I’ve researched the question, “What are the reasons against Universal Basic Income (UBI).” I call it “Social Security for All.”
Here is a summary of the anti-UBI claims:
1. Cost and Feasibility: One of the primary concerns is the high cost of UBI. For example, in the United States, a UBI of $12,000 per year for every adult would cost over $3 trillion annually/
2. Inflation: UBI could lead to inflation. If everyone has more money to spend, demand for goods and services might increase, driving up prices and potentially negating the benefits of the additional income.
3. Work Incentive: UBI might reduce the incentive to work. If people receive a guaranteed income regardless of employment, some may choose not to work, potentially leading to a decrease in the labor force and economic productivity.
4. Misuse of Funds: Recipients might misuse the funds, spending them on non-essential items rather than necessities. This could undermine the goal of reducing poverty and improving living standards.
5. Impact on Existing Welfare Programs: Implementing UBI might require cutting or restructuring existing welfare programs. This could harm those who rely on targeted support for specific needs, such as healthcare or housing.
6. Political and Social Challenges: Gaining political and public support for UBI can be difficult. Many people are skeptical of unconditional transfer programs and prefer welfare systems tied to employment or specific conditions.
Before I address #s 1 through 6, I’ll give you the real one:
7. It would narrow the income/wealth/power Gap between the rich and the rest. The Gap is what makes the rich rich. Without the Gap no one would be rich; we all would be the same.
The wider the Gap, the richer are the rich. The easiest way for the rich to remain rich is to make sure the Gap doesn’t narrow, so using their political and informational power, the rich invent and promulgate false reasons why UBI won’t work.
Now, let us address each of the reasons given for objecting to UBI.
1. Cost and Feasibility:
We already have a form of UBI, except it isn’t “U” (Universal). We call it “Social Security,” and it covers old and/or disabled people. All the ideas opposing UBI were put forth in the 1930s when Social Security first was proposed.
Contrary to popular myth, Social Security (as well as Medicare, the military, SCOTUS salaries, White House salaries, Congress’s salaries, and every other federal expenditure) are not funded by FICA or any other federal taxes.
These programs all are funded the same way: through federal money creation.
It is as simple as A, B, C.
A. When any federal government agency approves an invoice for payment, it sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. The instructions are in the form of a check or a wire.
B. When the bank does as instructed ( by pressing a few computer keys), dollars are created by being added to the creditor’s checking account and to the money supply measure known as “M2.”
C. The bank then balances its books by clearing the payment through the Federal Reserve, which has the infinite power to approve all federal checks and wires.
So long as the federal government has the infinite power to pass laws and to issue instructions, it has the infinite power to pay any invoices it receives. The U.S. federal government, being the original creator of dollars from thin air, never unintentionally can run short of dollars.
You often have been told that Medicare, Social Security and/or their trust funds are running out of money. It is a false claim. Unlike state/local governments, the U.S. government is Monetarily Sovereign. With the infinite ability to create dollars, it could create the above-mentioned $3 trillion at the touch of a computer key.
The sole purpose of federal taxes (unlike state/local taxes) is not to provide the government with spending money. The dual purposes are to:
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- Control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward and
- Assure demand for the dollar by requiring taxes to be paid in dollars.
Even if the federal government didn’t collect a single dollar in taxes, it could continue spending, forever.
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. It’s not tax money… We simply use the computer to mark up the size of the account.”
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
Mario Draghi, President of the Monetarily Sovereign European Central Bank: “We cannot run out of money.”
Further, UBI would grow the economy. It’s a mathematical certainty because the size of the economy is determined by this formula:
Gross Domestic Product (GDP) = Federal Spending + Nonfederal Spending + Net Exports.
By simple algebra, UBI would grow the economy because it would increase Federal Spending and, as a result, increase Nonfederal Spending, too.
When faced with the undeniable facts that UBI is affordable for the federal government and would grow the economy, those influenced by wealthy propaganda resort to excuse #2.;
2. Inflation: The common yet erroneous belief is that “excessive” fedeal spending causes inflation. This belief is wrong on several fronts.
