For the last week or so, I’ve been preparing to speak against a Universal Basic Income (UBI) motion at a debate club.  Here’s the Motion:

The Motion: This House Supports a Basic Income for All US Residents

Motion Summary:  Basic income recipients would include children and adults; the employed and unemployed; and citizens, permanent residents, and all other residents who could prove a residency duration of at least three years. The amount given would start at $1,000 per person per month and be pegged to GDP growth going forward. No programs in the existing social safety would be replaced by this policy.

This is the fourth in a series of posts laying out my case against the above UBI proposal. Per previous posts, this particular UBI proposal would cost about $4.1 trillion per year in benefits and another $41 billion for administration - raising government spending to about 56% of GDP, which is comparable to what the Danish government spends.

The UBI would have to be funded mostly by increased tax revenue, as feasible budget cuts wouldn't pay for much more than its administrative costs. Nor should the UBI rely on the government borrowing money: the US government debt to GDP ratio is already high, and an expensive UBI would likely limit our "fiscal space" to take on additional debt.  So we would just have to tax our businesses and households to pay for the thing. Ideally, with a broad-based tax system.

Last post included a $4.1 trillion tax scenario to pay for the UBI: the business community pays $500 billion and US households pay the balance of $3.6 trillion. The scenario was an exploration, not a recommendation. But it helped to bring home an important point: not only would this UBI redistribute wealth from rich (and not-so-rich) to poor, it would also entail a huge transfer of wealth from households without children to households with children, because the lions' share of UBI money will go to households with kids.  More kids, more UBI money. A lot of kids, a lot of money:

1 adult - $1000/month - $12,000/year

1 adult/1 child: $2000/month = $24,000/year

1 adult/2 children: $3000/month = $36,000/year

1 adult/3 children: $4000/month = $48,000/year

2 adults/2 children: $4000/month = $48,000/year

1 adult/4 children: $5000/month = $60,000/year

2 adults/3 children: $5000/month = $60,000/year

Consider that half of American households are childless couples or single individuals.  A whopping 57% of households in the bottom income quintile  are single individuals. This is not so surprising, given that 44% of bottom quintile households are headed by individuals younger than 25 or older than 64.  We're talking young people and seniors. Between higher taxes and higher prices, these low-income individuals wouldn't see much net value from this particular UBI. But then climbing up a career ladder to make more money may not be all that enticing either, especially for individuals with limited skills and education.  That's because earnings would be highly taxed, like in Denmark, where income tax rates for the middle-class are in the 40-50% range (and that's just one kind of tax).

Next: How would the proposed UBI plan influence decisions to have children and decisions to work? How would it impact career trajectories, which often require long and painful period of learning the ropes, as one powers through unpleasant starter jobs and occasional missteps to reach the (highly taxed) middle class and beyond?

Link:

https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-hinc/hinc-05.html