Advocates of a UBI have recently become so interested in the problem of robots taking our jobs. The idea is that automation will make human labor so worthless, and make humanity so fantastically wealthy, that we practically won’t notice if we siphon a considerable amount of that money into a benefit that will, effectively, allow people to be permanently unemployed without starving to death. I’m skeptical of this story for a number of reasons -- starting with the fact that “the machines are about to put us all out of work” has been a staple of science fiction for a century without coming noticeably closer to science reality. This time may be different, of course; even the boy who cried wolf eventually did come across a predator.
But even if this story eventually comes true, it isn’t true now -- and until it is true, there’s no real reason for voters to want to shuck their current welfare state for one that is either much more expensive or cuts benefits for current beneficiaries, while throwing in some possibly strong disincentives for lower-skilled people to hold jobs. After all, the government is pretty good at mailing checks. In the event that a majority of the population is thrown out of work by robots, a UBI can be set up in a trice.
The UBI advocates, in other words, have provided neither a realistic fiscal plan for their policy, nor any urgently compelling reason for us to pursue it. It’s possible that the UBI is the policy of the future. But if so, that future is probably still quite a ways off.
Policy makers trying to craft a UBI end up with an unpalatable choice between creating a benefit that is useless, or one that is too costly to pass. Consider a basic income of $1,000 a month. Most of us would not consider an annual income of $12,000 a year enough to live on; it’s just a smidge above the poverty line for a single person.
But there are 242 million adults living in the U.S. Now, 7 percent of the U.S. population consists of noncitizens, but even if we assume that grants go only to citizens, that’s 225 million adults. Multiply times $12,000 a year … right, it’s $2,700,720,000,000, or 70 percent of the current federal budget.
Yes, but we’ll get rid of the other programs, one might say. Okay, well, this $1000 monthly grant is considerably
less than the current average Social Security benefit, a benefit that President Obama (and judging from my social media accounts, most of his party) consider too paltry. It’s going to look even skimpier once one disposes of Medicare and force retirees to buy their health care on the open market, a cost that would consume most of their guaranteed basic income.
Oh, we weren’t going to get rid of Medicare? Nor Medicaid or Obamacare? And of course we’ll keep providing public schooling, and assistance for disabled children, and…. By the time one has started saving programs that obviously can’t be cut without immiserating large chunks of the population who currently rely on the government, what one has is a $2.7 trillion program to substitute for Temporary Assistance for Needy Families (welfare), unemployment insurance, Social Security and food stamps -- four programs upon which the federal government currently spends about $1.2 trillion.
Moreover, since the grant would be, in many cases, less generous than what a lot of people are currently collecting, we will probably have to either top up for those groups, or increase the size of the benefit, until we have a $3 trillion or $4 trillion program to replace $1.2 trillion worth of welfare spending. Even if we tax back the whole benefit from higher earners (which would reintroduce many of the marginal tax problems we were trying to avoid with the UBI in the first place), the dead-weight loss of the additional taxation needed to pay for this program will probably harm economic growth, making the program more expensive still. I’m not a supply-side hawk who thinks that any tax increases will plunge us all back into the dark ages, but running an additional $2 trillion to $3 trillion through government coffers every year might give even some ardent big-government Democrats pause.
Handing out a universal benefit of any size at all will be fantastically expensive. One can make it smaller, of course, but then one doesn't get any of the vaunted benefits: It doesn’t prevent the benefit cliffs, doesn’t encourage entrepreneurship, doesn’t lessen the distortions of all the in-kind benefits one has left in place.