• Marco Annunziata

The UBI Debate

Last Thursday Karl Widerquist and I engaged in a debate on UBI. Karl, a philosopher and economist at Georgetown University’s Qatar campus, is one of the leading proponents of UBI and has written a number of books and articles on UBI and broader economic justice issues. You can click here to see the full debate on YouTube (1 hour). If you prefer to spend only five minutes on it, below I summarize my position, and highlight some of the points that Karl raised. I will try to be objective, but you know what my view is.

We were hosted by Digi-Debates, an initiative that aims to help us break out of the echo-chambers and stimulate substantive discussion among opposing view-points, rather than the (admittedly more entertaining) partisan fighting and character assassination prevalent today. I think Karl and I were faithful to the spirit of the exercise, though we had never met or exchanged views before.

My opening statement, which summarizes my view ran broadly as follows:

Let’s first of all be clear on what Universal Basic Income is. It is an income. It is universal, meaning that the same amount is given to everyone regardless of circumstances and behaviors: the billionaire and the homeless receive the same amount. It is “basic”, meaning that it should be enough to live a decorous life (even if you are a billionaire). And implicit in the definition is that it should be permanent.

Proponents of UBI promote it as a way of solving several problems. The ostensible primary goal of UBI is that nobody in our society should be left behind, without enough money to survive, to have a decent life.

But whatever the problem you are trying to solve, UBI is the wrong way to address it; it is at best a very inefficient way to address it. UBI is fundamentally unfair, unaffordable, and riddled with unintended consequences.

UBI’s greatest flaw is exactly the feature that most proponents consider its greatest advantage: it is universal and unconditional, and therefore not targeted.

That is what makes it extremely unfair. Why would you give the same unconditional payment to a poor, unemployed person and to a billionaire?

Especially because a country’s financial resources are limited, which means that true UBI is unaffordable. Consider Andrew Yang’s UBI proposal: $1,000 per month for every adult over age 18. That’s $12,000 per year, which takes you just below the poverty line for an individual or for a family of two adults and two children. Just below the poverty line: this is as “basic” as it gets. (Karl noted that he would favor a more generous amount).

There are about 250 million people over the age of 18 in the US, so this comes to $3 trilllions per year, or about 15% of US GDP, which is close to the entire amount of federal revenues: personal income taxes, payroll taxes, corporate income taxes, custom duties…all of it. It is twice the total amount of federal personal income taxes.

So either we believe that we have a magic money tree, that we can simply print wealth with no limit and no consequences, year after year (in which case though, why stop at a basic income, why not make everyone a billionaire?) – or we have to plan to double federal taxes.

And here we come to the unintended consequences. With UBI, everyone is guaranteed a decent living without working, and faces much higher taxes than today if he or she works. It does not require an especially cynical view of human nature to expect that faced with this choice, a number of people will decide not to work. In fact, the whole point of UBI is exactly to give people the option not to work; if we believe nobody would want to take that option, then there is no point offering UBI in the first place.

Hence, more people will decide not to work. But with fewer people working, the taxes on those who do work will have to rise further; this will push more people to decide not to work. And so on and so forth.

The demotivating impact on the younger generations could be devastating, because with UBI we would signal a major rewriting of the social contract. Today’s social contract is based on the idea that everyone has a responsibility to contribute to the advancement of society: you have to do something that society as a whole finds valuable and is therefore willing to pay for – you have to get a job. In return, society will look after you if something bad happens: you fall ill, lose your job – that’s the social safety net.

UBI turns the social contract around: it says that society has a responsibility to ensure you have a decent life. You have no responsibility at all and can lead life as you please.

But society is all of us. And progressing, raising standards of living, is hard work and needs all of us to chip in. Signaling to students that it does not matter what you study, because you don’t need to get a job, would have tremendous negative consequences for learning, skills-building, productivity and growth.

Our goal should be to help all those who fall on hard times, while giving everyone a strong incentive to contribute to society and raise living standards. The best way to do this is with a better and stronger social safety net that targets our limited resources to those who really need help. UBI would waste precious resources and undermine work incentives; it would make society as a whole poorer and more unequal than it is today.

So my contention is that UBI is the opposite of a Financial Safeguard – it is a guarantee of financial failure for our society

Karl’s points:

  • Karl’s advocacy of UBI starts from what he sees as a fundamental imbalance of economic power: most of us don’t have capital or natural resources; our alternative to work is starving. Therefore, we have virtually no bargaining power in the labor market and are forced to accept jobs with very low wages and poor working conditions. UBI addresses this: with UBI the alternative to working is still a decent life. Now our bargaining power is stronger: employers will have to offer higher wages and better conditions to persuade us to take a job.

[My objection is that this problem can be more directly addressed raising the minimum wage and tightening regulations on work conditions. Karl argues that this approach has failed so far and it’s time for a more radical solution.]

  • Karl argues that UBI is a simpler, faster and less judgmental way of giving help to those who need it. Some people fall through the cracks of today’s social safety net; UBI would reach everyone. When you fall on hard times, you won’t need to queue at the doors of a bureaucracy and prove that you need help. (Karl made the poignant example of a woman who walks away from an abusing bread-winning husband: she needs income immediately, but on paper she still has a home and an earning partner).

[My objection is that giving money to everyone is so expensive that it cannot be the best way to plug the holes in the safety net; and the risk of sudden unprovable need as in Karl’s example would be best addressed by having an insurance UBI that you can tap once or twice in your life with no questions asked—there is no need for it to be paid out every year regardless.]

  • Karl argues that UBI is a lot less expensive and nowhere near as unfair as I argued, because through taxes the government would claw back all the income from those who don’t need it. He states that a "rich" person would essentially take $1,000 out of her own pocket and give it to herself. His estimates for the UK come closer to 3% of GDP.

[I really don’t buy Karl’s argument here: even in California, with the highest marginal rate for state income taxes, the top marginal income tax rate is just over 40%; that means you get to keep well more than half of the UBI check; if you really want to claw back the entire amount from those who don’t need it, then you are back to having to check who needs it and who doesn’t, which negates Karl’s previous point on UBI being a simpler system--we are back to square one. This to me is a form of magic money tree - thinking.]

The above is just a selection of the arguments Karl made in the debate. You can also find more of his views in this other YouTube discussion—it is more one-sided, as they are in favor of UBI, but you get an even fuller sense of Karl’s views.

Karl and I still disagree, but we did listen to each other. I feel I have a better appreciation of his views, and I share some of his concerns and objectives. Hopefully he feels the same. I still strongly oppose UBI, but with discussions like this maybe we could move forward and build a better social safety net.


@ 2018 Annunziata + Desai Advisors, LLC