The Morality and Intelligence of UBI

by Chris Hedgpeth

Fifty-one years ago, in New York City, Martin Luther King, Jr. gave a speech about two Americas – one wealthily supplied with everything it needs to flourish, and one with a “daily ugliness about it that transforms the buoyancy of hope into the fatigue of despair.” King knew his fight for civil rights and equality could not proceed if Americans were so economically divided. In his last years, MLK fought for a guaranteed annual income that would use America’s great wealth to eliminate poverty and push forward his goal of civil equality.

King was assassinated one month after his speech in New York, but an unlikely ally carried his torch in the following years. Richard Nixon’s proposed Family Assistance Plan guaranteed American households $500 for each adult and $300 for each child every year in the form of a tax rebate. That was in 1970 dollars. Today, that’s equivalent to about $3,300 per adult and about $2000 per child annually.

Two versions of Nixon’s FAP were passed by the House of Representatives, in 1970 and 1971, but both times they were killed by the Senate. Even Nixon’s Democratic opponent in the 1972 presidential race, George McGovern, proposed a $1000 per year guaranteed income for every American (about $6000 per year by today’s standards). And then guaranteed income seemed to go off the political radar for almost fifty years. Until now.

Andrew Yang, founder of the non-profit Venture for America, is running for president of the U.S. on a platform centered around giving every American adult $1000 a month in unconditional cash. Yang calls this universal basic income (UBI) the “Freedom Dividend”. By his logic, companies have profited from our loss of jobs via automation and the American people deserve a piece of that profit. Let’s do the math here. $1000 times 12 months times 233 million eligible adults equals $2.8 trillion dollars a year. To put this in perspective, that’s about 2.5% of Americans’ collective $113 trillion in net worth. This is a huge cost. How would we pay for it?

The UBI would save us a significant amount of money by taking the place of certain existing social welfare programs, like food stamps and SSI. Keep in mind that these programs would continue to exist optionally for people who prefer them to the Freedom Dividend. Other programs, such as Social Security, SSDI, housing assistance, and VA disability would not be affected. Americans receiving the benefits from those programs would get them on top of the $1000 a month. With universally increased financial stability, we’d see a drop in homelessness and property crime.

Combined with a public insurance option and prescription drug price control, the UBI could save us over $100 billion in healthcare costs annually. With an extra $1000 a month, Americans could make healthier food choices. People who live in food deserts could afford transportation to grocery stores stocked with fresh produce. We could all afford a gym membership, or the bike we’ve been meaning to buy, or even an electric car! Air quality is a serious health concern for people living in large cities, and we could improve it considerably if enough of us switched over to electric vehicles.

An overhaul to our tax system, including a 10% Value Added Tax (VAT), along with the economic growth created by giving Americans an extra $2.8 trillion in buying power, would recover a considerable amount of the cost. After all the projected savings, it would conservatively cost us about $320 billion a year to implement the Freedom Dividend. That’s less than half of the 2019 Department of Defense budget. So why would we want to spend $320 billion a year just to put money in people’s hands?

Poverty and debt are terrible for our psychological health. In the words of MLK, “Personal conflicts between husband, wife and children will diminish when the unjust measurement of human worth on a scale of dollars is eliminated.” It makes sense that people would stop fighting about money if they had some financial security. People would be less dependent on abusive partners and employers as they become more financially secure. Workers would have better bargaining power with a guaranteed income. A study by Anandi Mani et al. from 2013 even shows a measurable drop in cognitive ability when people worry about money, equating to about a 13 point reduction in IQ. Financial stress increases our chances of making bad decisions.

The extra $1000 a month would also boost our national economy by more than a trillion dollars every year. Local businesses would grow and create more jobs. Small business start-ups would be more likely to succeed. Many people could afford to quit their second or third jobs. People who care for family members at home would finally receive some compensation for the hard work they do. Americans would have more opportunities to pay off debt, and to save money.

Dr. King decried wealth inequality in the 20th century. Five decades later, we have done very little to remedy the problem. We’re empirically less financially equal now than in the 1960s. The Gini index that measures wealth inequality on a scale from 0 to 1 is fast approaching 0.5 in America. Perhaps it’s time to try a universal basic income. As Dr. King said in his final book, Where Do We Go From Here, “If democracy is to have breadth of meaning, it is necessary to adjust this inequity. It is not only moral, but it is also intelligent.”

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