A universal basic income, with the government providing, say, $1,000 a month to each and every American, is impossible. It would cost too much.
That is the most common objection to the idea of universal basic income, or UBI, which is growing more and more popular every year. Chicago is proposing a UBI trial, Barack Obama is signing on to the concept, and other pilots are ongoing around the globe. Providing $1,000 a month to every citizen would mean spending something like an additional $3.9 trillion a year. That is equivalent to one-fifth of the American economy — and roughly equal to every penny the federal government currently spends, on everything from building bridges to fighting wars to caring for the elderly to prosecuting crimes to protecting wetlands.
If politicians were to fully finance that expansion of benefits through the tax code as it is structured now, it would mean steep income tax increases not just on the wealthiest Americans, but also on middle-income Americans. You could tax away every penny the top 1 percent of earners make each year, and it would still not come close to paying for a full-fat UBI. “Nothing in the history of this country suggests Americans are ready to add that kind of burden to their current taxes,” Eduardo Porter has argued in the New York Times.
It would be simple, if not easy. It would be about will, not mathematics.
Maybe nothing in the history of this country suggests that we are ready to implement those kinds of taxes, but nothing in the realm of public policy suggests that we could not. Raising enough revenue for a $500 per month or even a $1,000 per month UBI would bring the United States’ tax burden in line with that of the European social democracies. It would be simple, if not easy. It would be about will, not mathematics.
Eliminating or trimming back other programs would likely help defray the expense, for one. Right now, the government spends roughly $2.7 trillion on its social insurance programs, including Social Security, Medicaid, Medicare, unemployment insurance, benefits for veterans, and so on. Nearly $1 trillion of that total goes to Social Security alone, an amount that could be transferred directly to the UBI fund. The government also spends more than a half-trillion dollars a year on defense, a number that might be winnowed down, particularly if the next war were fought with hackers rather than tanks. Still, a $1,000 per month benefit, or a smaller one, would require new spending and likely new sources of revenue, regardless of how deeply other budgets were cut.
Creating a top tax bracket at 55 percent, instituting a modest wealth tax, ending the mortgage interest deduction, implementing a value-added tax — proposals like those would get us there. Again, the United States does far less taxing and spending than other rich countries do. We are, by OECD standards, a low-tax country, even if it does not feel that way. A UBI would require us to turn into, and would turn us into, a social democracy, with all the taxes and benefits that come with it.
But a UBI need not be financed through the personal income tax code alone — and arguably should not be. A financial transactions tax would raise an estimated $100 billion to $400 billion a year. A value-added tax could easily raise $1 trillion. A well-designed carbon tax would raise about $100 billion a year. Moreover, a wealth tax, such as a hefty levy on estates over $1 million, could raise hundreds of billions. That opens the door to dividend policies like the state of Alaska’s annual oil dividend, distributed to all residents of the resource-rich state. A panel of Republican statesmen — among them former secretaries of state James Baker and George Shultz, as well as former treasury secretary Hank Paulson — have proposed sending each and every citizen a quarterly Social Security payout funded with a tax on carbon. And economist James K. Boyce and writer Peter Barnes have found that the country could grant $200 a month to everyone with levies on carbon, financial transactions, and energy extraction.
If robots were to start putting all of us out of work at some point, it might make sense to tax them, too — an idea Bill Gates floated a few years ago. “Certainly there will be taxes that relate to automation. Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed, and you get income tax, Social Security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level,” he mused to Quartz. “What the world wants is to take this opportunity to make all the goods and services we have today, and free up labor, let us do a better job of reaching out to the elderly, having smaller class sizes, helping kids with special needs. You know, all of those are things where human empathy and understanding are still very, very unique. And we still deal with an immense shortage of people to help out there. So if you can take the labor that used to do the thing automation replaces, and financially and training-wise and fulfillment-wise have that person go off and do these other things, then you’re net ahead.”
It sounds like a flight of fancy, but it’s not. It exists firmly in the realm of the possible. Stevedores and longshoremen, of all people, show one way how. Back in the midcentury, those workers recognized that newfangled heavy machinery was rapidly improving and putting them out of work. The unions negotiated a kind of productivity dividend so that the longshoremen would be compensated for any labor-saving investments the docks made. That kind of contract stipulation still exists today, with longshoremen earning healthy wages and moving orders of magnitude more containers, all thanks to the new machines and the unions’ foresight. Of course, trying to organize an economy-wide productivity dividend — a tax on robots — would be far trickier than that, but again, hardly impossible. One way to do it would be to increase taxes on investment income, the idea being that labor-saving investments would boost corporate profits, which would in turn increase payments to shareholders. Another would be to close the loophole for capital gains. No need to have the IRS running robot inspections.
