Second Thoughts About “Second Thoughts About Universal Basic Income”
Tyler Cowen, who previously thought that a universal basic income (UBI) “might be a good idea,” now says he’s having “second thoughts.” I’m a fan of Tyler Cowen’s writing (as well as his podcast), and so I take his thoughts quite seriously, but count me unconvinced by his case against a UBI.
Cowen’s “first worry” is that a UBI “eventually would choke off immigration to the U.S.” He reasons that “[v]oters don’t like sending money to immigrants,” and so if immigrants receive the UBI, then opposition to immigration will increase. Will Wilkinson has a nice response to this point over at the Niskanen Center’s blog No Virtue: Insofar as economic insecurity fuels anti-immigrant sentiment, a more “robust safety net” might well “leave[] us feeling sunnier about immigration.” (Wilkinson’s full response to Cowen is worth reading, as is most everything that Wilkinson writes.) I’m not sure whether Cowen’s prediction or Wilkinson’s is more likely to prove correct, but I’m sufficiently uncertain that I don’t think Cowen’s point amounts to a strike against a UBI.
Cowen’s second worry is that a UBI, over time, might weaken America’s “symbolic commitment” to “prioritizing a work ethic over comprehensive welfare.” The expressive effects of a UBI are difficult to predict, but it’s again not obvious to me that the effects run in the direction that Cowen posits. Our existing tax-and-transfer system imposes very high marginal tax rates on many low- an moderate-income individuals (e.g., one-tenth of taxpayers with earnings between 100% and 149% of the federal poverty line face a marginal tax rate above 65%). Worse yet, the cash cliff embedded in the Social Security Disability Insurance and Supplemental Security Income programs effectively imposes a marginal tax rate exceeding 100,000% on the first dollar of monthly earnings above the “substantial gainful activity” amount (following a trial work period). Replacing some or all of these programs with a UBI might well serve to encourage work over reliance on social support. To be sure, a UBI would cost money — and probably more money than would be raised by the repeal of existing transfer programs. And so the implementation of a UBI would likely require an increase in marginal income tax rates overall. But the additional burden could be allocated across the income distribution so as to avoid the astronomical marginal rates that the status quo sometimes produces.
Cowen’s third concern is that a UBI would be politically unsustainable. He writes:
If two able-bodied people live next door to each other, and one works and the other chooses to live off universal basic income checks, albeit at a lower standard of living, I wonder if this disparity can last. One neighbor feels like she is paying for the other, and indeed she is. It’s different from disability payments, which enjoy public support because they require recipients to pass through a legal process certifying that they are not able to hold down a job.
Cowen continues that the “cleanness and transparency of a universal basic income” (by which I assume he means: the fact that a UBI makes redistribution so explicit) “are sometimes touted as virtues, but in the context of American political culture they might prove its undoing.” On this point, I doubly disagree with Cowen. In the context of American political culture, one of the virtues of a UBI is its ostensible universality — though this universality is somewhat of an illusion.
To see why, imagine two households: the Riches, who earn $100,000 in wages, and the Poors, who earn zero. Under System 1, the government imposes a tax of 10% on the Riches and uses the money to write a $10,000 welfare check to the Poors. Under an alternative System 2, the government imposes a 20% tax on the Riches and uses the money to write two $10,000 UBI checks: one to the Riches, one to the Poors. Of course, the two systems lead to the same post-tax-and-transfer result for the Riches and the Poors ($90,000 for the Riches, $10,000 for the Poors). But superficially, the systems look quite different: under System 1, the Riches are paying for the Poors’ “welfare,” while under System 2, the Riches are contributing toward a benefit that they receive themselves as well.
Perhaps unsurprisingly, government programs that are universal or close to universal (e.g., Social Security and Medicare) tend to be more popular than programs targeted at the poor (e.g., Medicaid). If there is a lesson to be learned, it might be that redistribution is more politically sustainable when it’s part of a program that disburses benefits broadly. The implication might be that a UBI would be more durable than the status quo: instead of feeling like they’re paying for “welfare” that goes to others, taxpayers under a UBI might see themselves as paying into a system that also pays out to them.
Of course, all this is speculative. But so too are Cowen’s predictions. And once we’re speculating, it seems quite plausible that a UBI might have effects on public opinion that are the exact opposite of what Cowen fears. A UBI might mitigate rather than intensify anti-immigrant feelings. It might reaffirm America’s “work ethic” by reducing penalties for reentry into the labor force. And the very breadth of a UBI might make redistribution more palatable to the median voter than it is today. At the very least, it seems to me that the long-run effects of a UBI on attitudes toward immigration, work, and redistribution are sufficiently ambiguous that they don’t give us a reason to reject an otherwise good idea.
