Universal Basic Income Could Grow the U.S. Economy by an Extra 12.5%
A team of economists from the left-leaning Roosevelt Institute conclude in a new research study that implementing a guaranteed income of $1,000 a month for all Americans would accelerate U.S. economic growth by an additional 12.56% over eight years if it were financed by increased federal debt.
If the same program were financed by increased redistributive taxes, the growth impact would be smaller, producing an additional 2.62% of GDP growth over 8 years. But the federal deficit would also, according to the model, shrink by 1.39%. In both scenarios, unemployment would also decrease.
A universal basic income, or UBI, is a once-fringe policy proposal that has gained increasing public support in the U.S., including from many tech business leaders including Elon Musk and Mark Zuckerberg. In part, the idea is appealing because it would help insulate workers against labor market shocks likely to be produced by innovations like self-driving cars and artificial intelligence.
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The Roosevelt Institute’s conclusions about the broader economic impacts of a UBI highlight a well-established phenomenon known as “marginal propensity to consume.” In essence, people in the lowest income brackets are more likely than the wealthy to spend additional income, so a UBI would put a greater proportion of cash into circulation. Somewhat ironically, there’s plenty of evidence of this in the tech world itself, with dominant firms like Apple and Google sitting on giant piles of cash that are contributing relatively little to macroeconomic growth.
The Roosevelt Institute is named for Franklin Roosevelt, the U.S. President most known for implementing sweeping redistributive social programs, such as Social Security. It is largely focused on issues of inequality, making it an unsurprising supporter of a UBI.
And the study’s conclusions would surely be rejected by more conservative economists, including those who believe rising taxes or government debt can slow the economy. The idea of a redistributive UBI is also anathema to conservative political thought, which regards increased taxes as unjust government overreach. The report concludes that fully funding a $1,000 a month UBI would require tax increases from 21% to 35% for the top 10% of American earners.
The study, which is based on a consumption-driven economic model, also does not address one of the biggest controversies surrounding UBI: Whether it would make workers less likely to seek jobs, or increase their freedom to take innovative risks.