Can UBI Possibly Be A Good Idea?


In the last few years the idea of a government provided universal basic income has made the rounds. It failed a vote in Switzerland, has been tried in a few places including Finland which just threw in the towel on a UBI 'experiment.' Some view this as a form of welfare and of course it is difficult to fathom how it could be paid for.

I have always found the idea fascinating but I wasn't exactly sure why but I figured out why when the story of Finland stopping its experiment surfaced. If UBI could somehow actually work it would be yet another tenet of capitalism that would be disproven or at least cast into doubt along with bad things supposedly stemming from negative interest rates and government intervention in capital markets. Although, there could still yet be negative consequences from those actions.

One context that I have heard in favor of UBI in the US is that it could be constructed such that it could replace all other entitlements and result in a smaller outlay for the government. The Heritage Foundation says that total entitlement spending in 2014 was $3.5 trillion. If all of that was replaced with a smaller outlay, in the form of UBI then should the US consider it? Giving $25,000/yr to 300 million people works out to $7.5 trillion so not sure there is a great argument there, at least not yet.

One futuristic argument for UBI is that more and more jobs will be replaced by robots and other forms of automation (this is why I own ROBO for clients). Employees are any company's largest expense. Taken to a hyperbolic extreme, if there were no jobs left, companies could pay a much higher tax rate in lieu of salaries and still be more profitable than they are today. That extra tax could cover the cost of UBI and then some. Again, hyperbolic extreme.

One criticism of UBI is that it would make people lazy and not want to do anything. That could be correct but the positive spin here is that buoyed by the UBI safety net more people would take entrepreneurial risk with small business which would/could make the country better off.

Ultimately I am not in favor of this. There could be some sort of robot outcome that necessitates it but that is at least a couple of decades away if not further. However it is interesting for the reasons I stated above and for the higher level reason that it challenges what most of us believe.