Why Republicans and Democrats Should Both Embrace Universal Basic Income


Photo by Sharon McCutcheon | Unsplash

Photo by Sharon McCutcheon | Unsplash

In 2019, I sat in my college dorm room watching Andrew Yang propose giving $1,000 every month to Americans over the age of 18. I initially scoffed at the idea. Like most, free money like that seemed too good to be true, and I had many concerns regarding the practicality of such a fiscal policy. 

 

But after some introspection, I asked myself, what if I was receiving $1,000 every month? How would I spend it? 

 

I would buy more groceries beyond just the ramen and cheap snacks that I had become accustomed to. I’d finally have enough housing money for a summer internship and begin to pay off my student loans. The steady flow of income would provide me freedom and stability, allowing me to focus on my academic pursuits instead of worrying about making ends meet every day. Millions of other Americans like me could also use the money for housing, food, and fulfilling other basic needs. 

 

Universal Basic Income (UBI) is direct cash relief that a government provides to all individuals with no strings attached. Advocates of UBI disagree on what constitutes ‘basic income,’ but at its core, it is designed only to fulfill our basic needs. While Yang became the poster boy for UBI, he did not invent the concept, nor does it have crazy leftist origins as many of its critics try to brand it as. 

 

The idea dates back to the very founding of the United States. In 1797, Thomas Paine advocated for basic income in his book Agrarian Justice. He believed that a monetary stimulus through an inheritance tax was necessary and a natural right for those who did not own property. 

 

 Since then, from libertarian economist Milton Friedman to Martin Luther King Jr, many have endorsed a recurrent basic income. MLK once wrote:

 

“I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”

 

Even Nixon introduced a basic income framework in legislation that the House of Representatives passed in 1970. Most recently, Elon Musk deemed UBI “necessary” if the automation of jobs in manufacturing, retail, and service industries continue to accelerate. 

In late 2019, when Yang stood on the national debate stage, who knew that our government would institute a temporary basic income in just a few months to respond to a global pandemic infecting millions and wreaking economic havoc. 

The bipartisan Cares Act gave all Americans who filed a tax return $1,200. Since then, another round of $600 checks has been distributed. These stimulus bills were not universal; nonetheless, they were a type of basic income. 

 

As we approach the one-year mark of COVID-19, the country’s economic status-quo has exacerbated. Decades of income and wealth inequality have reached a breaking point. According to Chuck Collins, a senior scholar at the Institute of Policy Studies, 600 billionaires have added more than $1.1 trillion in wealth since the inception of the pandemic. As a result, the capital of the wealthy has skyrocketed while the bottom half continues to suffer disproportionately. 

 

The Department of Labor recently reported that 18.2 million Americans are currently collecting unemployment. At the height of the economic downturn caused by COVID-19, the U.S. unemployment rate shot up from 3.8% in February to 13.0% in May, according to the Pew Research Center. The Census Bureau Pulse Household Survey conducted during the first two weeks of January this year found that 39.5 million of the 119.7 million surveyed adults could not afford to buy more food. 

 

For Black and Latino Americans, the pandemic has exposed the racial component of the wealth disparity. Despite the government’s stimulus efforts, the structural inequities within our system are compounding. According to the Brookings Institution, since the 1970s, median household income has remained stagnant while wages continue to decline. On the other hand, healthcare, education, and housing costs have increased considerably as the middle class faces an uphill battle to upward mobility.

 

The country needs some semblance of a basic income to reverse these trends. But how do we pay for it? 

 

On the campaign trail, Yang proposed a Value Added Tax (VAT) under which goods and services are taxed at every point throughout the supply chain. Nearly 160 countries around the world exercise this tax. However, a VAT will only work efficiently if it is supplemented with a UBI. Small businesses, the backbone of economic productivity, should be given the option to opt-out of the VAT. 

 

In a tax infrastructure where big corporations like Amazon pay zero dollars in federal income taxes, a VAT would ensure big companies pay their fair share. The Tax Policy Center estimates that a 10% VAT would raise $1.2 trillion annually. But that’s still not enough for a UBI. 

 

As a country, we need to rethink how we spend taxpayer money. Last year alone, over $700 billion of the federal budget was spent on defense. Though a large portion of our budget is also disbursed to social safety nets, our country’s priorities are antiquated. We don’t need more missile defense systems; we need innovative solutions to people’s problems. 

