Homelessness, sickness, and hunger are all issues that we, as a society, want to eradicate. Regardless of your political affiliation, you almost certainly want to see these problems solved. What if I told you that one policy has the potential to drastically reduce all of these issues and that it might actually not be that hard to implement?
Universal Basic Income, often referred to as just UBI, has the potential to alleviate the stress that many of our modern societal issues present. If implemented, it would likely boost the economy and improve the lives of most Americans.
So what is this magic policy?
UBI is a policy where all citizens are regularly given a set amount of money with no strings attached. The goal of UBI is to make sure that every American citizen is able to receive an income adequate to meet their basic needs.
If you’re an American then you are most likely already skeptical of this idea. I and most other supporters of UBI felt the exact same way when were first introduced to it. Free money to everyone sounds like an absolutely ridiculous idea, but once you get past the initial skepticism it starts to make more sense.
The Positive Impact of UBI
My first thought, and the first thought of many people I’ve talked to about UBI, has been, ‘why should we just give people money? Shouldn’t they have to work for it?’” This sort of thinking is deeply ingrained in us. Most people don’t typically want money going to people they don’t like or believe don’t deserve it, especially if that money is coming from the government.
Also, the idea that giving people money makes society worse is very pervasive in our culture. Many people believe that giving out money will cause people to work less, contribute less to society, and hurt the stability of those who are already doing well; however many real-world examples of UBI have proven that the exact opposite is true.
The Stockton Economic Empowerment Demonstration (SEED) was a mayor-led UBI program. This program ran in Stockton, California from February 2019 until February 2021. The program gave 125 residents in neighborhoods at or below Stockton’s median household income an unconditional $500 every single month.
The SEED program was found to have increased the quality and productivity of its participant's lives. Employment increased by 12% among the participants — in February 2019 28% of recipients had full-time employment, one year later that number was 40%. The financial safety net that was provided to participants allowed them the freedom to seek better full-time employment rather than struggle to find it while working a part-time job or side gigs.
The stability offered by the $500 monthly payments can’t be understated. At the start of the program, only 25% of participants could afford to pay for an unexpected expense with cash, one year later that number had increased to 52%. This along with the many other positive effects of the monthly payments contributed to the increased mental well-being of participants.
People who received this money used it to better themselves and improve their lives. A majority of the money was used for basic needs and less than 1% of it was used to purchase alcohol or tobacco. This program shows that as little as $500 a month can be enough to drastically change the lives of those who need it.
While the SEED program may have been a test of what is possible with UBI, one state has already implemented something that is similar: Alaska. In 1976 the Alaska constitution was amended so that all residents who had lived in Alaska for at least one calendar year and intended to remain in the state indefinitely would qualify to receive the Permanent Fund Dividend (PFD).
The Alaska Permanent Fund Corporation is a state-controlled corporation that invests money obtained from the vast oil and gas reserves of the state. Every year since 1982 the PFD has been distributed to all qualifying citizens, annually, based on the average five-year performance of the fund. This means that the amount received each year can vary a lot. In 2023 the payout was $1312 while in 2022 it was much higher at $3284.
While the PFD isn’t as large a payout as many UBI advocates want, it is one of the only examples of a system like UBI in practice. It has also had some noticeable positive long-term effects. Most notably it has lifted between 15,000 and 25,000 Alaskans out of poverty annually. This effect has been especially helpful for vulnerable indigenous populations, who have seen poverty rates drop from 28 to 22 percent. It is also important to note that 50% more children in Alaska — 15% of the total population of children rather than 10% — would be living in poverty without the PFD.
The Permanent Fund Dividend is particularly interesting. Not only is it one of the only long-term UBI-type programs in the world, but it is also extremely popular in a conservative state — where ‘government handouts’ are typically much more frowned upon. It might be that when individuals see the impact direct unconditional payments have on their community they support it.
A short-lived nationwide example of something like UBI is the Expanded Child Tax Credit. Passed in 2021 the new version of the tax credit greatly increased the amount of money families would receive. Typically the maximum tax credit is only $2,000 per child, but when it was temporarily expanded, due to COVID-19, families could receive tax credits of $3,600 per child under age 6 and $3,000 per child up to age 17.
However, the biggest change was that the tax credit would now be refundable. This meant that you would still receive the tax credit even if you didn’t owe that much money in taxes. These payments could also be distributed in advance monthly. A family with a child under 6 could receive $300 per month; a family with a 6 to 17-year-old would receive $250 per month.
These payments meant that many families in the United States had more financial security than they had ever had before. It also meant that over 2 million children were lifted out of poverty; however, on December 31, 2021, the Expanded Child Tax Credit expired, and sadly many of those children fell right back into it.
