Universal Basic Income

IntroductionAn unconditional, individual, and universal basic income would indisputably boost the economy and allow many low-income Americans to climb the ladder of social mobility. It would not only lift people above the poverty line and reduce income inequality, but create jobs, lower school dropout rates, improve health, and raise overall economic output. A UBI would enable, rather than trap, those with unfortunate financial situations as it would provide *everyone* money to work with; all would have the fiscal leverage to progress forward when they otherwise wouldn’t.Our current welfare programs, in contrast, do the opposite of what they’re intended for. They encourage passive behavior and inhibit productivity. The means-tested programs withdraw benefits as soon as a certain income is reached, and are burdened with high marginal tax rates so long as their income is below a certain level. Others require people to exhaust nearly all their assets until they become eligible for aid. With so many strings attached, and the overall counter-productive nature, welfare programs simply are inferior to a UBI, and have too many downfalls.Economic/Societal ImpactsThere are several instances of cash transfers, or UBI trials, working. The following examples turn up multiple benefits:Namibia tried out a UBI program, the Basic Income Grant, in 2007-2012. After just one year into the program, household poverty rates dropped from 76% to 37%. Other effects were noted too: income-generating activities rose from 44% to 55% over the time period. Parents were enabled to purchase school uniforms, afford school fees, and encourage attendance because of this problem, and as a result, school dropout rates dropped from 40% to nearly 0% in a year [2].India tried a cash transfer project from 2013-2014 too. The result was that sanitation improved, medicine could be afforded, clean water became more accessible, and participants could eat more regularly [3].Uganda’s UBI trial enabled participants to invest in skill training. The findings were that “relative to the control group, the program increases business assets by 57%, work hours by 17%, and earnings by 38%” [4]. Kenya has an ongoing trial, and it has so far reportedly let to increased happiness and life satisfaction, and reduced depression and stress [5].If we are to quantify the effect this would have in the US, we should look at the current poverty levels. Currently, the poverty level is a $12,140 income for individuals [1]. With my proposed UBI of $10,000, this would pull everyone with an income of a few thousand or more above the line. That’s potentially *millions* of people. The Failure of Welfare ProgramsThe current welfare programs do *not* provide overall work incentives. Most are means-tested, meaning that if you demonstrate that your income and capital are below specified limits, you’re eligible. This can lead to what some call the “cliff effect”: once someone passes an income threshold, that aid is withdrawn, and climbing further up the income ladder becomes more difficult. This issue is maximized when we understand how disadvantaged the poor are tax-wise under welfare. In fact, the Congressional Budget Office, “[found] that the marginal tax rate climbs to 40 percent when a worker earns slightly more than about $12,000, and then to nearly 50 percent in the mid-$20,000 range.” [6] These programs impose high marginal tax rates, essentially trapping these recipients into a large income hole that they can’t climb out of. To put this into better perspective, here’s a graph [7] that shows tax-less income in respect to income earned: These welfare programs are creating a clear poverty trap. Under a universal basic income, this wouldn’t happen. A UBI would extend to *every* person, regardless of what their incomes are, enabling them to have more social mobility than they would under the incredibly flawed welfare programs that are burdening so many lower-income people.But that’s not all. Many welfare programs also have asset limits, meaning that one must have almost no assets to be eligible for benefits. Programs like Temporary Assistance for Needy Families (TANF) have asset limit ranges from $1,000 in states like Georgia and Texas to $10,000 in Delaware [8]. This is problematic because it discourages the importance of saving and self-reliance; only those who exhaust just about all of their assets become eligible for aid. Savings are very important because they provide cushion against anything that goes wrong. Just having under $2,000, for instance, is enough to protect against eviction, missed meals, or the loss of utilities during a financial setback. To force such recipients to go to the point of being broke to receive benefits in no way incentivizes them to increase their income.To sum, a UBI would (1) significantly reduce poverty and boost economic output, and (2) incentivize people to work in ways our current welfare programs cannot. Thus, I affirm.=Sources=[1] https://www.healthcare.gov...[2] http://www.bignam.org...[3] http://sewabharat.org...[4] https://www.povertyactionlab.org...[5] https://www.princeton.edu...[6] https://www.urban.org...[7] https://www.economist.com...[8] https://www.americanprogress.org...