 

One such way of effectively raising money is by appropriately taxing Wall Street. During his short run campaign for President, billionaire Michael Bloomberg proposed a 0.1% tax on all stock trades. To protect households, Senator Bernie Sanders, who had put forth a similar plan back in 2016, would allow those earning less than $50,000 to reclaim the costs as tax credits. Sanders’ Wall Street tax would raise $2.4 trillion over ten years. 

 

These targeted increases in taxes would raise money without burdening the middle class. However, despite these revenues, the government would likely have to run on a deficit, which is not as cumbersome as the deficit-hawks in Congress would like us to believe. The federal government can continue to print money – as it has – amid rising national debt. 

 

If adding to the debt eradicates poverty and ensures that all Americans have enough food and shelter, the opportunity cost in favor of a UBI is explicit. Over time, our economy would be stimulated as people would put money back into the markets through increased spending. Unlike the wealthy, who Princeton economist Atif Mian dubbed “the saving glut of the rich,” the middle class and those at the bottom cannot afford to save. Many live paycheck to paycheck. The efficacy of direct relief during COVID-19 has already been profound. Americans are spending their checks, and as a result, our financial markets are strong even in the face of a lower GDP.  

 

Now that we have figured out how to raise – most of the – money for a UBI, would implementing it disincentivize people from working?

 

Economists refer to UBI as a ‘lump sum’ amount. Because it is geared to meet only our most basic needs like food and shelter, it neither incentivizes nor disincentivizes people from seeking work. Look no further than Alaska.

 

Since 1982, the revenues generated through its oil and minerals resources have been deposited into the Alaska Permanent Fund (APF). The fund then invests the money into various securities and bonds. The profits generated through the APF are shared by all Alaskans regardless of age.

 

The amount ranges from one to three thousand dollars payment annually, but it has already reduced poverty in the state by 20%, according to
a 2016 University of Alaska study. Another 2018 study conducted by professors from the University of Chicago and the University of Pennsylvania found that the Alaska UBI did not affect aggregate employment

 

Under a Republican government, the state has instituted what the political mainstream views as an infeasible policy. The Alaska dividend is not perfect as the state’s tax laws and smaller size create certain externalities. Nonetheless, it proves that a UBI is apolitical; both sides of the aisle can and will have to get behind it. 

 

Just as Alaska allows its residents to share its oil revenues, the time has come for the federal government to share the profits generated by technological advancements with the rest of us through a VAT on large corporations. As Yang argues, technology is indeed the oil of the 21st century. 

 

We saw an entire Georgia Senate runoff election centered around increasing direct stimulus checks. Then-Democratic Senate candidates Jon Ossoff and Raphael Warnock had both been aggressive in calling for $2,000 checks and won in a traditionally red state. Even in Alaska, Republican Governor Mike Dunleavy waged his candidacy in his 2018 election campaign on increasing the APF dividend. He won the party’s primary handily and comfortably beat his Democratic opponent in the general election.

 

A recent Hill-HarrisX poll showed that 55% of Americans were in favor of a UBI. The support was up 12 points from 2019. Populists, both on the left and the right, have already embraced more direct federal relief. Moving forward, it will become more politically convenient for those aspiring for public office to support UBI. 

 

Much of the current polarization in our politics stems from the country’s wealth inequality. A UBI is not the only solution, but it can be an integral part of the reforms the American people are yearning for. 

 

In the long run, it’s not a matter of if, but when. Eventually, many blue-collar jobs will be displaced on a massive scale by artificial intelligence, and support for UBI will rise exponentially. The technological advancements of today are no steam engines of the 19th century. Their progress has continued to be unprecedented, one that will pose an existential economic crisis. If our government does not address these trends now, the economic grievances of the working class will reach a boiling point that will be ripe for political exploitation. There will certainly be more Donald Trumps who continue to deceive the working class or even he himself may return for the next presidential election.

 

Will some try to abuse a UBI? Of course. But to use this excuse is to propagate a centuries-old stigma that the poor find every opportunity not to work. It is a lie perpetrated by those who want to maintain their economic power and the political benefits that come with it. For the sake of our present and future, a Universal Basic Income is indispensable.

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