The Federal Stimulus Plan was the Equivalent of Universal Basic Income for all. But why only now? Why not for anyone in distress?

Universal basic income is having a moment. An idea that has long percolated in different parts of the world is now the source of more serious conversation in the U.S. after Andrew Yang made it a centerpiece of his campaign, calling his version the “Freedom Dividend.” These days although no one on either political party is saying it, the stimulus package is basic Federal Universal Income for everyone. Long looked at as the SOCIALIST AGENDA, became main stream political reality.

The government is paying out direct payments to every citizen, regardless of their income. Proponents say the UBI could eliminate poverty, simplify the social safety net and help create an economy that better allows everyone to discover and achieve their true potential. To critics, it’s a massive giveaway that’s destined to cripple the economy and create a generation of shiftless dependents unable to support themselves.

So to actually have a UBI program in place and another one most likely on its way, is amazing to me. This is an enormous change — not just to the government and economy, but to the culture of the U.S. political system itself. But as automation and artificial intelligence continue to replace human workers at a faster and faster rate, more people are considering some form of direct cash payments as a way to combat a future with less need for human workers and less need for expensive out dated social programs that do not work.

What Is Universal Basic Income?

At least for now, UBI is basically “Social Security” for all.” The U.S. government already has a system in place to guarantee a fixed income to senior citizens and retirees. A UBI would expand this to include every adult age 18 and up.

The core idea — direct cash payments with no strings attached — has many variations. A UBI is, well, universal. But some argue for a more limited approach that only offers payments to those people who really need them. In a negative income tax variation, for instance, anyone earning under a certain amount could expect to receive money instead of paying. At least for now this does not seem to be part of the long term plan, but many argue it should. Of course this is no inexpensive program, it is massively expensive. Especially in situations like we are in now where a pandemic has crippled individual income. 

Why Is Universal Basic Income So Important At least For Now?

People have been proposing some version of a UBI for hundreds of years. Thomas Paine was an advocate, and the idea was even popular among Republicans as recently as the early 1970s. President Nixon promoted a form of guaranteed income and won support from Donald Rumsfeld and Dick Cheney because of it.

Part of the driving force behind renewed interest in UBI stems from the current economy. Globalization has pushed manufacturing jobs overseas, and automation is continually replacing human workers. Driverless automobiles, for example, are likely to save tens of thousands of lives a year, but they’re also going to put some truck drivers out of work.  During this pandemic people who are at high risk quite literally have to choose between putting their lives at extreme risk and working. And now many people are starting to see what it is like to be forced out of work even though they do not want to be out of work. Now it’s not just limited to blue-collar workers. Advances in artificial intelligence and machine learning mean that some white-collar professionals, like accountants and financial advisors, do work that could be replaced by a computer program in a heart beat. Bookkeepers from around the U.S. have already started to be replaced and it is just a matter of time before accountants and tax preparers are out of work as well. 

As more and more reliable jobs paying decent salaries are replaced by low-wage, low-skill service work that rarely supplies a living wage, it’s clear that many hard working American’s will be destroyed by the new economy. The UBI would be a way to counter the failure of the economy to provide for the working class in the way it used to. Why limit the UBI to just during pandemics? Shouldn’t anyone who is out of work be worthy of the same lifestyle we are giving ourselves now? Just does not seem to be fair that when everyone is suffering there is an added six hundred dollar weekly kicker, but for those who are out of work before and after are living on fumes, next to nothing. 

How Is Universal Basic Income Distributed?

One of the most controversial aspects of the universal basic income is that people might get money for nothing. And, to be sure, some of the plans — including the next stimulus package — are advocating for just that. In fact, it’s actually a selling point for many.

The universal nature of a UBI means a lot of people who would get checks shouldn’t get them — multimillionaires or those able but unwilling to work, for example. But eliminating the need for means testing would make the program easier to implement, perhaps saving enough money on administration costs to more than make up for payments to people who otherwise might be excluded. Imagine that if we get rid of the waste in managing outdated programs we can give everyone a security blanket.

Making the program universal would help change the conversation about it. Social programs that only benefit a certain portion of the population often stir up controversy and drive an angry backlash. By giving the same sum to each and every adult in America, the program would benefit everyone equally.

What Would Be the Cost of Universal Basic Income?

Simply put — a lot. Even UBI’s biggest proponents admit this would be enormously expensive. UBI would cost about $3 trillion a year — putting it about on par with projections for Medicare for All plans and increasing federal spending by about 75%.

Who Would Pay for the UBI?

Who is paying for the UBI? The American people, ultimately. The debate over how to pay for universal basic income is not unlike debates over funding other government programs. Although the total price tag is going to be high any way you slice it, proponents suggest options for paying for the program that could reduce the tax burden on the average American.