Using those kinds of taxes — on wealth, shared resources, pollution, consumption, and so on, as opposed to just income taxes — to help finance a UBI would not only be practical, but also would underscore the UBI’s role as an investment in everyone and a right for everyone. It would be not just a way of taking hard-earned money out of someone’s pocketbook and putting it in someone else’s. It would reinforce that a UBI is a public good, financed with public wealth.
It also seems worth raising the issue of whether a UBI needs to be “paid for” at all. The Bush tax cuts were not “paid for.” The wars in Iraq and Afghanistan were not “paid for.” The United States controls its own currency and has far more latitude in financing new programs than even most progressives would care to admit. We like to think of the government as being like a big household, earning money, budgeting it, and spending it. But sovereign nations with a printing press and an army do not work like that. The federal government spends first and raises taxes later. Save for a few whispery moments, it has not bothered to balance its budget nor has it raised enough money to cover its spending in the postwar era. Contrary to those hoary debt scolds, I might add, all those years of deficits have not spiked long-term interest rates or choked off growth or spooked away investors. The point is not that the government should run its printing press to cover a multitrillion-dollar UBI, or that it should spend until it spikes interest rates and inflation to unsustainable levels. But assuming some degree of deficit financing seems wise, as does seeing a UBI as an investment that would pay dividends in terms of a bigger and stronger economy powered by a healthier populace, as does recognizing that dollars are not something that the U.S. government can run out of.
One of the lessons of a UBI is that our policy outcomes are not inevitabilities but choices.
Of course, granting all Americans a UBI raises far thornier questions than just how to pay for it. In a world with limited resources, does it really make sense for everyone to get something and for everyone to get the same thing? The federal government is, in some sense, an institutional Robin Hood that takes money from the rich and gives money to the poor, a function that has become more and more prevalent over time, as the welfare state, health initiatives, and social insurance programs have expanded and the population has aged. A UBI could mean diverting money from the poor to everyone, including the rich. At a time when the government arguably needs to become more redistributive and more progressive, a UBI could make it less so.
Then there is the concern that a UBI would become an easy-to-cut entitlement targeted by fiscal hawks. Programs that benefit the middle class, like Social Security and Medicare, tend to be more popular than initiatives aiding the poor, such as welfare. Nevertheless, safety-net programs have expanded greatly in recent years, as the government has bumped up the value of the Earned Income Tax Credit, signed up millions for food stamps, and extended Medicaid to 12 million people and counting. The effort has reduced poverty in the country, full stop. At the same time, programs aiding individuals regardless of income have mostly stayed static, and in some cases have come up for cuts. The unemployment insurance program, for instance, has gotten whittled down in the postrecession years. Republicans are targeting Social Security and Medicare. Benefiting the middle class is no guarantee against diminishment, in other words.
Still, a $500 or $1,000 per month UBI is possible. And if such generous cash-transfer policies were designed right, they would not help the poor at the expense of the middle class, raise taxes obscenely, or fail to end poverty. One of the lessons of a UBI is that our policy outcomes are not inevitabilities but choices. The United States would be significantly richer right now if it had passed more fiscal stimulus at the onset of the Great Recession. It would be richer if it invested in infrastructure. It would be richer if it chose to ensure that no child grew up in poverty. It would be richer if it had worked to make black and white Americans, as well as men and women, true equals. Europe would be significantly richer if Germany had not insisted on austerity for its debt-laden periphery economies. Brazil would be in better shape if it rooted out corruption in government contracts. Japan’s economy would be larger if it allowed in more immigrants and figured out how to assimilate them. North Korea would be richer if it adopted the policies of its neighbor to the south.
Here, poverty in the United States is a choice. Stagnant middle-class incomes are a choice. Technology-fueled mass unemployment is a choice. Racism is a choice. The patriarchy is a choice. This is not to discount how deeply entrenched existing policies, interests, and tendencies are — but to recognize that while they might be entrenched, they are not immutable.