I just completed some simple, “back-of-the-envelope” estimates the net cost of a UBI set at about the official poverty line: $12,000 per adult and $6,000 per child with a 50% “marginal tax rate.” They are in a paper entitled, “the Cost of Basic Income: Back-of-the-Envelope Calculations.” It’s currently under peer-review at an academic journal and available in un-reviewed form on my website.
Here are some of its most important findings:
- The net cost—the real cost—of a roughly poverty-level UBI is $539 billion per year, less than 16% of its often-mentioned but not-very-meaningful gross cost ($4.15 trillion), less than 25% of the cost of current U.S. entitlement spending, less than 15% of overall federal spending, and about 2.95% of Gross Domestic Product (GDP)
- This $539 billion UBI would drop the official poverty rate from 13.5% to 0%, lifting 43.1 million people (including about 14.5 million children) out of poverty.
- This UBI will be a net financial benefit to most families with incomes up to $55,000, making it an effective wage subsidy (or tax cut) for tens of millions of working families.
- The average net beneficiary of this UBI is a family of about two people making about $27,000 per year. The family’s net benefit from the UBI would be nearly $9,000 raising their income to almost $36,000.
- Lowering the marginal tax rate to 35% would spread the benefits of the UBI program to more of the middle class while increasing the cost to $901 billion.
- The cost of a UBI of $20,000 per adult and $10,000 per child is $1.816 trillion per year, less than 85% of total entitlement spending, less than 45% of total federal spending, and less than 10% of GDP.
-Karl Widerquist, Begun in New Orleans, completed at Cru Coffee House, Beaufort, North Carolina, May 21, 2017
415 trillion is a typo.
Should be 4.15 trillion. Otherwise, nice summary.
It kind of makes everyone that receives it, a slave to government. Does it not? I can see it. Everyone gets chipped. All currency goes digital (no more cash). The holdouts either starve or are rounded up and done away with. The masses will swallow everything government feeds them, and label the resisters, terrorists. Can you think of a better scenario to have the entire world involved in civil war at the same time? Because that’s what will happen. There are people everywhere that just will not go along with this.
@Adam….how would it make people slaves giving them a floor level subsistence income? if anything those people are slaves now and poorly treated at that. If everyone below the $50k a year had $1k a month they get at least have food and a place to live, they would still need a job to get the rest of things people usually want to have like a car or the newest phone.
But lets say the worst case scenario happens like you stated and people get cut off all of a sudden, then guess what, they are no worse off then than they are now. But while they were getting a UBI they had a better quality of life AND the opportunity to better themselves by starting a business or getting a higher education while not being at or below poverty level.
Besides, all businesses want customers to spend money on them. It would be a boon to the economy and to businesses profits. The free (but regulated) markets will keep prices in check as well as improve the well being of society in general. UBI is not a silver bullet to solve all problems but it will help to move us in that direction.
“Starve to death or become a wageslave” is fine for capitalism, but people giving you things is slavery! I don’t understand this capitalism double-think.
How is the net cost only 13% of the gross cost? Where do you account for landlords increasing rent? You can’t cap rent because that would then trigger a shortage of low income housing.
This is only a static analysis. It does not look at how anyone will change their behavior in response to UBI, not workers, employers, consumers, landlords, or anyone else. It is the jumping off point for analyses that look at those effects.
Certainly UBI would cause an increase in rent in neighborhoods where net beneficiaries live and a decrease in rent where net contributors live. So it would reduce the value of the UBI to net recipients. That’s a bad thing. But it would also reduce housing segregation, and that’s a good thing.
There’s any easy way to solve the bad thing: use rent taxes to finance the UBI. The increased rent would automatically generate increased revenue, which could be added to the UBI. Then you get the decrease in housing segregation without the decrease in net benefit to net beneficiaries
WON’T HOUSING COSTS INCREASE OUT OF REACH OF THE HOMELESS?
• The homeless will have better mobility to look for housing.
• When they had insufficient income, they have to resort to doorways on the street, to huddling below overpasses, to winter time shelters.
• Subsequently with a UBI of $1,000 a month, they can group 2, 3, or 4 together to bundle $24K, $36K, $48K and get a 2, 3 or 4 bedroom unit and be able to look for work without fear of getting their benefits cut off because their earnings exceed the ‘welfare cliff.’
1. Google “cheap apartments,” then again appending “near me” or any zipcode
2. Google “cheap condominiums,” ditto
3. Google “cheap houses for rent,” ditto
4. Google “cheap houses for sale,” ditto Google “cheap cars,” ditto
5. Google “best price comparison website or app”
• Amazon is selling entire houses for less than $20,000 — with free shipping
• Now, 3D printers can print ten houses in 24 hours
• Construction is set to kick off on the first 3D printed neighborhood to house more than 400 individuals. Sited in El Salvador, the homes are designed for families living on less than US$200 a month, and will ideally serve as proof of concept for low-cost housing solutions around the world. In this case, a 3D printer from Icon dubbed Vulcan laid down the walls of the model home before humans came in to fill in the blanks with windows, roofing and other odds and ends. This proof-of-concept 350 sq. ft. home took 48 hours to make and cost US$10,000.
