Less-than-Universal Basic Income

It might be time to consider an alternative approach to large-scale cash transfers.

Andrew Yang’s 2016 presidential campaign popularized the idea of a Universal Basic Income. But it might be time to think more incrementally. Image credit: Gage Skidmore from Peoria, AZ, United States of America, CC BY-SA 2.0, via Wikimedia Commons

Ten years ago, almost nobody in the United States had heard of a Universal Basic Income (UBI). Today, chances are that the average college graduate has not only heard of the idea, but probably holds a firm opinion about it. From Silicon Valley elites to futurists to policy wonks, the UBI ignites passions and divides opinions across the political spectrum.

Much of the credit for this is due to Andrew Yang, whose 2016 presidential campaign took a centuries-old academic idea and transformed it into a focal point for conversations about poverty, inequality, and the future of work in an age of increasing technological automation.

Since then, the idea of a UBI has taken off. The organization Mayors for a Guaranteed Income reports that it has sponsored almost 60 pilot programs in various cities across the United States. And the results of these pilots have been largely encouraging. In Stockton, California, a guaranteed income program reduced income volatility and mental anxiety and significantly boosted full-time employment among recipients — by 12 percentage points, compared to a mere 5-point increase in the control group over the same period. A more recent experiment in St. Paul, Minnesota, showed similar increases in employment and improvements in housing and psychological well-being.

And yet, for all its popularity, the UBI seems stuck at the level of a temporary experiment. No government has yet to implement a UBI as a permanent, large-scale policy, and none seems likely to do so in the near future.

After all, we’ve been here before. Back in the 1960s, a similar wave of enthusiasm for the UBI (or “guaranteed income,” as it was called at the time) swept the United States. Milton Friedman popularized the idea in 1962 with his proposal for a negative income tax. In 1968, a letter supporting a guaranteed income garnered over 1,000 signatures from academic economists and front-page coverage in the New York Times. Finally, by 1969, Richard Nixon proposed his “Family Assistance Plan,” which would have provided a federally guaranteed income to families with children. Between growing bipartisan support and extreme public dissatisfaction with traditional welfare, it seemed the timing might be just right for the idea to become a reality.

Except, it didn’t. After months of struggle and compromises that left no one happy, the Family Assistance Plan ultimately failed to make it through Congress. The full story of its defeat is a complicated one, well-documented in Brian Steensland’s masterful book, The Failed Welfare Revolution. But, in essence, its failure came down to the same two objections that always bedevil guaranteed income programs: cost and fairness.

As Miranda Perry Fleischer and I discuss in our recent book, Universal Basic Income: What Everyone Needs to Know, the issue of cost is a serious challenge for advocates of a UBI. A grant of $1,000 per month would be almost enough to bring a single individual with no other income up to the poverty level. But a fully universal grant of $1,000 per month to all the roughly 330 million people living in the United States would cost almost 4 trillion dollars — more than half the entire federal budget for 2024! A smaller grant would cost less money, but the smaller the grant, the less effective it will be at lifting people out of poverty. Fiscal constraints thus create a dilemma that is difficult to escape.

A permanent expansion of the Child Tax Credit has the potential to realize much of the promise of permanent, broad-based, unconditional cash transfers, while simultaneously avoiding the biggest pitfalls of the UBI.

The other problem is, if anything, even more difficult to manage. One of the defining features of a UBI is its universality, meaning, in this context, that everyone is eligible to receive the grant, whether they are working or not. But it is precisely this universality that strikes many people as morally unfair. It’s one thing, the argument goes, to help people who are trying to support themselves but can’t. It’s quite another thing to declare that everybody is entitled to live off the federal dole, whether or not they’re able and willing to work. The old Victorian distinction between the deserving and the undeserving poor resonates deeply with a sizable majority of the American public, liberals and conservatives alike.

Of course, UBI advocates have responses to both of these objections. But so far, at least, those responses have failed to persuade a majority of the American public. This doesn’t necessarily mean that they should give up. But it does suggest, perhaps, that it might be time to consider an alternative approach to large-scale cash transfers — one that avoids both of the main objections to the UBI while retaining much of what makes that policy so attractive in the first place.

We don’t have to stretch our imaginations to conceive of what such an alternative might look like. We’ve already tried it — at least briefly. In 2021, responding to the economic crisis caused by Covid-19, the United States made its Child Tax Credit (CTC) fully refundable. This meant that families whose income was too low to owe any taxes received cash payments from the government, the size of which depended on how many children they had. The results of this experiment were impressive. The CTC, combined with other cash transfers from Covid-related stimulus payments, appear to have made a significant dent in childhood poverty in 2021, which (by some but not all measures) disappeared in 2022 once the expansion expired.

So far, efforts to make the expansion permanent have been unsuccessful. But its demonstrated success and relative popularity suggest that it might be the viable path forward for enacting a policy of large-scale, no-strings-attached cash transfers.

First, because the CTC is limited to families with dependent children, its scope is far narrower than a fully universal UBI. Only about 22 percent of the U.S. population is under 18, so even keeping the size of the grant at $1,000, a CTC drastically cuts the cost of a UBI.

Second, and perhaps more importantly, because the CTC is focused on families with children, it is much less vulnerable to the kind of worries about unfairness that plague the UBI. Even if you think that there’s something morally objectionable about able-bodied adults being dependent on government support, surely that objection doesn’t apply to children. Children aren’t responsible for putting themselves in poverty. And they aren’t capable of getting themselves out of it. If anyone deserves a helping hand, it is children.

As Josh McCabe has recently noted, other countries such as Canada, Australia, New Zealand, and the United Kingdom all have child tax credits where the full amount is available to families that do not pay income tax. The United States not only lacks such a policy, but spends less on cash transfers to children than any other country in the OECD. No surprise, then, that the U.S. has among the highest post-tax, post-transfer child poverty rates of any country in the developed world.

For many of the UBI’s supporters, its universality is one of its strongest appeals. And yet it might also be one of its greatest political liabilities, as the objections of cost and fairness show. A permanent expansion of the Child Tax Credit has the potential to realize much of the promise of permanent, broad-based, unconditional cash transfers, while simultaneously avoiding the biggest pitfalls of the UBI. In bridging ambition with practicality, expanding the Child Tax Credit could be the key to transforming the ideal of universal financial support into a sustainable reality.