On June 5, Switzerland held a national vote on Universal Basic Income and four other pressing issues. So what is Universal Basic Income (UBI)? A UBI is a government program that gives all citizens of that country a monthly income with the goal of keeping individuals above the poverty threshold. In the United States this number is set annually by the Census Bureau and is currently set at $11,880 dollars annually or $990 a month.
UBI differs from current U.S. welfare because it does not require means testing, verifying an individual income is below a certain point, and differs from U.S. unemployment benefits, because it does not require an individual to have previously worked or to prove they are currently trying to find work. Another big difference is not earmarked to be spent on a specific good unlike food stamps or government housing. These changes make the system more efficient than previous systems because less time and money is spent trying to prevent people from getting money they aren’t entitled to, or for citizens to spend time proving their lack of income; however, it is more expensive because it would add the entire U.S. population to those benefits.
A back of the envelope calculation puts the cost at 3.5 trillion dollars annually, or 87.5 percent of the 2016 budget. To put that in perspective in 2015 State and Federal government spending on Welfare benefits, including Medicaid, Medicare and Social Security, was $2.4 trillion. The cost of such a program could easily change as the payout to individuals could be changed both overall, and dependent on an individual’s age or other characteristics; for example if the value was changed to $7,540 annually per individual then it would be approximately equal to current spending on welfare programs.
Due to the lack of implementation of any similar program on a large scale much of the impact of such a program is highly speculative; however one incontrovertible fact is that the program would be extremely expensive. If such a program is extremely costly why would a sovereign government and its informed citizens consider a program like this? The supporters of UBI implementation believe that alleviating the burden on those below the poverty line will give them the ability to invest in their own skills rather than being focused on work exclusively for sustainment. It also could give citizens the safety net and capital to start their own businesses or start in work that does not initially provide income to support the individual or their family.
This investment in human capital could be highly beneficial to our transitional economy that is intensive in its demand for skills, and as the demand for the demand for unskilled labor is shrinking. It also has the added benefit of efficiency that individual’s best know their needs, desires and improvements they would like to their selves and can reduce the growth of private debt. The detractors point to the possibility of wage push inflation, or increase in the cost of goods caused by the increase in available capital and a stagnate supply of goods and services. Many people also do not desire public assistance money to subsidize individual’s ability to spend money on items like alcohol, tobacco or illicit drugs, even though many of the individuals also engage in some of the same behaviors. They also claim that such a program would incentivize individuals to not work due to their lack of need to do so to survive. Much of this paternalistic attitudes surrounding government aid and assistance programs.
Regardless of your stance on the role of government and its desired size and involvement, much more research is required about UBI programs and the macro- and micro-economical impacts of such a program on its citizens. It is my hope that upcoming pilot programs in Kenya, the Netherlands and Silicon Valley will provide clarity on the economic and human effects of these programs, and afterwards informed citizens can decide whether or not a massive and costly program like this is what they desire for their respective nations, then decide how to pay for it through growth in the economy caused by secondary effects of the program, increased taxes, decreased spending on other government programs, the use of a Sovereign Wealth Fund, State Owned Enterprise or some combination of all five.
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