Is a Universal Basic Income System Even Possible?

Three years ago, OpenAI CEO Sam Altman published an essay dubbed “Moore’s Law for Everything,” in which he claimed artificial intelligence would soon drastically reshape our world. “As AI produces most of the world’s basic goods and services, people will be freed up to spend more time with people they care about, care for people, appreciate art and nature, or work toward social good,” he claimed. Altman’s vision of the future was a dramatic departure from the present. According to him, software and robots would soon take over much of the global economy, effectively liberating humans from most forms of work.

To Altman, this was a good thing, but it also required a radical shift in America’s thinking about welfare. To offset the economic “disruption” that would occur as a result of new forms of automation (that is, to make up for the fact that AI could potentially destroy millions of jobs), Altman felt that America needed to roll out a bold new system that could financially support the huge new sections of the population that would join the ranks of the unemployed.

What Altman was describing was a universal basic income system. And he’s not alone in thinking it’s a good idea. Basic income pilots have become extremely popular in recent years. By one count, there have been as many as 120 pilots in the U.S. since 2017. In general, these programs, which are mostly carried out by local governments, seem to succeed at what they’re designed to do: alleviate economic anxiety and provide a better standard of living for the recipients. Proponents of such programs envision a future where such programs—which are currently quite small and experimental—could be scaled up to a national, federal system. Indeed, both tech executives and futurists claim that this is not only possible but necessary to alleviate the coming wave of automation.

But could a national UBI ever actually work in the way people claim it could? And how could such a system ever be scaled up from a small, local program, funded by excess budgetary spending, to a large, national program, that needs serious, ongoing revenue flows to survive? We tried to nail down the basics of how such a system might work and…well, it’s certainly a steep hill to climb.

How much would UBI cost?

When it comes to basic income, the most frequently asked question is about cost. There are roughly 330 million people in America and, in order to pay each and every one of them a monthly lump sum, you need a whole lot of cash. It’s due to the presumably large price tag that many critics argue basic income is prohibitively expensive.

“There are over 300 million Americans today,” Robert Greenstein, a visiting fellow at the Brookings Institute and the founder of the left-leaning Center on Budget and Policy Priorities, wrote in 2019. “Suppose UBI provided everyone with $10,000 a year. That would cost more than $3 trillion a year—and $30 trillion to $40 trillion over ten years.”

In a 2019 policy memo written for the Aspen Institute, economist Melissa Kearney similarly claimed that “enacting a UBI that pays $10,000 to every US adult would distribute about $2.5 trillion in benefits each year” or “roughly 75%” of the U.S. government’s 2018 revenues.

Even proponents of UBI admit that the cost of the program is the elephant in the room. “Cost is a big, frequent question and, as you might imagine, the calculation depends on your view of what UBI looks like and whether it supplants other public benefits,” said Sean Kline, the former director of Stanford University’s Basic Income Lab. However, Kline says that many UBI critics may be over-inflating (or, at the very least, misrepresenting) the real cost of a basic income system.

Karl Widerquist, an economist with Georgetown University, has also suggested that the real cost of a UBI system would only be a fraction of what critics claim it would. In an article arguing his case, Widerquist says that most projections for UBI’s cost conflate the net cost of such a program with the total amount of money that would be exchanged as a result of the system.

That is, according to Widerquist, the $2-3 trillion projections are just bad math. These simplistic calculations involve multiplying the number of people in America (roughly 330 million) by the average UBI output (approximately $10-12k). While they accurately assess the amount of money that would be involved in such a system, they aren’t accounting for the fact that most of that money will be exchanged via the tax system (many people will pay into it, but they will also get that money back, effectively nullifying the need to generate “new” revenue), meaning that the total amount of new revenue that the government actually needs to generate is only about $539 billion, or roughly 3 percent of GDP. That new revenue, according to Widerquist, could mostly be generated by taxing America’s richest families and would help pay for basic income for some 99 million people, or roughly a third of the U.S. population.

When looked at this way, Widerquist says that a national UBI system would be a relatively small part of federal spending. “The net cost of this UBI scheme is 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),” his 2015 article claims. “The average net beneficiary is a family of about two people making about $27,000 per year in market income.”

How would we pay for it?

There’s no getting around it: a basic income system would be funded by new taxes. The critical question is: What kind of taxes? And for who? There are many different ideas about where the money could come from. Sam Altman has suggested that a massive new UBI system should be funded using taxes on all U.S. land holdings, as well as a national tax on the assets of the nation’s largest companies. Others have suggested that taxes on inheritances could yield enough revenue to fund it. Widerquist suggests a tiered system of new taxes that would largely source revenue from America’s richest families. While taxes on everybody in the U.S. would likely go up, much of the tens of billions of dollars needed to support the new system would come from our nation’s top 1 percent earners.

