Should the United States Implement something like Universal Basic Income? Would It Work?

 

    Should the United States Implement something like Universal Basic Income? Would It Work?

            Lawmakers and prominent figures flirted with the idea of a Universal Basic Income as far back as the 1700s when Thomas Paine, the revolutionary, advocated for an introduction of UBI. During the recent debates among the Democratic party presidential hopefuls, there was a lot of debate in regards to UBI and Andrew Yang made headlines when he pledged to give every American adult a no-strings-attached $1,000 stipend. Other candidates like Elizabeth Warren, and Pete Buttigieg were also open to the idea of introducing some form of a Universal Basic Income. The fact of the matter is, a Universal Basic Income will not work and there is no justifiable reason why the United States should try to implement a program of this nature.

UBI will not work as it would trigger an inflation. If every American adult received a basic income, they will spend that money almost immediately, driving demand up. Consequently, retailers will place more orders for commodities which in turn will push manufacturers into trying to ramp up their production and despite all this, the supply will still not be enough to meet the growing demands. This will force prices up and it will only be a matter of time before basic items become unaffordable for those at the lowest level of the income pyramid. The people will have a guaranteed income but in the long run their living standards will not be raised at all.

A Universal Basic Income will demotivate people from working. The allure of receiving money without having to work for it will quickly override any benefit intended for this program. When work becomes optional, people will stop advancing their skills and this will dull the competitiveness that has been the hallmark of the American economy. A depleted labor force participation rate will negatively impact the tax base and without sufficient tax the government will eb unable to properly run many of its programs, UBI itself included. On the global stage, America will be weakened as its economic vitality will be drastically reduced, it will no longer be able to compete with other countries.

A Universal Basic Income in the American economy because it will add trillion of dollars to an already expanding deficit. According to the Bureau of Labor Statistic, there were about 159 million working adults in America. If each individual was to receive an annual basic income of $12,000 based on the poverty level, the government will be set back about $2 trillion. When you factor in the existing welfare programs that cost about $1 trillion annually, the deficit that would be added would be in the region of $1 trillion. That is not sustainable for any economy looking to grow.

The counter argument here would be that a Universal Basic Income program would have a lot more benefits that include freeing up people financially to pursue other endeavors like returning to school or staying home o take care of their children and other relatives. Another expected line of argument would be that young couple will have sufficient funds to consider starting families in places where birth rates have become low.

All the scenarios described above are working on the assumption that job creation would be constant, which is wrong. As already stated, when the tax base is constrained due to a reduced labor force, the government will have a lot of trouble creating an environment where jobs are available for new graduates. Couple all that with the decision by those that choose to remain at home and you have a population that receives money but does very little to create it. For value to be created, money has to circulate within the economy and this will not be the case when spending, rather than creation, is the only way that this money moves around.

For all its intentions and purposes, a Universal Basic Income is a noble idea, but the existing conditions of the free markets model cannot allow it to fulfill its true potential. For this reason, a UBI program should not be implemented in the United States. For an economy of this size to continue standing, it needs as many employment-age adults to be engaged in some form of an employment or an income generating enterprise. This is the tax base upon which all the government depends to run the country. The demotivation to work created by UBI works counter to this, on top of triggering an inflation that will hurt the same people the program is trying to uplift. At over 300 million people, a basic income will have to be very substantial, something that goes beyond the poverty line threshold, for it to have visible impact. For UBI to stand any chance of working in thee United States, there will be a need for a total overhaul, the implementation of checks and balances which will come at the expense of the basic foundations that are the hallmarks of the great American story, and that is the competitive nature of the American economy.