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A Universal Basic Income as a Solution

Riley Foushee ’23 Staff Writer
Despite unemployment levels at lows not seen since the 60’s and a continuously rising GDP, the average American is not benefiting from the growing U.S. economy.
Wealth inequality continues to grow, with the top 1% of the richest men and women in America having more than $30 trillion in wealth than the bottom 50% of Americans. Twenty-five percent of all jobs are highly susceptible to automation, with many of these jobs being low wage jobs. With other economic crises such as the student loan crisis, the American people need a solution to their monetary woes. The most effective and realistic proposal would be a universal basic income.

A universal basic income, broadly, is a periodical payment of cash from the government to a set population. The amount and the beneficiaries can vary, but the principles are the same in all instances. The universal basic income (shortened to UBI) has been supported by Nobel Prize winning economists including Milton Friedman and F.A. Hayek, civil rights leaders such as Martin Luther King, Jr., and prominent names in technology, like Elon Musk and Mark Zuckerberg. UBI today is Democratic presidential candidate Andrew Yang’s flagship policy, suggesting a payment of $1,000 a month to all U.S. citizens over the age of 18, no strings attached.

There are several benefits to a UBI, firstly being the economic effects. The Roosevelt Institute found that with a UBI of $1,000 per month, the economy would
grow 12.56% more than the baseline over eight years, without any taxes and raising the national debt. With a progressive income tax, the economy would grow 2.62% over eight years, still an improvement. The labor force would also increase with 4.6 million jobs in the model sans taxes and 1.1 million jobs with a progressive income tax created. This would add between 2.9% and 0.7% more jobs to the economy.

Most Americans would use the money in one of two ways. The first would be into a savings account or to pay off debts. This would lessen the effects of a recession, as Americans would have more money in their bank accounts to prevent families from going bankrupt. Debts could also be paid off, such as student loans, a major burden for millions of young Americans. Cumulatively, there is $1.6 trillion in student loan debt today. Having extra cash would allow those struggling to pay for the costs of their education to feel relief. Americans could also put the money back into the market. Those without financial issues would spend it, giving a boost to businesses in a community.

Socially, there would be many benefits as well. Those working jobs without pay, like stay-at-home mothers, would be financially rewarded for the work they do. Workers would have more leverage in negotiations, as they would have a safety net to fall back on if they are unhappy with their employment status. Those in poverty would have an increase in overall health, as they would have more money for healthcare and less overall stress as their financial insecurity would be at least partly relieved. A UBI would alleviate these stresses related to healthcare and job insecurity, causing a ripple effect for a better quality of life.

Those opposed to a UBI make the claim that it would cause massive inflation. However, the money supplying the UBI would come from the existing market, whether it be through a progressive income tax, where the wealthy would have increased taxes, or a value added tax, where a tax is placed on a product at each stage of production. Other counter arguments include landlords raising rent to capitalize on the influx of cash to their tenants. However, the landlords would also be receiving payment, and their tenants, with their new cash, could afford to move if their rent was too high, forcing landlords to keep rents reasonable. There is also the case that a UBI would be an overreach on the case of the government. The current welfare system, though, adds many restrictions to what recipients can use the handouts they receive on. A UBI lets recipients have more autonomy with their money, as the government can put no restrictions on it for it to be a true UBI. Basic income programs have had great success when put to the test. In the struggling California city of Stockton, 125 residents below the median income line received $500 a month. Most of the spending went to bills, food, and clothes, dispelling the myth that the money will be spent on frivolous things. Alaska gives each resident $1,000 to $2,000 each year from the revenue of the state’s natural resources. The Alaska Permanent Fund, as it’s called, reduced poverty up to 20%. These two examples, in two wildly different scenarios, show the power of the UBI. And at the end of the day, free money sounds pretty good to all of us.
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