“My most preferred plan is a net benefit to 70% of people,” said Widerquist in an email. “That’s 234 million people. We can reasonably say that half of them benefit ‘a lot’—that’s about 117 million people. We could then say that about as many people are net beneficiaries who benefit only ‘a little.’ Again the two groups together are 70% of people,” he said.

“Another 20%, the people in the top 30% of the income distribution but not in the top 10% would pay only a little more in taxes. That’s another 47 million people.”

“The top 10% could pay significantly more. That’s only 23 million people. If we did it the way I most would like to do it, we would concentrate the new taxes on the top 1%—about 2.35 million people. And even if we increase their taxes so much that they paid the enter cost of UBI and more, they’d be better off than the 1% in the 1970s—because inequality has increased that much.”

Who would benefit most from a UBI?

If we follow Widerquist’s vision, a national UBI system would look very much like the kind of classic anti-poverty program introduced during previous decades by presidents like FDR and LBJ. It would transfer the bulk of that previously mentioned $539 billion from America’s richest families to some 43 million people who currently live at or below the poverty line, including 14.5 million children, he says. Thus the overwhelming tax burden from the program would fall on the top 1 percent of Americans, but the overwhelming benefit would go to people at the bottom of the economic system.

Those in the upper middle of the economy wouldn’t see much of a benefit but they also wouldn’t see any loss, either. Households above a certain income threshold would largely break even, meaning that the UBI that they received and the taxes they paid would effectively cancel each other out. But they would enjoy the same reassuring security that there’s a bit of backstop in the case of a disaster.

What a UBI system wouldn’t do.

Some UBI proponents have claimed that advances in AI will soon usher in a new “post-work” future—an era in which robots and software take care of most jobs. Last year, billionaire jackass Elon Musk predicted that, in the future, “any job that somebody does will be optional. If you want to do a job as kind of like a hobby you can do a job, but otherwise, the AI and robots will provide any goods and services you want.” Altman, in his “Moore’s Law” piece, predicted much the same. Even leftist futurists have heralded the coming of something call “fully automated luxury Communism,” which similarly imagines a no-work future.

The underlying assumption in these predictions is that a large welfare system will deliver for everybody, allowing people to live out their dreams unencumbered by a 9-to-5. But if the actual estimates of UBI output are to be believed, these predictions are utter fantasies. UBI will almost certainly never be a replacement for a job; at best, it can only be a supplementary form of income.

Scott Santens, a longtime UBI advocate, about the potential financial output of a UBI system, told me that, best case scenario, a normative UBI payment would be “somewhere around $1300 a month.”

Yes, $1300 a month isn’t exactly going to make anyone rich (nor, in this day and age, will it even allow you to keep paying their rent). What it can do is make a working person’s life slightly easier and help them keep their head above water.

Even a recent basic income study, the likes of which was funded by Sam Altman, seems to reveal that such monthly payments are hardly transformative. That research, which was compiled over a period of three years, involved sending $1,000 a month to a group of low-income participants based in Illinois and Texas. The study found that while the money helped participants pay for basic stuff like groceries, transportation, and rent, it didn’t help them find better jobs, and was limited in its ability to provide “greater access to healthcare or improvements in physical and mental health.” The study also showed that the extra money did not lead to significant “investments in human capital,” i.e., the sort of training or education that would lead to better, more satisfying forms of employment. “In terms of dollar amounts, the largest increases in spending in response to the cash transfers were on basic needs—food, rent, and transportation,” the study says.

“We really haven’t seen a case where a pilot program provided sufficient funds where a person didn’t have to work at all,” said Stanford’s Kline. “There isn’t talk yet about a UBI that would fully supplement the cost of living if AI were to totally replace jobs.”

The political problem of making it happen.

When it comes to UBI, there’s a bigger problem than the money problem, and that’s the political one. Currently, the legislative branch of our government is highly polarized, to the point where agreement on anything other than defense spending (and even, sometimes, that) is often doubtful. A bold new entitlement program, whether it costs $3 trillion or $500 billion, seems highly unlikely, especially given the GOP’s mantra that government spending—particularly entitlements—must be curbed, not expanded.

To get a political insider’s perspective, we spoke with Wendell Primus, a visiting economics fellow at the Brookings Institute. For nearly two decades, Primus served as a senior policy advisor on health and budget issues for Nancy Pelosi’s office. He was also deeply involved in the policymaking process behind the Affordable Care Act and, thus, has firsthand experience with what it takes to bring a large federal entitlement program to the American public. When I asked Primus what the likelihood of a federal basic income program being enacted anytime soon was, he quickly answered: “Uh, zero or zero point one percent.”

Primus said that proponents of UBI needed to think about how such a program would ultimately “mesh with the current system.” That is to say, it wouldn’t. Alternatively, Primus argues that Democrats should focus on protecting and expanding currently existing welfare programs. He points to the child tax credit, which was drastically expanded by the Biden administration in 2021 for a period of one year, at the height of the pandemic. The credit has since returned to its previous rate, but Primus points to the expanded version as a program that could be resurrected in years to come. “That’s where I think the energies of the Democratic Party are going to be in terms of improving the safety net anytime soon,” he said.

