Universal Basic Income - An Idea Worth Considering
Universal Basic Income Makes Sense But Not Because It's a Right or People Deserve It
I just finished reading Rutger Bregman’s book Utopia for Realists – How We Can Build the Ideal World. His book focuses on three basic concepts, one of which is a universal basic income. If you have read some of my articles you might very well think the idea of a universal basic income is something that I would be very much against. I am not against the idea, and it is something we should seriously consider, but not for the reasons that you or Mr. Bregman might think. Let me explain.
In 1964 President Johnson officially launched the war on poverty in the United States. The idea was that an economic powerhouse like the United States could implement a series of programs that would eradicate poverty. Wikipedia describes it as follows:
“The war on poverty is the unofficial name for legislation first introduced by United States President Lyndon B. Johnson during his State of the Union Address on January 8, 1964. This legislation was proposed by Johnson in response to a national poverty rate of around nineteen percent. The speech led the United States Congress to pass the Economic Opportunity Act, which established the Office of Economic Opportunity (OEO) to administer the local application of federal funds targeted against poverty. The forty programs established by the Act were collectively aimed at eliminating poverty by improving living conditions for residents of low-income neighborhoods and by helping the poor access economic opportunities long denied from them.”
Now, some seventy years later, the Federal government spends approximately $1.3 trillion dollars to $1.6 trillion dollars on programs to help the poor each year. That includes (for 2023) $124 billion on housing, $147 billion on food and nutrition, $70 billion on unemployment, $756 billion on Medicaid, and $208 billion on other programs (www.lexingtonlaw.com). According to urban.org, states spend about $800 billion on public welfare. Add the two together, and in the United States we are spending over $2 trillion dollars a year on programs to eliminate poverty.
That number is just what the government spends. We have a plethora of private charities, religious organizations, and businesses that all contribute to this war on poverty. I was not able to find out how much of charitable givings are spent on poverty but American giving totaled close to $500 billion in 2022 and some 24% of that was spent on human services and health. That would be around $125 billion.
These numbers also do not include spending at the state and local levels. California’s budget for health and human services was about $220 billion in 2022. All states spend money on health and human services, so it would not be unreasonable to suggest there is an additional $1 trillion or more spent on health and human services at the state and local level.
If you add together what is spent at the local, state, and Federal level and what is spent by charities a good estimate would be about $3.5 trillion.
When Johnson started the war on poverty the national poverty rate was nineteen percent. Now, some seventy years later, and after tens of trillions of dollars in spending, we have a national poverty rate of around 12% or some thirty-eight million people. Clearly something has not worked.
As Bregman points out, services for people in poverty are complex and convoluted. The US Department of Health and Human Services employs 80,000 people and operates some 115 programs across eleven different divisions. In California, the Department of Health and Human Services has fourteen departments, each department with a plethora of programs and initiatives under it.
For anyone who is in poverty, figuring out which programs are available to help and navigating through a cornucopia of rules, regulations, forms, departments, and bureaucracies must be a nightmare. I am sure anyone reading this article has been frustrated in trying to complete government forms of one sort or another. Further, many of those who need the government’s help are less educated and less resourceful than average citizens. I suspect many in need do not take advantage of available programs simply because they do not know about them, or the application process is too complicated. Then once we have given money to those in poverty, there is an army of auditors, investigators, and overseers who make sure the person receiving the government money is complying with certain regulations (such as searching for work or improving skills) and not scamming the system.
So, what is the solution? Mr. Bregman suggests one solution is a universal basic income. Can’t capitalism solve the poverty problem? Mr. Bregman admits that capitalism pulled seven hundred million Chinese out of poverty and that “It is capitalism that opened the gates to the Land of Plenty.” He goes on to say that capitalism alone cannot sustain a continued reduction and possible elimination of poverty and that something else is needed. His solution is a universal basic income.
It is interesting to note that his second chapter is titled “Why We Should Give Free Money to Everyone.” Going along with the title of his book about Utopia, it is only Utopian thinking that suggests money is free. What he is really saying is we should take money from some folks and give it to other folks. Bregman sees a universal basic income as some sort of right we all deserve. I would not agree with him. It is not a right. But it might just be a good idea.
There are three common objections to a universal basic income. The first is cost. However, as described previously we are now spending about $3.5 trillion on those in poverty, give or take a few billion. Do we need to spend any more? $3.5 trillion divided by thirty-eight million in poverty works out to about $92,000 per person. That’s right. We currently spend about $92,000 per person on services and programs for those in poverty. We could give each person in poverty $30,000 a year and even if administration cost another $10,000 per person, we would still be saving more than half of what we now spend.
The second objection is work disincentive. If you pay people and you do not force them to work, they will just become lazy and not bother to find jobs or improve their skills to better their circumstances. I have no doubt that there are those who will behave just as described. However, Bregman provides several examples where the studies showed numerous positive outcomes from a basic minimum income. People who received a basic minimum income were frugal with the money they received, healthier, less inclined to get divorced, obtained more education, had higher high school graduation rates, and many tended to work harder than previously. These studies are limited but certainly worth considering.
The third objection is fraud. If you just give people a basic minimum income they will cheat the system in some form. The reality is that fraud in our current social services programs is already rampant. The food stamp program in the US estimates that close to $5 billion is stolen from the system every year. We already experience massive fraud in our social welfare programs. It is likely fraud will actually decrease because the only test will be earned income, which is reported for almost everyone on a W2 or 1099 form (and in other countries their equivalents) and there will be no restrictions on how the recipients spend the money, so compliance with various rules and regulations will not be an issue.
As mentioned previously what we are doing is not working. Despite spending trillions of dollars on the war on poverty and employing an army of bureaucrats to administer and control the money through hundreds of different programs, politicians and community activists are screaming we just need to spend more.
We do not need to spend more. We need to spend less. We should replace all government programs with one simple basic income that should cost us less money than we spend now, and if Bregman is correct, improve the results.
It is not because we can afford it, it is not because it is a basic human right and it is not because capitalism does not work. It is because what we are doing now is a mess, is costing too much and clearly does not work. So, let us give it a try and see what happens.
One final point. Universal basic income should only be for United States citizens, not for illegal immigrants.