Of late, it has become increasingly apparent that the status quo of an expansive welfare state is running into problems. I made a post recently regarding the unintentional consequences of the system, namely that it encourages distrust among a population the more diverse it becomes as well as encountering diminishing returns on combating poverty as the years go on. In response, some have begun to bring up the idea of a universal basic income (UBI). The idea has found expression on different levels across various countries, and has found support across different branches of the political spectrum…even including those who would typically be considered skeptics of such programs (Milton Friedman and Frederick Hayek advanced some measure of a UBI program). All of this leads to a simple question…is such a program one to support, particularly with regard to handling the ever-increasing financial liability that is the welfare state?
At first glance, a UBI appears to have showcased some measure of success. Studies on public and private cash-transfer programs in developing nations of Latin America and Africa demonstrate some impact on reducing poverty, as well as not pushing recipients of the funds to dependency necessarily. There has also been, on a theoretical basis, arguments that simplifying the system to be just a UBI would encourage more transparency and less interventionism in governmental policy. As the move would be a simple cash-transfer, there would be no strings attached to how such money would be given. It would go straight to the taxpayer, and they would be treated as adults in that it would be up to them on how it is spent. Also since in theory it would be a low, flat rate, it wouldn’t provide the disincentives to employment and financial independence as more onerous welfare transfer programs have. Therefore, it would seem like something worthy of support.
However, it is when implementation starts to be considered that important questions are raised. After all, the devil is in the details, and there are grave ones to consider here. While the aforementioned studies about cash-welfare programs in Latin America and Africa appear to show some measure of success, there are significant differences in how such programs would work in the United States. While benefits in less-developed nations can be used to supply liquidity that allows for the pursuing of activities like entrepreneurialism, such opportunities are more limited in developed countries. Given that human capital works different in such nations, the causality of benefits would be less direct. Add in the difference in monetary value and hardship as a result of different economic standards (as well as the fact that each state/city/municipality has a different cost of living), and such programs would likely have much less payoff.
Even if our entire welfare system were replaced with a UBI, the sheer population size would likely lead to a cost that would dwarf how much our government currents spends on welfare programs. Again, the fact that the rate would have to be high enough to ensure that everyone would be able to support themselves would lead to a high price…likely over $4 trillion dollars if put at the current poverty level of $12,316 for a non-elderly individual. To offer context, the totality of the entire American welfare state budget tops out at a little over $2 trillion. If it were limited to just adults, the cost would fall under 3 trillion, but that of course would still require big tax hikes to make up the difference. With less universal programs like a negative income tax, or wage payments, there would be the need for oversight in order to see how such “means-tested” programs are administered, or that they are corresponded to specific limits. This, however, has the side-effect of undercutting the argument that the system would be more transparent or simple than what we currently have (which already has such “oversight” processes). Such policing would inevitably leave many people with hardship out in the cold based on arbitrary cut-offs on the margins, as well as potentially leaving some family sizes at a significant hardship to others…a form of unintentional social engineering.
At its heart, there is also other questions to consider on a measure of political nature…can we expect public officials, imbued in the constraints of votes and power, to rescind welfare programs for a UBI? Can we be assured that they will hold such programs at prudent levels? Considering history of welfare programs from ancient Rome to our modern times, such assurance(s) wouldn’t seem very likely.
Therefore, taken together, the payoff of a UBI seems unlikely given what is involved. Theories can seem good at first glance, but implementation is what really matters…and that doesn’t seem to be the case here. It doesn’t mean such a thing should be dismissed without question, but given the serious questions involved, a better solution…if a UBI is to be considered…would be to have such a thing experimented with on a more local or state level, where voters can be closer to their representatives, policy can be more tailored to cultural/local concerns and constraints, and budget levels can be curtailed. More private programs could also be a better deal, as at least those systems have shown a good chance at avoiding the corruption and mismanagement that can encompass more public initiatives.
In the short term though, a good step would be to simply rein in the excesses that define much of the welfare state today. Decentralize programs so that such regulations are closer to those impacted by them, tighten standards so that those who really need the assistance are getting such benefits, and close down those programs that are prohibitive to citizens and residents with little to no payoff…those would be big steps in the direction of bringing our financial house back to some semblance of sanity.
There are many analyses of the UBI issue, but this comprehensive study does a very through overview of the different sides of the argument. Take a gander when possible for a more intricate walkthrough – https://object.cato.org/sites/cato.org/files/pubs/pdf/pa773.pdf