People like Stanford’s Kline, meanwhile, remain optimistic about UBI’s chances. Even if common wisdom currently suggests that basic income is politically unlikely, Kline says that it’s just a matter of waiting for the right “window” of opportunity “to open.” He points to the covid-19 pandemic as an example of one of those paradigm-shifting events that forced governments to rethink their relationship to direct economic intervention. “I find it helpful to think about UBI as we might have thought about Social Security when it was introduced in the 1930s,” Kline said. “It was a big program. Is it too expensive? Or have we come to see it as a broad-based entitlement that has been essential to reducing elderly poverty in America?”

Yet one of the most tricky aspects of creating a national basic income system is that there’s no way of telling what kind of system it would be. This is something that Kline readily admits: “It’s sort of like saying, ‘Well, I have a cat.’ But you don’t know whether that cat is a kitten or a mountain lion,” he said.

Both conservatives and liberals have expressed interest in basic income systems in recent years, albeit for drastically different reasons. In 2016, The James Madison Institute, a libertarian, “free markets” think tank, published an article authored by Cato Institute fellow Michael Tanner asking what “advocates of free markets and limited government [should] think about a universal basic income.” According to Tanner, said advocates should be excited about the opportunity to reform—or, in Tanner’s words, “abolish”—the bulk of other federal welfare and anti-poverty programs in favor of a small, regular cash payment to all Americans. Tanner said:

Why not simply abolish the entire thing? Get rid of welfare, food stamps, Medicaid, housing assistance, unemployment insurance and all the rest. [Charles] Murray would even throw in Medicare and Social Security. Replace it all with a simple cash grant to every American whose income falls below some stipulated level, and then leave the recipients alone to manage their own lives free from government interference.

The degree to which conservative forces support UBI would appear to hinge on its role as a battering ram to decimate government spending that helps the poor. When UBI is pitched as an expansion—rather than an alternative—to welfare systems, the same forces decry it as a villainous leftwing plot. In an article published this past February, the Foundation for Government Accountability, yet another libertarian think-tank, criticized the recent wave of state-level UBI pilot programs, calling them a drag on the economy and

Unsurprisingly, universal basic income programs have been proposed by socialist politicians for decades, both in the United States and abroad. These programs disincentivize work and promote increased dependency on government handouts, at the expense of individual responsibility.

For progressive political forces, the benefits of UBI are basically the opposite, and they see it as a sensible way to expand the current social safety net.

Are there alternatives?

Some critics argue that basic income may not be the most efficient (or realistic) way to deliver a better standard of living for most Americans. For people like Primus, the answer isn’t a bold new program, but to double down on existing benefits. Programs like Social Security and Medicare need to be protected and expanded before any new welfare programs can be enacted. “At some point, we’re going to need to bite the bullet and focus on Social Security solvency,” he said, referencing the need to modernize and update the revenue flows for the program.

“Can you imagine a situation where a new entitlement program could be brought into existence that was similar in scope and in scale to the Affordable Care Act?” I asked Primus during our conversation.

“Not really,” he said. “We have to take care of our current programs and improve our current programs before we can worry about that.”

Another critic of UBI is Anna Coote, a fellow at the British think-tank, the New Economics Foundation. “UBI has never been an interest of mine, except to argue that it is a bad idea,” Coote said in an email.

In her previous writing, Coote argued that basic income is one of the less efficient methods for strengthening the economic power of everyday people. “UBI is an individualistic, monetary intervention that undermines social solidarity and fails to tackle the underlying causes of poverty, unemployment, and inequality,” Cootes wrote in 2018. “These are systemic problems that need to be addressed by people getting together and building shared control over local economic development, wage bargaining, and decisions about national investment in industry and infrastructure, not by governments giving individuals small amounts of money.”

Instead of basic income, Coote advocates for something she calls universal basic services. Coote argues that while UBI delivers more disposable income to individuals, that income doesn’t mean much if the cost of basic services—like housing, transportation, and education—remains prohibitively high. In recent years, the average cost of a house in the U.S. has risen by as much as 54 percent. The average cost of tuition at most state universities shot up by over 40 percent in the last two decades. Car prices and groceries have also seen drastic upticks in value. Against such drastic incursions against affordability, $1200 a month may not make much of an impact. Coote suggests a more holistic approach that seeks to use government intervention to bring down the cost of basic services.

If there is one thing that both critics and proponents of UBI agree on, it’s that income inequality has forced society to a point where something has to be done. “Over the last fifty years, automation, artificial intelligence, the computer revolution—all of this has contributed to the doubling of our economic capacity as a nation,” said Widerquist. “However, most of the gains have gone to the top 1 percent. The rest of us—if you look at teachers, doctors, truck drivers—most people are no better off and, in many cases, are worse off, than a person with an equivalent job was fifty years ago.”