• Higher Taxes: A UBI would mean more taxes. Probably a lot more taxes. But the monthly stipend would reduce the impact. Paying another $100 in taxes every month sounds bad, but if you’re also getting $1,000 as a result, it’s a different situation.
• Less Spending: Although the sticker price of a UBI is very high, many advocates see it as a way of consolidating or eliminating government programs. The federal government spends about $350 billion a year on programs to support low-income Americans, $945 billion on Social Security, $700 billion on Medicare and $580 billion on Medicaid. Replacing all of those programs with a UBI could cover about $2.6 trillion of the cost right off the bat. Yang’s plan calls for a UBI that piggybacks Social Security and Veterans Affairs disability benefits rather than replaces them, but any UBI proposal would likely create at least some savings for government spending at the state and federal levels.
• Economic Expansion: Republicans have argued for decades that tax cuts pay for themselves by stimulating the economy. The same principle would apply here, on a much larger scale. Yang cites estimates that his UBI proposal could permanently juice the gross domestic product by $2.5 trillion by 2025.

What Are Potential Advantages of a Universal Basic Income

Advocates of the UBI are quick to detail the various ways a universal basic income could address some of society’s most pressing issues. Although the program wouldn’t be a cure-all, it could have a variety of positive effects.

• Ending Poverty: Roughly one in seven Americans currently lives under the poverty line. Considering that the current poverty rate is $12,490 for an individual, a $12,000-per-annum UBI would effectively end poverty as defined by the federal government.
• Improving Wages: One of the basic components of American society is that you need to work to earn enough money to support your basic necessities, if nothing else. On a fundamental level, that puts workers in a terrible negotiating position — when your family’s basic existence is on the line, you’ll ultimately accept any wages and working conditions to avoid unemployment. Guaranteeing that even the unemployed can meet their basic needs would enable working-class Americans to just say no if the money’s not enough. As a result, wages could climb — particularly for low-wage, low-skill jobs that offer little in the way of job satisfaction or career development — as corporations make work more attractive to job seekers.
• Breaking the Cycle of Poverty: Basic expenses are often higher for those with the least ability to afford them. Take the massive “food deserts” in American inner cities, for instance. People living in poverty don’t make great consumers, so stores are less likely to set up shop near them — pushing low-income individuals to buy food at pricey convenience stores. Providing every adult with enough income to cover needs would incentivize grocery stores to set up shop in some of these long-neglected neighborhoods. The same would likely be true for banks and other businesses crucial to building communities, helping neighborhoods with a high concentration of poverty begin to build basic economic opportunities and break the cycles that reinforce poverty generation after generation.

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What Are Potential Disadvantages of a UNIVERSAL BASIC INCOME

Of course, with a program of this size — and one as radical in nature — there are plenty of potential downsides that need to be carefully addressed before implementing a UBI.

• Declining Labor Force Participation: Few fears loom as large as that of an unruly mass of people refusing to work because they’re getting something for nothing. A lot of this fear is probably unfounded, but it’s impossible to say just how different our economy and culture might be after a shift like this.
• Runaway Inflation: In the event that everyone has more money to spend and starts spending it, businesses could respond by raising prices, resulting in widespread price increases and ultimately reducing the value of the UBI payment to the point that $1,000 is no longer enough to meet basic needs.
• Excessive Cost: The debate over the effects of government spending is older than the country itself. But budget hawks worry that debt resulting from too much government spending would crowd private investment out of the bond markets and weaken the economy in the process.
• The Law of Unintended Consequences: It’s difficult to forecast what the biggest problems with a UBI would even be. A program that would so fundamentally change the economy and people’s relationship with the government likely would have consequences that can’t fully be anticipated.

If a Universal Basic Income Happens, Will It Work?

That’s the $3 trillion-per-year question. And unfortunately, there’s no good answer. Naysayers like Bill Gates, co-founder of Microsoft and the Bill & Melinda Gates Foundation, say no. “We are not rich enough to give up work incentives,” Gates told Fox Business. Granted, it would be a be a huge mistake to assume that what works for a village in Kenya would work just as well if applied to America’s $20 trillion economy. But the various experiments and pilot programs dealing with direct cash payments paint a fairly rosy picture of what could happen with a UBI especially now with the economy recovering from the covid pandemic.

As with many big policy ideas, the universal basic income currently exists entirely in the label of “Stimulus Packages” where in reality UBI has been implemented on a mass scale. UBI at its core seems to have excited many people interested in building a fairer society, so you’re likely to be hearing more about the “Stimulus” plans — whether or not the two political parties can come to some agreement is questionable, however, as for now at least for the last few months and probably more, Universal Basic Income and the “Threat of socialism” is already in place. I do not hear to many people complaining about it. Let’s see where the next stimulus bill takes that idea of Universal Basic Income. I am torn as I often am between the risk and the reward.