While the idea of giving people money may seem counterintuitive at first, the experiments done with it so far seem promising. However, it is important to note that no wide-scale, long-term, UBI has ever been implemented. So, the exact outcomes it would have on society are only speculative.
How Would UBI Work On A National Level?
To look at how UBI would work on a national level let’s look at an actual proposed plan.
When running in the 2020 presidential election Andrew Yang ran primarily on the idea of passing UBI. You could also argue that he’s the main reason the idea regained popularity. So, what was his plan?
Yang called his UBI policy the Freedom Dividend. His idea was to give every single American citizen, over the age of 18, $1,000 a month. This $1,000 would be given to citizens without any stipulations; there would be no test to pass, no income to be below, or work requirement to fill.
As you may expect, this sort of plan would be extremely expensive — estimated at $2.8 trillion dollars per year. Yang planned to pay for it in several ways.
Primarily, he wanted to pass a value-added tax (VAT) — a tax that is imposed on goods and services at each stage of production — of 10%. This tax would be implemented in some industries, but not those that are staples for American families like groceries and clothing. The VAT would likely add an additional $952 Billion to the US Budget.
Yang also proposed several other ways to pay for the Freedom Dividend:
Only allow those on certain benefits, such as food stamps, to be on one or the other. This means many Americans who are already receiving government assistance would likely just switch to the Freedom Dividend — due to its lack of stipulations and higher payout.
Higher taxes on the wealthiest Americans by increasing the Social Security payroll tax cap — as of 2023 you do not have to pay any Social Security taxes on incomes above $160,200. And implementing a financial transactions tax.
A carbon tax.
The Freedom Dividend was also expected to add between $800 Billion and $900 Billion in additional revenue due to economic growth.
While it is unclear if Yang's proposed ideas would create enough revenue to pay for the Freedom Dividend, it could still be worth the cost due to the many positive effects it would have on our society.
A few ways that this proposed plan was anticipated to help Americans:
Raise millions out of poverty
Increase labor participation
Grow the economy by over 12%
Improve both the mental and physical health of citizens
While this is an interesting look at how UBI could be implemented in the United States it’s important to note that this is only one example. Many individuals have proposed ways to implement similar policies and they often look very different from each other.
Why UBI Is Better Than Most Existing Programs
A lot of the worries surrounding UBI originate from the concerns around other social programs. Many of these programs, like Food Stamps (SNAP) or Supplemental Security Income (SSI), have a lot of problems. They are often extremely complicated and hard to get benefits from in the first place. And if you do end up receiving the benefits you have a strict set of rules you must adhere to.
With SSI once you make a certain amount of income in a month it starts cutting into your monthly benefits. And you can only make so much money before you lose your SSI benefits entirely. This sort of program actively discourages many people from trying to better themselves. If they attempt to go back to work they could lose their safety net entirely. So, many choose to play it safe by not going back at all.
UBI has none of these problems. You don’t need to have a disability or specific income to get UBI, you simply would get it by being a US citizen. You also won’t risk losing it by trying to better yourself.
If you become disabled for a time and are unable to work you will still continue to receive the UBI. If you later go back to work and make $60,000 a year that won't change. There would be no worry about losing your additional income or dealing with government bureaucracy. The UBI check you receive each month is there to be a safety net, not cause additional stress.
Will UBI Actually Happen?
Universal Basic Income is a very interesting idea with many people both for and against it, so could it actually become law? The short answer is yes, the long answer is probably not right away.
The idea of UBI has been around in America since its very inception. Thomas Paine — most famous for his pamphlet Common Sense — proposed something very similar to UBI. Fast forward to the Great Depression and Huey Long proposed ‘Share Our Wealth’, a program that would provide households with an annual income. In the 1960s and 70s, the idea of UBI and similar programs became fairly popular. Martin Luther King Jr actively supported UBI and Richard Nixon supported legislation that would provide direct payments to many families.
If UBI has been shot down so many times, why would now be any different?
If a lot of problems in today's society — income inequality being the most prevalent — continue to get worse we could see support for UBI increase. Andrew Yang believes that AI and automation will leave so many Americans unemployed that the government will need to implement UBI. Regardless of what may be the catalyst for UBI, it currently has a fairly mixed perception among the American public.
A 2020 study showed that 54% of US adults opposed the government providing $1,000 a month for all adult citizens. 45% of Americans actively supported the idea. While it's good that nearly half of the country supports UBI we still have a long way to go before it could reasonably become law. Clearly, there will need to be an ideological shift in opinion before politicians in DC would consider trying to pass it. Still, I’m optimistic that one day it will be passed and the lives of most Americans will be greatly improved.