is the most popular program the U.S. government has. Over 85% of Americans called it “important” in a study by the National Academy of Social Insurance.
UBI has some surprising friends. Facebook co-founder Chris Hughes said, “UBI is the only solution to an economy where a small group of people are getting very, very wealthy while everyone else is struggling to make ends meet.”
Tech leaders like Hughes, Tesla CEO Elon Musk, and Sir Richard Branson, founder of the Virgin brand, point out that automation and globalization have eliminated huge numbers of jobs. Corporate megastores are pushing out small businesses. Most of what’s left is gig labor and pop-up businesses that don’t provide a decent standard of living.
Tech-connected presidential candidate Andrew Yang shocked established political pundits with the stunning support he received, running mostly on the UBI issue in 2020. He would have done better if anyone in corporate media had given him a platform.
Outside of Tech, though, most rich people seem to hate the idea of UBI. Here are five arguments they raise, and why they are wrong.
1. “People wouldn’t work.”
Oren Cass, a Senior Fellow at the Manhattan Institute, a conservative think tank, says UBI would make work seem optional. “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. UBI could reduce an already-falling labor force participation rate.”
For owners, a decline in labor force participation is their worst nightmare. As Karl Marx pointed out in the 1800s, owners need workers desperate enough to take low-paid, dangerous, unpleasant jobs, and to be grateful they have them. If people could survive without jobs, even in near-poverty, owners would have to make jobs better or pay more for them, which would hurt their bottom line.
Would people really stop working if they could eke out a minimal living on UBI? Most wouldn’t. As Senator Bernie Sanders says, “People want to work, and there’s a lot of work that needs doing.” Our bodies, minds, and spirits want work, but work that helps, work that uses our abilities, that doesn’t injure us, other people, or the environment.
Bad jobs are different. When the subject of UBI came up, my friend Mario, a mid-level tech executive, asked “Who would work at McDonald’s?” At current wages, few would, except teenagers in starter jobs, but that’s the point. Those jobs would get better, be paid better, or go away. Good jobs would have plenty of takers. People could create, care for others, build, repair and clean or do useful things they wanted to do, but nobody would have to take a horrible job for fear of starving.
2. “UBI would cause huge inflation.”
Perhaps, if UBI payments were too high, and too many people declined to work, production would drop. More UBI money would be chasing fewer goods and services. That scenario would lead to rising prices, a process called demand pull inflation. Some economists say that, because of inflation, people wouldn’t be any better off with UBI than they were before.
But the “B” in UBI stands for Basic. It’s not a ‘get everything you want’ payment. According to economist Robert Jameson, the payments will not be high enough to greatly increase demand or suppress the supply of labor. Prices might go up slightly, but this might also be a good thing. It might slow growth of consumption, and over-consuming damages both our health and our environment.
UBI is a move toward stability. According to the economic school called Modern Monetary Theory (MMT), skilled economists can prevent inflation by balancing the amount given out (demand) with the goods and services available (supply).
3. “We can’t pay for it.”
Where will the money come from to provide UBI to everyone? From the same place all other government spending comes from, out of thin air. It’s the same place our military spending comes from, but applied to helping people instead of killing them. According to MMT, countries that issue their own currencies can never “run out of money” the way people or businesses can. They can keep printing more, as long as they keep a balance between money supply and production.
That might sound impossible, but it reflects the truth that money is only a social agreement to facilitate buying and selling. As long as people believe money has value, it does.
UBI would increase federal deficits, but MMT says this is not a problem. An article on the economic website thebalance.com, says that to pay everyone an above-poverty-level UBI in 2012 would have added $1.2 trillion to the deficit, or 7.5% of the year’s total economic output. That would have sounded outrageous even ten years ago, but since 2008, the government has given out trillions to large businesses and also as COVID-19 relief. Except for the stock market, there has been little inflation as a result, and despite its massive deficits, government has not run out of money.
4. “You want people dependent on government.”
Unlike existing welfare programs, UBI is not a dependency trap; it would not require recipients to be poor. According to the Foundation for Economic Education, people are kept in dependency and poverty by existing programs, which withdraw payments as people earn higher-pay through work. So why should they bother?
UBI does not have this problem. Nobody gets kicked off when they get a good job or start a successful business. On the contrary, studies find that people receiving UBI are more likely to start and maintain new businesses or start new jobs, because they don’t have to fear becoming destitute.
5. “UBI is socialism.”
UBI doesn’t mean government control of the economy. Even democratic socialist Senator Bernie Sanders opposes UBI, proposing instead a universal guarantee of work. He has a point. A work-for-all program seems a valid alternative or complement to UBI, like the Works Progress Administration (WPA) complemented relief efforts during the Great Depression.
Programs like UBI and the WPA don’t change private ownership of the means of production or create a planned economy. UBI might actually strengthen the role of markets, because everyone will be able to participate. We might get a whole new range of services, products, and programs.
Experts are coming around to MMT and UBI. Even super-investor Warren Buffet has written, “Can you keep doing what we’re doing now, pouring out more money? The world has been able to do it for a dozen years or so [since 2008]. It’s probably the most interesting question I’ve ever seen in economics.”
UBI and MMT embody a new story of money as a medium of exchange to make society function for all. For people raised in the old story and profiting from it, MMT and UBI can be hard to accept, but some like Buffet are trying: “I’d have to see it to believe it,” he says, “but I’ve seen a little bit of it. I’ve been surprised. I’ve been wrong so far.”
If successful, UBI could change everything. Can you imagine a world where most people work on healing their environments and communities, creating and living healthy lives, doing what they want to do, because they don’t have to take soul-killing jobs to live? That’s the road on which UBI could start us. And so far, naysayers’ objections don’t hold up.