Most of my life I have been conditioned to believe that a universal basic income is the worst idea imaginable. You deserve what you work for, and no more. However, after listening to Dr. Steve Trost's presentation on a universal basic Dividend has me thinking in more ways than one. While I am still not completely sure that any sort of Universal Basic Income (UBI) is actually feasible in our political landscape. Let me first begin with the idea of disincentivizing work upon receiving a UBI.
Disincentivizing of work
A common theme against universal basic income is that upon receiving some sort of guaranteed payment, people will stop working or at least become less likely to work. I think this is both correct, and incorrect.
There are certainly people who will take this money and choose to live exclusively live on that basic income. If they can, they will. Objectively it is much more difficult to work all day long than it is to diddle around all day doing nothing. However, there are also people who will take their UBI, and drastically increase their quality of life. As Dr. Trost highlighted, having extra guaranteed money floating around creates a safety net for those who want to do something different. People will be more willing to try and form new businesses if they know they can still feed their family if they fail. At some level, people will experience freedom of choice to do what they want if they are not "stuck" because of current financial conditions.
To me, this is an essential tennant of Entrepreneurship. Imagine if Henry Ford was so worried about his medical bills or mortgage that he was stuck in his deadbeat job all day at the horse and buggy factory just to survive. Entrepreneurial endeavors are certainly stifled by being unattainable for some economic groups in society.
Unrealistic Expectations for Inflation?
One area in which I disagree with Dr. Trost boils down to inflation. In this country, we have inflation. We will likely always have inflation. This is a cause of concern to me because this means that a universal basic income will eventually purchase less and less and less unless it is adjusted to be higher. For me this is a rock and a hard place, and this issue is stuck right between it.
On one hand, the idea Dr. Trost suggests of having the states threaten a constitutional convention in order to force congress to turn his theory of a UBI into a constitutional amendment is genius. The Houses of congress would never agree to it otherwise. Creating a constitutional amendment also ensures that the politicians keep their nasty paws off of a good system. However, what happens when if the amendment needs to be updated? Most good jobs will offer a yearly cost of living salary increase to help their employees stay on top of inflationary costs. This would be impossible if it were an amendment. I worry that the UBI he suggests would likely be slowly eroded away year by year as inflation cuts away at purchasing power. Within 5-10 years, people would be clamoring because their UBI essentially decreases by whatever inflation is every year.
But what is the alternative? Realistically the alternative is to simply have a UBI based as some sort of congressional law. One that gets altered and changed as politicians find ways to benefit those who it was not intended to benefit. Soon they would find a way to increase the UBI based on geographical costs of living. Then they would increase it to unsustainable levels because that is what their constituents want. Maybe we have another disaster like COVID that causes them to panic and triple the UBI just so people stay afloat. Any of these things crush the intentions of a beneficial UBI and create an unsustainable monster that would be rather difficult to tame.
Great Financial Sense
As a finance guy, I love what the numbers do upon implementing a UBI and dissolving all other assistance programs. So much government money is spent on things that people don't really want or need, so UBI would increase the freedom of the individual to spend money what they want and need, instead of what some bureaucrat thinks they want or need.
This has great implications. Freedom of choice is essential to an effective entrepreneurial system. However, I do have concerns about what happens if someone needs to spend beyond their means due to unforeseen expenses such as medical emergency.
Currently someone on Medicaid or Medicare generally doesn't have to pay much at all if they experience a medical emergency. If Medicare or Medicaid is one of the programs cut upon the institution of a UBI, this could have negative implications on the sector of people that truly couldn't afford to pay their medical bills.
While it makes great financial sense, I also don't think that we can let people live in misery or destitution if their medical bills exceed their income. We likely need to have some sort of failsafe. The challenge then becomes how to implement an appropriate solution when challenges such as inelasticity of a constitutional amendment like I discussed earlier are in play. As it stands, I do not have a great solution.
Conclusion
Ultimately, I think as long as certain concessions are made, such as the abolition of other welfare systems and the establishment of a flat tax upon all other income, the idea of a UBI makes great sense. That same money, and much much more, is already being spent. We might as well spend it on what we want to and what would best serve us. If we as a society can work together to make this a reality, then we could be propelled into a much more entrepreneurial future, which would benefit us all.