• Icon, in Austin Texas, says its Vulcan II printer can print the home’s structural elements in 24 hours. The printer is portable, produces close to zero waste and remains functional in testing scenarios where there may be a lack of power, water, or typical labor infrastructure. This last point is important, as it is hoped it can be used to construct low-cost housing for remote communities. The variety of homes now include outdoor kitchens and large outdoor spaces for raising chickens and gardens. They are also designed for the local tropical climate where rainfall can be on the heavy side, with overhangs at the front and back, while a clerestory with puncture holes rests over the living space for improved ventilation. The interior will feature built-in kitchen and bathroom counters, seating and shelves, while the walls will be curved for easy cleaning.
• Bautex, a building supply company in Texas expects to increase 2019 sales by 60%. Every two days it ships enough building materials to build two Super Walmarts. It will not be increasing the number of its employees who number 25, four of whom work in in its factory. Everything is automated, its workers do not have to touch any products. The 10-year-old company is seeing increased demand for its products, which can be installed less expensively and more quickly than traditional building methods at a time when construction companies in Texas are struggling to find workers and are facing higher costs for materials, particularly steel, due to tariffs.
Giving a ubi to children just exacerbates the problem of the least qualified people having children to receive benefits. Perhaps there are other things to spend the money on like public education, free college and training, to encourage people to have their lives sorted out before becoming parents. There has to be some opportunity cost or we will have an ever growing population of people who regard free handouts as the purpose of life.
What abouy all the people who will try to immigrate into the country? A more modest first step that we can also encourage other nations to adopt is a private supplememtal social security IRA that can be withdrawn from when needed, and passed on after death. It would end the worst most desperate poverty. Also giving UBI to children is worse at breeding bastardd than AFDC, that money should go to schools, teachers, and healthcare.
Hello there! Isn’t a 50% marginal tax rate insanely high? That’s almost doubling the tax rate.
You’re confusing “marginal tax rates” with “tax rates.” No 50% is not a particularly large MTR. Some people on benefits right now face MTRs of 100% or more. So, depending on what programs UBI replaces, 50% could be a significant drop in MTR.
Love this. below is what i have worked through so far. Karl. Add it to your well thought out look-see.
Optimal Universal Basic Income & Single Payor Insurance
With just ONE easy way to oversee restriction, UBI and Medicare for ALL can work well and based on Karl Widerquist’s theory can largely self-fund itself.
Both the health care exchanges created by the Affordable Care Act and Medicare for All provide health insurance for the uninsured. However, the exchanges leave power in the hands of private insurance companies. Medicare for All takes power away from those companies and puts it in the hands of a public agency that is accountable to the public. BUT that public agency needs to require personal responsibility for what we stick in our mouth while realizing that the dollar profit system creates and pays for the ads that sell the mostly lifeless foods on mass media. Special interests in DC tip the scales toward the profit motives of the those companies. To hell with health.
The concept behind UBI is appealing in its simplicity — everyone should be entitled to a-no-strings attached minimum income. Those receiving this income are not required to report on their financial circumstances or on how they spend their money.
Neither are they required to attend job-seeker workshops or any other government initiative designed to try and make people ‘work ready’ as is currently the norm within many welfare systems.
Free Cash For Doing Nothing?
While it might sound absurd, before you dismiss the scheme as a good recipe for disincentivising the need for work and encouraging laziness, consider the following.
In the developing world providing people with a basic income has proven to be an effective method for poverty alleviation, (https://thewire.in/economy/universal-basic-income-developing-countries-poverty) leading institutions such as the World Bank and the United Nations Development Program (UNDP) to advocate for continued testing and implementation of basic income schemes.
The Prettier The Package The More Suspect The Food.
The one flaw I see for the USA is to include a limitation for using the money for unhealthy foods. The UBI can only be used for the foods we know are healthy such as organic fresh or frozen fruits and vegetables, and raw seeds and nuts. The plan could be phased in increasing the UBI amount over 20 years to allow for educating people around proper cooking and storage. TV is slowly using losing its media power to the internet. This will help offset ads that sell the mostly lifeless foods on mass media and greatly reduce the trillion dollars spent on the chronic illness aspect of healthcare.
Many Corporations Who Self-Fund Insurance
were a $million or more behind. They $bonused and incentivized sick & overweight to change diets & exercise & in 1 year their self-insurance funds had huge $surpluses. Message? Eat right & you heal faster & DON’T GET SICK. Eat wrong-GET AND STAY SICK
Reducing Prescribed Drug Costs Is Absurd.
They treat symptoms not causes. Reduce USAGE by 90%: take responsibility for what U eat; no fried or packaged foods, pizza, dairy, red meat, TV ads & eat a mostly plant-based diet. ONLY THEN yes on Single Pay and UBI.
Add the savings from healthcare to a small changes here and there in taxation https://basicincome.org/news/2017/05/much-ubi-cost/ and you have the funding needed.
All entitlements come with certain requirements of those entitled. The requirement for UBI and Single Payor is to eat properly and exercise. That’s it. To not do this will simply allow the drug, packaged food industry, politicians and TV stations to divert the money for themselves.
Food waste needs to be addressed as well but that is a bonus that will improve the numbers
Michael Grant White