First, no one knows what “excessive” means. The rich always claim federal spending is excessive (see: Historical claims the Federal Debt is a “ticking time bomb.” From Sept. 26, 1940, to July 22, 2024) because most federal spending goes to the poor. It narrows the Gap, a situation the rich despise.
By contrast, the rich favor tax deductions for the wealthy, which are not part of “spending” but widen the Gap just as federal spending does.
Economics is a pseudoscience loaded with hypotheses and flush with data — and ne’er the twain shall meet.
Some economists make this arguement based on intuition, but not on fact: They claim that people earn income by selling their labor on the labor market as a contribution to the production of goods and services for the economy. Income increases that aren’t directly related to correlating increases in production tend to result in higher prices.
It’s nonsense.
Which of these can claim their income is “directly related to correlating increases in production?” Taxi driver? School teacher? Musician? Flight attendant? Doctor? How about Elon Musk? If he made “just $100 million instead of a few billion, would that “directly relate to a correlating decrease in production”?
Pay has little to do with production and more with labor scarcity, politics, heredity, and other social factors. Queen Elizabeth’s pay had little to do with her output. I am retired, and my income has nothing to do with my production. Raising hotel workers’ skimpy pay or decreasing mortgage brokers’ high pay would not “directly relate to their production.”
The hypothesis is something that only an economics professor in a well-endowed think tank could dream up.
Inflation is not caused by federal spending. Inflation is caused by scarcities, most often scarcities of oil and food:
Today, the federal government is spending more than ever, yet inflation is drifting down. The most recent inflation was COVID-related, not spending-related. It was caused by shortages of oil, food, computer chips, metal, lumber, shipping, and labor.
Raising everyone’s income by giving them money would not cause inflation. Scarcities of crucial items cause inflation.
Federal spending to cure scarcities cures inflation. The “federal spending causes inflation” meme is a fever dream promulgated by the rich to maintain the income/wealth/power Gap.
The common meme that inflation is “too much money chasing too few goods” is half right. Inflation is caused by too few goods (and services).
3. Work Incentive: Critics argue that UBI might reduce the incentive to work, decreasing the labor force and economic productivity. This is a favorite of the rich, who love to portray lower-income people as lazy slugs who, if given money, will simply loll about doing nothing.
The truth is that poor labor is harder than rich labor unless one considers costly vacations, country clubs, and having servants do one’s work to be “labor.” Virtually everyone wants a better life, and that includes the poor. Given a stipend by the government, they will work to increase their standard of living, just as the rich do.
Similarly, the vast majority of the rich want to be richer. Almost no one is satisfied, and it is certainly not a low-income family that receives Social Security.
I trust this isn’t just a projection on my part, but I began collecting Social Security at age 65. I continued to work for a living until I was 73, not because I loved work, but because I wanted more money to feel secure. I had what some may consider a lot, but I still wanted more.
That said, what is wrong with a decrease in the labor force? What is wrong with a four-day work week or a five-hour day? Work usually is not a purpose unto itself. The primary purpose of most work is to improve one’s life, however one defines “improve.”
For households in every quintile of the income distribution, the share of income required to pay for their 2019 consumption decreased, on average, because income grew faster than prices did over that four-year period.
Households in the top income quintile had the largest decline, on average, in the share of income required to pay for their 2019 consumption.
Translation: The rich kept earning more spending money than the rest of us did. Even though they had plenty of money, they wanted more, and worked for it. Why would the average and below-average income people be less motivated? They wouldn’t, but that is what the rich claim.
Artificial intelligence (AI) and automation are making it more possible to do less and accomplish more. A solution to the possible unemployment caused by AI may be UBI.
4. Misuse of Funds: Some argue that recipients might misuse the funds, spending them on non-essential items rather than necessities. This is another one the rich love — the notion that the poor are ignorant money managers and that if you give them money they’ll waste it on drugs and lottery tickets.
The reality is quite the opposite. By necessity, the poor have learned to be good money managers. In any event, it is none of the government’s business whether or not someone “misuses” their income. The idea the the government knows better is repulsive and bigoted.
