Why Universal Basic Income Is Not a Good Idea

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Owing to the inadequacy of the social safety net in the United States and other developed countries, proposals for a universal basic income (UBI) are gaining in popularity. The gap between the rich and everyone else has expanded significantly in recent years, and many fear that automation and globalization will widen it further.

To be sure, if the only choice were between mass impoverishment and a UBI, a UBI would be preferable.

Such a program would allow people to spend their money on whatever they value most. It would create a broad sense of ownership and a new constituency to shake up the system of big-money politics. Studies of conditional cash-transfer programs in developing economies have found that such policies can empower women and other marginalized groups.But UBI is a flawed idea, not least because it would be prohibitively expensive unless accompanied by deep cuts to the rest of the safety net. In the U.S. (population: 327 million), a UBI of just $1,000 per month would cost around $4 trillion per year, which is close to the entire federal budget in 2018.

Without major cost savings, federal tax revenue would have to be doubled, which would impose massive distortionary costs on the economy. And, no, a permanent UBI could not be financed with government debt or newly printed currency.

Sacrificing all other social programs for the sake of a UBI is a terrible idea.