Calculating the cost of implementing a Universal Basic Income (UBI) in the United States requires considering several factors including the amount of income to be distributed, the number of recipients, and potential offsets from current welfare programs.
Various estimates exist, ranging from $3 trillion to $4.5 trillion per year, depending on these variables.
This article will go deeper into these calculations and offer a comprehensive look at the prospective financial impact of UBI on the U.S. economy.
Understanding the problem UBI aims to solve
UBI, or Universal Basic Income, proposes a solution to income inequality and poverty – two significant challenges in the U.S. According to the U.S Census Bureau, 10.5% of the population, or roughly 34 million people, lived below the poverty line in 2019.
The gap between the rich and the poor has also been widening, with the top 20% of earners taking home more than half of all U.S. income.
The core idea behind UBI is to provide every citizen with a regular, unconditional sum of money, regardless of employment status or income level.
Proponents argue that this could reduce poverty levels and help level the economic playing field.
However, the implementation of a UBI program on such a large scale carries a hefty price tag.
To understand the cost implications better, we will break down different models of UBI and their respective costs in the following sections.
Why UBI could be the solution
UBI advocates believe that providing each citizen with a regular, no-strings-attached sum of money could dramatically reduce poverty levels.
It would provide a safety net for those struggling to make ends meet, and might enable more people to pursue education or entrepreneurship, potentially stimulating economic growth.
A study from the Roosevelt Institute suggests that implementing a UBI of $1,000 per month per adult could grow the economy by 12.56% over eight years if it’s financed by increasing the federal debt.
This research indicates that not only could UBI alleviate poverty, but it may also have positive macroeconomic effects.
Moreover, UBI could help address income inequality by redistributing wealth.
Stanford’s Basic Income Lab found that countries implementing cash-transfer programs saw a reduction in income inequality.
By providing everyone with the same base income, UBI ensures a minimum standard of living, potentially reducing the wealth gap.
Calculating the cost of UBI
Estimating the cost of implementing UBI in the United States involves considering several key factors. Primarily, the cost hinges on the amount distributed to each individual and the number of recipients.
For instance, if every adult in the U.S. were to receive $1,000 per month – a figure often proposed by UBI advocates – that would equate to roughly $3.1 trillion per year. This calculation is based on the U.S. adult population of approximately 260 million.
- Monthly UBI payments: $1,000
- Number of recipients: 260 million adults
- Total annual cost: $3.12 trillion
This substantial sum is just over half the entire federal budget, which stood at $6.1 trillion. It’s clear that financing UBI would require significant resources.
Funding a UBI program
Paying for a UBI program on the scale proposed would require significant financial resources.
There are several proposed methods for funding UBI, each with its own economic implications.
One potential source of funding is through a progressive tax system. This would involve higher earners paying a larger percentage of their income in taxes, which could help fund UBI.
Such a system could further help to address income inequality.
Another proposal involves reducing or eliminating certain welfare programs and using the saved funds for UBI.
However, this could result in less targeted support for those most in need.
Finally, some propose creating new revenue streams such as a carbon tax or data tax to fund UBI.
These innovative solutions could provide sustainable funding but would require systemic changes.
UBI for kids
Above, we explored how much it would cost for each adult to get UBI. But what if kids got it too? The smartest thing to do is to agree to this proposal from Bill Ackman, the billionaire hedgefund manager.
He proposed that we should provide every child with $7,000 in their investment account. That way, they’d be able to retire with more than $1 million in 65 years because the compound interest would do its magic.
This would do wonders, not only for these future millionaires but for the retirement crisis as a whole.
Long-term impact of UBI
The long-term impact of implementing a UBI program in the United States is subject to intense debate.
On one hand, UBI could potentially stimulate economic growth by increasing consumer spending.
Moreover, UBI could reduce income inequality and poverty, and provide a safety net for workers displaced by automation or other economic shifts.
On the other hand, if implemented improperly, UBI could lead to increased taxes or higher public debt, which could have negative economic consequences.
Still, it’s becoming undeniable that it’s much-needed and sooner, rather than later.