5. Impact on Existing Welfare Programs: Implementing UBI might require cutting or restructuring existing welfare programs. Critics worry that this could harm those who rely on targeted support for specific needs, such as healthcare or housing.
This is easily prevented. Just don’t do it. Don’t include UBI income as part of any welfare criterion.
The current system — requiring someone to be poor to receive financial aid — is self-defeating. It encourages the very thing the rich claim to fear: people not working. It also leads to dishonesty and to gaming the system by mischaracterizing income.
6. Political and Social Challenges: Gaining political and public support for UBI can be difficult. Many people are skeptical of unconditional transfer programs and prefer welfare systems tied to employment or specific conditions.
This is the old “If I had to work for my money, why should he get money for doing nothing?” The solution would be to give every man, woman and child in America the same amounts regardless of their other income or wealth.
The money would mean little to the rich and much to the poor, but it would overcome the resistance of those who hate to see others receive something.
7. It would narrow the Gap between the rich and the rest. The Gap is what makes the rich rich. Without the Gap no one would be rich; we all would be the same.
The wider the Gap, the richer are the rich. The easiest way for the rich to remain rich is to make sure the Gap doesn’t narrow, so using their political and informational power, the rich invent and promulgate false reasons why UBI won’t work.
This is the single biggest hurdle to cross. The first six objections easily are overcome and/or are based on incomplete information. This one is based on the intense emotions of America’s most influential people.
A rich man might be generous about charity for the poor, but he doesn’t want poverty to be eliminated altogether. He needs the poor. Having a mansion is not as attractive if everyone else has a mansion. It’s the Gap that makes him rich, and narrowing the Gap makes him less rich, an unappealing prospect.
If a neighbor wins the lottery or even gets a more lucrative job, how does the rest of the neighborhood feel? What does Mark Zuckerberg think about Elon Musk having more money?
The majority of us suffers from Gap Psychology, the desire to distance ourselves from those below us on the income/wealth/power scale and to come closer to those above us. The conflict arises because those above us don’t want us closer and those below us want us closer.
SUMMARY
There are no good reasons not to begin a UBI program and plenty of reasons to start.
I suggest the following monthly payments:
- $1,000 to every adult (18+)
- $500 to every child
- Include undocumented adults and children.
Assume:
- 258 million adult (citizens) + 31 million adult (non-citizens) = 289 million total adults; Annual Cost: $289 billion * 12 = $3.468 trillion
- 73 million children (citizens) + 14 million children(non-citizens) = 87 million children; Annual Cost: $43.5 billion * 12 = $522 billion
- Combined Annual Cost: $3.468 trillion (adults) + $522 billion (children) = $3.99 trillion per year
This compares to the most recent (2023) federal expenditure of about $6.3 trillion.
(Socialism is government control of industry, not just government funding. All governments fund things, but relatively few of those things can be called “socialism.”)
Government spending has a multiplier effect on GDP. The multiplier effect measures how much economic activity is generated by an initial amount of the expenditure. Estimates for the fiscal multiplier vary, but a typical range is between 0.5 and 2.0.
With a conservative multiplier of 1.5, GDP would grow about $6 trillion on top of the most recent 28.65 trillion for a new value of $34.65 trillion.
Consider this: The expanded Child Tax Credit (CTC) in 2021 provided up to $3,600 per child under 6 and $3,000 per child aged 6 to 17. The total cost of this expansion was approximately $105 billion for the year. It lifted about 3.7 million children out of poverty during its implementation.
Today, about 37.9 million people live below the poverty line. The UBI described above would:
- Eliminate poverty in America
- Vastly increase economic growth
- Stimulate scientific progress
- Increase all areas of production.
- Improve the quality and availability of education
- Improve the infrastructure and help cut global warming
- And improve the entire American nation’s quality of life by using the brainpower now hampered by a lack of funding
- Do all this at no cost to anyone.
Think of it. The United States of America has the power to be the first large nation on earth to eliminate poverty. Millions of men, women, and children could begin to contribute to America’s success.
Too good to be true? No, too good only for those who don’t understand the power of human thought and desire, when funded by Monetary Sovereignty.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
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