The UBI is Worse Than the Status Quo

A reply to Chris Freiman

Here’s my reply to philosopher Chris Freiman’s defense of the Universal Basic Income. He’s in blockquotes; I’m not.

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I agree with Bryan that the right question to ask about a universal basic income isn’t whether it’s the best possible option but rather whether it’s better than the status quo. If we replaced the current welfare state with a UBI, would that be an improvement? I think it would be.

Not quite. Given how bad the status quo is, I maintain “The UBI would be worse than the status quo” is a harsh but fair indictment of the UBI. My actual view is that we should try to find the best possible option. But if you’re worse than the bad system that already exists, you’re definitely not the best possible option.

One major advantage of a UBI over the status quo is that it’s better for recipients. To motivate this idea, suppose your employer gives you the following choice: take your annual $1,000 bonus in cash or receive free lunches at the office with a total value of $1,000. Surely you’d take the bonus in cash. Why? Because if you want the lunches, you can use the cash to buy them. And if you don’t want the lunches, you can use the cash to buy something else.

You’re overlooking the best argument for in-kind redistribution: child well-being. Let’s be blunt. The very fact that you need taxpayer help is a reason to question your personal responsibility. Which is in turn a reason to doubt that you will be a responsible parent. If you give parents cash, they may spend it on alcohol. Giving parents food stamps reduces this risk.

While we’re on the topic of personal responsibility, Chris really should be more open to the possibility that some adults predictably make bad decisions. And while libertarians will want to defend their right to go to hell in their own way with their own money, they needn’t (and shouldn’t) defend the use of taxpayer money to subsidize self-destructive journeys.

So what about the downsides? Bryan argues that the UBI is wasteful—if you were running your own charity, “you’d target spending to do the most good. And unlike the UBI, the status quo makes some effort to so target its resources.” I’ve got a couple of thoughts here. First, while the status quo does make some effort to target its resources, it doesn’t do a very good job. As Michael Munger points out in Tomorrow 3.0, welfare spending amounts to about $42,000 per family of three in poverty per year, which would be more than enough to lift them above the poverty line if it were distributed to them directly. So a lot of welfare spending simply isn’t reaching those who need it the most.

How does that argue for expanding the system to fund everyone? The reason we can afford to spend $42k on every family of three is that most families are ineligible for funding.

Second, we can make a UBI progressive with adjustments on the tax end. It’s true that even Bill Gates will get a check—and that looks wasteful—but he’ll be paying far more into the UBI than he’ll be getting out. Plus, this consideration should help allay worries about the affordability of a UBI.

Chris, you keep talking about this issue in general terms, when you should be looking at actual number crunching. Ed Dolan, a libertarian fan of the UBI, was able to squeeze a UBI of $4452 out of the 2014 welfare budget. Does that seem sufficient to you? Did Dolan make serious mathematical mistakes? Are you dramatically altering the hypothetical? Just saying “we can make adjustments” really isn’t good enough if the adjustments would have to be massive.

And I honestly don’t see how they could be anything but massive. Look, if you give $10k per year to every person, with a marginal tax rate of 25%, you have to put 100% of the net tax burden onto the shoulders of families earning over $160,000 per year! Progressivity at lower income levels will help, but a tweak won’t do. Even mainstream Democratic economists like Jason Furman say so. They like redistribution, but they like accurate number-crunching more.

Bryan raises another concern about UBI’s lack of targeting—those who simply choose not to work will still receive money. And there’s a clear reason to worry about this: it will incentivize people not to work… However, a UBI will also improve incentives to work in some cases.

To take one example, replacing the status quo with a UBI would eliminate benefit cliffs. A recipient of a benefit faces a “cliff” when they’ll lose more than one dollar’s worth of the benefit upon earning one dollar of income; thus, someone facing a benefit cliff has a strong incentive not to earn that dollar of income. A UBI doesn’t create any cliffs—earning more money won’t reduce your benefits. Of course, it could be that a UBI creates worse incentives than the status quo, all things considered. Yet evidence suggests that we shouldn’t be too worried that a UBI will cause a dramatic drop in employment. As one overview of the effects of a UBI puts it, “The evidence from diverse interventions in low-, middle-, and high-income contexts indicates minimal impact on aggregate measures of labor market participation, with some studies reporting an increase in work participation. When reductions do occur, time is channeled into other valued activities such as caregiving.”

Kevin Lang, another mainstream Democratic economist, says otherwise. Why are you so cavalierly accepting sanguine stories from social scientists you would normally read skeptically?

There’s a second reason to be concerned about a UBI’s lack of targeting… In brief, while taxing someone to help those unable to work may be just, taxing them to help the person who is perfectly able to work but would prefer to surf (to take an example from Philippe Van Parijs) is not.

What, though, should we do about the problem of the surfer? Presumably the way to address it is to restrict access to the money somehow. But this creates a new problem: restrictions will inevitably exclude some people who need the assistance along with those who don’t because they’ll create administrative burdens that make it more difficult to access the benefit.

Frankly, these “admistrative burdens” are a feature, not a bug. If you aren’t desperate enough to overcome moderate bureaucratic hurdles, how dire can your situation really be?

I favor the unconditional income program for two reasons. First, as noted above, evidence suggests that a UBI won’t prompt many people to drop out of the workforce to spend their days surfing. Second, and more importantly, it’s worse if someone who needs help doesn’t get help than if someone who doesn’t need help gets help. That is, it’s morally better if both the surfer and the child from a poor family receive assistance than if neither receive assistance.

At minimum, your judgment should depend on the size of the two groups. But if you’re going to be deontological about all this, what about the rights of the taxpayer? Again, your attitude seems cavalier.

Final point: While we have many moral and empirical disagreements, the biggest comes down to cost. Forget every other issue. Simple cost estimates for a UBI are simply astronomical. $10,000 a person times 330M Americans is $3.3 trillion. That’s more than double what the U.S. will spend on Social Security in 2023. I have immense respect for your intellect, Chris. But seriously, how can you get around numbers like that?!