During the 2020 presidential race, businessman Andrew Yang presented the idea of a universal basic income (UBI) during his candidacy. His plan was to provide a monthly stipend of $1,000 to every adult in the country. Yang has continued to advocate for guaranteed income, and the idea has piqued the interest of over local 30 governments — including Durham — as a part of the organization known as Mayors for a Guaranteed Income. Funded by Twitter CEO Jack Dorsey, the organization seeks to provide local governments the funding to experiment with the idea of basic income.
Durham Mayor Steve Schewel announced that around 300 citizens would receive payments between $500 and $1,000 over the next 12 to 18 months. As time passes, we can expect more cities, including Raleigh, to at least consider the idea of UBI. That being said, a UBI program on any significant scale is expensive to the point where the government would have little room to focus on anything else. Yang’s plan would cost $2.8 trillion annually and would require $1.6 trillion in new revenue on the federal level. For context, the entire 2019 federal budget was about $4.4 trillion.
The concept of UBI on the scale Yang is proposing has never been implemented; there are no real instances of it that we can properly analyze.
Yang has cited Alaska as having a guaranteed income program, but the logistics of it are quite different from what Yang is interested in. For one, Alaska gives a yearly stipend of around $1,000 while Yang wants a monthly stipend of the same. Secondly, Alaska acquires that money from deals with the oil companies that drill in the area, not through tax revenue. Alaska is also the third least populous state in the country, so the ease at which it can give its citizens this money is not comparable to a national program, even proportionally speaking.
If a city, state or country is interested in adopting what Yang is proposing, they have to go all in on it. The costs of UBI leave limited room for significant spending in other areas, areas like health care, infrastructure and education. Therein lies the core problem with Yang’s UBI: It makes high demands without providing fundamental solutions.
Take infrastructure for example. In 2017, the United States received a “D+” from the American Society of Civil Engineers’ Infrastructure Report Card, and they estimated $4.59 trillion would be required to bring infrastructure up to a “B” grade. Infrastructure is another area that would have to be overlooked by the massive costs of Yang’s plan.
Intuitively, one could think that Yang’s plan could help solve the college tuition crisis. Currently, the United States has $1.7 trillion in student loan debt. NPR found, in the last five years alone, tuition has increased 70% or more in states like Georgia, Arizona and Washington. But Yang’s proposal could perpetuate an existing problem. For decades now, the cost of college tuition has been increasing, and when interviewed by NPR, economist Sandy Baum of the Urban Institute indicated the single biggest reason for that spike is a lack of public funding of secondary education. With UBI, the deficiency of government funds would not only continue but worsen; colleges and companies like Sallie Mae will have more incentive and justification to continue the trend of rising prices.
Yang is certainly on the right track in calling for some form of basic income, but having a plan as ambitious as his neglects other issues and responsibilities in the purview of the government. However, a form of basic income could actually be feasible as long as it wasn’t the center of a public budget.
In the late 20th century, economist Milton Freidman posed the idea of a negative income tax (NIT). NIT is similar to UBI in that it provides direct funding to citizens, but it does this in a more modest, focused manner. NIT basically sets an income level where people who make more than that level pay money to the government, while those who make less than that level receive stipends from the government. A team at the University of Michigan found that a NIT that gives money to everyone at or below the current poverty line would cost $219 billion annually — less than 10% the cost of Yang’s plan.
I think it is safe to say that UBI is not the way to go, but by implementing some variation of the NIT, we can fight and alleviate poverty while also giving attention to other vital sectors.