Millions of Americans enjoyed a taste of basic income during the coronavirus pandemic. The federal government, achieving bipartisan support at the time, handed out billions of dollars in “free money” for just sitting at home, and taxpayers are now stuck footing the bill for these reckless inflationary schemes. Because the cost of living is so high, vote-hungry politicians believe they could appeal to more of the electorate by proposing a guaranteed income program. But if the public thinks inflation is high now, wait until the government starts handing out piles of cash.
Several states and cities are considering introducing basic income initiatives. Years ago, Stockton, CA, launched a $500-a-month no-strings-attached scheme. Others are joining Stockton, including Nashville, TN; Louisville, KY; and Birmingham, AL. Minnesota could soon become the country’s first state to launch a something-for-nothing initiative, and Washington may not be far behind.
Republicans are starting to push back. Texas Attorney General Ken Paxton recently filed a lawsuit against Harris County to block a pilot program that offers $500 per month to nearly 2,000 low-income individuals in Houston. But Democrats aren’t going quietly. In Arizona and Wisconsin, for instance, Democrat governors vetoed GOP-led bills that ban universal basic income (UBI).
Republican leaders, like South Dakota state Sen. John Wilk, say these proposals are designed to create a new generation of voters addicted to free money. Invoking former President Ronald Reagan, he recently stated, “What did Ronald Reagan say, ‘The closest thing to eternal life on this planet is a government program’? So, if you get people addicted to just getting a check from the government, it’s going to be really hard to take that away.”
However, the genie is out of the bottle, and there is a demand for this so-called anti-poverty measure. According to a February Lake Research Partners study, nearly two-thirds of voters support monthly cash payments of up to $1,000. Additionally, the poll revealed that most voters would be more likely to vote for a candidate supporting a basic income. Evidently, the writing is on the wall.
But while it might be a popular public policy plan, is basic income sound economics?
When the basic income idea was first introduced decades ago, advocates championed abolishing the welfare state and solely imposing monthly cash payments for everyone. In recent years, the concept has evolved to be installed as a complement rather than a substitute. If a basic income of $1,000 for every person in the United States were implemented, estimates suggest the gross cost would be approximately $4 trillion – and that only accounts for the price tag.
Funding a basic income would be a challenge. The US government spends roughly $7 trillion a year, and lawmakers are finding it a Herculean feat to pay its bills. The Congressional Budget Office (CBO), a non-partisan budget watchdog, projects that trillion-dollar-plus federal deficits are the new normal in Washington. As the national debt targets $35 trillion and interest payments become the third-largest budgetary item, how would the nation fund another entitlement program? Why, inflation, of course!
The US government is able to keep the lights on, hand out generous subsidies to domestic and foreign corporations, and fund foreign conflicts through inflationary practices. The Treasury is currently engaged in issuing trillions of dollars in new debt to global capital markets, while the Federal Reserve is thinking about slowing its balance-sheet reduction campaign. Put simply, the federal government sells bonds, the central bank purchases these securities, the printing press is turned on, and the public receives diluted currency and higher prices.
In addition, rampant price inflation happens when too much money chases the same level or diminished volume of goods and services. This was observed throughout the pandemic. Four years later, cumulative inflation is around 20%, and the consumer price index is struggling to slide below 3%. Policymakers then believe the panacea to this mess is even more inflationary pressures, be it a higher minimum wage or a guaranteed income. In other words, politicians started the fire, and they think dumping kerosene will help people cope.
Like Social Security, the UBI would become ensconced into Americans’ daily living standards. It would need to be adjusted for inflation. If it is means-tested and not everyone has their fingers on the no-strings-attached cash, more voters would demand their share of the loot. Any recommendation to trim UBI benefits would be met with pitchforks and rage, like the famous Spencer Tracy jailhouse scene from Fury.
Unfortunately, as all government programs have proven, they are one step closer to serfdom, designed to enslave the public to ensure they rely on the state. Once a central bank digital currency is installed in the US economy, punishing the public for committing the cardinal sin of independent thought will be easier. Like social credit scores, politicians and bureaucrats will remove the primary income stream and freeze accounts for a wide array of infractions, be it exceeding your daily CO2 emissions limit or wandering too far from your 15-minute city. A basic income might be benevolent at the beginning, but it would eventually expose itself as the chief Faustian bargain.