Budget Buster: Universal Basic Income

Congressional Democrats have proposed several new income redistribution programs.[1] These policies are incremental steps toward a goal, espoused by liberal presidential candidates and intellectuals, of implementing a universal basic income (UBI) program.[2] A UBI program would provide a regular, taxpayer-funded paycheck with the purpose of covering basic living expenses and eliminating the necessity of work.

Universal Basic Income Would Bust the Federal Budget. A leading UBI proposal would pay $1,000 per month ($12,000 per year) to all American citizens over the age of 18. According to the Tax Foundation, this proposal would cost the federal government a stunning $2.8 trillion annually,[3] which is equivalent to more than 80 percent of total fiscal year 2019 federal revenue. Over ten years, the cost would be almost $30 trillion.

Universal Basic Income is Unworkable. Many proponents of UBI are pessimistic about the future of the job market. One prominent UBI advocate argues: “In the next 12 years, 1 out of 3 American workers are at risk of losing their jobs to new technologies—and unlike with previous waves of automation, this time new jobs will not appear quickly enough in large enough numbers to make up for it.[4] By contrast, opponents of UBI believe technological progress could create new jobs and this gloomy scenario will not occur. For example, after decades of remarkable technological progress, the unemployment rate is currently at a 50-year low and the number of job openings exceeds the number of unemployed Americans. However, despite the strong job market, many economists argue that there is room for labor force participation to improve. A UBI program would reduce work incentives and decrease labor force participation at a time when the goal of policymakers should be to encourage work and self-sustainability.

Pro-Growth Policies Increase Opportunities and Middle-Class Income. The robust job market is spreading opportunity not only to higher-income and credentialed workers, but also to job seekers who had previously been left behind by the labor market. Federal Reserve Chairman Powell stated in the most recent Federal Open Market Committee meeting, “…wages have been rising, particularly for lower-paying jobs. People who live and work in low- and middle-income communities tell us that many who have struggled to find work are now getting opportunities to add new and better chapters to their lives. This underscores for us the importance of sustaining the expansion so that the strong job market reaches more of those left behind.”[5] House Republicans support policies which would sustain a strong economy, such as the Tax Cuts and Jobs Act, and provide opportunities for individuals to find fulfilling work.

[1] Examples include S. 2231, American Opportunity Accounts Act and S. 4, LIFT (Livable Incomes for Families Today) the Middle Class Act.

[2] https://taxfoundation.org/andrew-yang-value-added-tax-universal-basic-income/

[3] Ibid.

[4] https://www.yang2020.com/what-is-freedom-dividend-faq/

[5] https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20191030.pdf