Is UBI the next frontier in the battle over the American welfare state?

American politics is divided by competing answers to one fundamental question: what are government’s responsibilities to its citizens?

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The Founders agreed that citizens had certain inalienable rights, among them life, liberty and the pursuit of happiness, and that government maintained its moral authority only if it protected these rights. Their agreements stopped there.

One of the most bitter presidential elections in history was between Founders Thomas Jefferson and John Adams – an election partially defined by Adams’ Alien and Sedition Acts, laws that allowed Adams to imprison anyone who made “false statements” about the government. Jefferson and his Democratic-Republicans won the election thanks in part to their rejection of these laws. The race birthed the predecessors of America’s today’s two major political parties.

Democrats and Republicans joust over the role of government in American society. Central to that conflict is the topic of entitlements. The Democratic platform calls for an expansion of programs like Social Security, Supplemental Nutrition Assistance Program benefits (a.k.a SNAP or “food stamps”), and Medicare, while the Republican platform calls for a curtailing of these entitlements. These ideas are incongruous, but there’s a policy solution that could appease them both: Universal Basic Income.

Money with no strings attached

Universal Basic Income, or UBI, is a policy that, if enacted, would totally uproot the current American administrative apparatus. Popularized by businessman Andrew Yang’s 2020 presidential campaign, the policy calls for government to give citizens consistent payments – with no strings attached. According to Fabian Wendt, an assistant teaching professor in UNC’s  philosophy, politics & economics program, the policy would lift a significant portion of the 11.8 percent of Americans who are poor out of poverty by giving them a “floor to stand on.”

Research says it can work

This assertion is backed by research. In 2019, Stockton, California, began the Stockton Economic Empowerment Demonstration. The two-year study randomly selected 125 residents living in neighborhoods at or below the city’s median income level and gave them $500 a month. From February 2019-February 2020, the recipients saw their rate of full-time employment rise and also reported improvements in their health and financial situations. Recipients also had measurable decreases in their levels of anxiety and depression.  

The Stockton study was limited in its scope, but other cities, including Raleigh, North Carolina, have followed suit nonetheless. The most expansive modern study on UBI is being done in Kenya, where GiveDirectly started its study in 2019. The plan split 20,000 people into four groups: one group receives a monthly payment each month for 12 years; one receives a monthly payment each month for two years; one receives the same amount as the first group receives but in a lump sum; and one receives no payment at all. Innovations for Poverty Action (IPA) is carrying out the study, which has so far yielded positive results. Evidence suggests the money helped participants significantly mitigate the financial impacts of the COVID-19 pandemic.

Will people stop working?

UBI is not without its detractors. One concern is UBI disincentivizes people to work because it allows them to have all of their basic needs met. Even though there’s little evidence to support this claim, skeptics point out that participants in UBI studies always knew the programs in which they were enrolled were not permanent, therefore keeping them from quitting their jobs. Longer-term studies – such as the one taking place in Kenya – are needed to evaluate this argument.

Inflation and other worries 

Some also believe UBI would further contribute to another nasty economic externality – inflation.

Arguably, the U.S. has already tried UBI in the form of the stimulus checks and child tax credits the government implemented to help citizens overcome the economic meltdown brought on by the COVID-19 pandemic. Although that’s not technically true – the checks were lump-sum, one-time payments, and the child tax credit increases did not carry over into this year – the money still had virtually no strings attached to it, making the program the closest the U.S. has come to implementing UBI to date. The results have been staggering, as the Census Bureau estimates the programs cut the poverty rate down to 9.1 percent in 2020 and further in 2021. But according to the Federal Reserve Bank of San Francisco, the checks may have contributed to an increase in the annual inflation rate of about 3 percentage points. So while the checks and the tax credit are not an apples-to-apples comparison to UBI, they’re still closely enough related that any implementation of the program would likely  put further inflationary pressures on the economy.

 Another politically-relevant attack against UBI is that the money would go to all people, not just those who need it most. This problem could be more easily offset than the problem of inflation, as long as government pays for the program via federal income tax revenue. If that were the case, wealthier people would put far more money into the program than they would receive.

How UBI could happen

The challenging political landscape surrounding UBI makes two things certain. First, it would have to be implemented by a Democratic congress and president. According to a 2020 Pew Research Center poll, a majority of Democrats support UBI, but almost eight-in-ten Republicans do not. While there’s some evidence to suggest these numbers have improved over the last two years, it’s clear the proposal does not enjoy universal appeal.

The second certainty is that any passing of UBI would come at the cost of other entitlement programs – either immediately, or after a shift in Congressional power from the Democrats to the Republicans. Since one of the major appeals of UBI is its simplicity, Republicans would use it as an opportunity to take aim at what they see as redundancies in America’s welfare state. Because of this reality, there are some liberals who are against UBI because they believe it would actually decrease access to money from government for poor Americans.

Until Democrats can get dissenting liberals on board – and, in a greater sense, accept the entitlements cuts that would follow any UBI passage – the program will remain an academic fantasy. But as it shows how one policy can satisfy two very different constituencies with very different goals, it’s quite an intriguing fantasy.