The Pros and Cons of a Universal Basic Income (UBI)

Proposals to adopt a UBI raise three questions.

The first is whether a UBI should add to, or replace, the existing safety net. Adding the program is a nonstarter, since the current U.S. fiscal path is already unsustainable.

The second question is whether a UBI would be better than the existing safety set, holding expenditure constant. The answer is probably yes: eliminating TANF, SNAP, Social Security, Medicaid, Medicare, disability insurance, energy assistance, housing subsidies, and more would mean a huge reduction in bureaucracy and a less paternalistic system.

Replacing the current system with a UBI also facilitate repeal of policies that attempt to redistribute by interfering with the price system (minimum wage laws, rent control, anti-price gouging laws, and more). These policies are often poorly targeted and even counterproductive.

The third question is whether a UBI should be a federal program or left to individual states.

Advocates of anti-poverty spending assume it should be federal, believing the state-by-state approach generates a “race to the bottom.”

Government programs, however, almost always expand, so competition between states plausibly promotes a reasonable balance. Many states redistribute beyond what the federal government mandates; California and Washington, for example, have minimum wages higher than the federal requirement.

Eliminating all federal redistribution, while allowing states to operate UBI programs, thus implies a smaller, less distorting safety net that would still protect the most vulnerable.