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The Economic Devastation of Universal Basic Income

The opinions expressed by columnists are their own and do not necessarily represent the views of
AP Photo/Mark Lennihan

Free money. Sounds great, right?

However just as it is as devious when you see the offer in a misspelled spam email from a supposed foreign price or elderly estate-owner so is it with public policy.


Universal Basic Income (UBI) is the idea of giving out to every American a set amount of money every so often with little to no strings attached. It is meant to address the transformational economic changes that have come about as a result of technological advancements and automation across nearly every industry and which are expected to only continue.

While an old idea, and with various theorists government entities having experimented with it throughout history, it recently has gained greater visibility among both Americans in general as well as everywhere from government to Wall Street to Silicon Valley.

A February 2018 Gallup poll found that 48% of Americans supported a universal basic income. A March 2019 The Hill-HarrisX poll found specifically that 55% of those ages 18 to 34 and 53% of those ages 35 to 49 supported a UBI.

However the idea of UBI very likely would not only not bring about the utopia that its proponents prophesize but also cause catastrophic economic, social, and political devastation – yes, ‘devastation’ – in its wake.

The primary economic – not even going into the social or moral - issue that comes with UBI is how to pay for it and the consequences of whatever path is chosen. From my standpoint there are four main ways to pay for UBI:

1. Increasing taxes on high-income earners and corporations.

2. Print new currency.

3. Fund it with government/public debt and deficit spending.


4. Shift spending from current programs to UBI.

UBI would be costly. In 2018 the United States Census estimated there were 327,167,434 persons in the United States, of which 22.4% were under the age of 18. Thus that is about 253.881 million adults over the age of 18 who may be entitled to a UBI to compensate for societal job instability. At $500 a month that would cost the government about $1.523 trillion a year. At $1,000 a month that would amount to $3.046 trillion a year.

At $2,000 a month that would be over $6.093 trillion a year. Even a small amount, such as $100 a month, would still amount to about $304 billion a year and that’s not including the cost of administration as well as fraudulent and incorrect claims.

The first option to pay for this would be to raise taxes on the rich and on corporations, as some UBI proponents have stated they would. It is unlikely it would be a tax on the middle-class or poor as that is precisely who UBI is meant to support and benefit.

We saw recently firsthand how corporate tax cuts created jobs, as the Congressional  Budget Office estimated in April 2018 that the 2018 tax cut bill created a sustained average 900,000 nonfarm jobs over 2018 to 2028.  However the reverse is also true, as an increase in tax on companies would decrease their investment in their own operations and in their spending, thus reducing economic and job growth as well as cutting current economic activity and employment. A tax the levels needed to fund UBI would, without question, stifle business in draconian ways.


Another option is to simply print new dollars to fund UBI. While this would be a radically departure from current U.S. monetary policy, which exists for good reason, it seems an easy solution to pay for such a large bill.  Such an option would likely result in massive inflation as every year large sums of new dollars are circulated into the currency, quickly overwhelming current supply and reducing the actual purchasing power of the shiny new UBI. Hyperinflation is no fun at all.

The third option seems unfortunately a particularly likely one were UBI to pass. Deficit spending has been our nation’s addiction for years as our national debt has gone from a ‘mere’ $5.7 trillion around the beginning of 2000 to now over $22.027 trillion. Perhaps more importantly as a measure of economic constrictive impact, the national debt is now higher than our annual GDP.

Were we to accelerate this trend with UBI we would fall likely soon into the permanent melancholy that we see now in Japan, where its federal government debt stands at almost two and a half times its GDP and restricts everything from government spending to economic activity. It’s a major reason why the worries over Japan overtaking the U.S. economy in the 1980’s and 1990’s soon became just a funny footnote in history.

The last option would be to take some of our current spending and shift it to a UBI. The most recent enacted federal government budget is about $4.746 trillion in spending, with most of that going to Social Security, Defense, Medicare, and Medicaid. Shifting from any of these programs would face enormous resistance, as our defense budgets are already constrained and those who paid into current core entitlement programs would likely find easy support for their resistance among our elected officials.


As shown, UBI sounds ‘great’ but faces enormous problems in implementation and potentially destructive results on the very people it claims to help were it to be actually enacted. While the problems it hopes to address are real, we will need more complex solutions – to match the complexity of the technological developments that led to these dilemmas – than simply broad-based cash handouts.

Erich Reimer is a Captain in the United States Army. He previously served as a government affairs lawyer and media commentator. Views expressed are his own and not those of the Department of Defense.


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