Universal basic income (UBI) gained some popularity as an economic policy, yet COVID-19 relief funds may have provided insight into how successful such a program would be.
Key Details
- UBI is an economic policy where every adult citizen regularly receives a set amount of money the government distributes.
- Proponents of the program argue that it would help alleviate poverty and solve employment problems caused by increasing automation.
- The idea gained new popularity in the U.S. in 2020 when presidential candidate Andrew Yang voiced support for a form of UBI.
- UBI has been attempted in smaller sample sizes in the U.S., including Alaska, but it has yet to be tried on a larger scale.
- However, stimulus checks distributed during the COVID-19 pandemic, and the fraud that ensued, may give policymakers some insight into how UBI would work in the U.S.
Why it’s news
Proponents of UBI have suggested that it could significantly alleviate poverty in the U.S. and may actually be necessary to give Americans some form of income as more industries become automated.
Alaskan residents have benefited from UBI since 1982. The state provides residents with a percentage from the Alaska Permanent fund, which is financed by oil revenue. The check generally ranges from $1,000 to $2,000 per year, depending on the price of gas.
Opponents of UBI have suggested that a consistent, government-funded paycheck would discourage citizens from working, yet an economic study from the Social Science Research Network found that the state’s employment rates have been relatively unaffected by the funds.
Other countries, such as Canada and Finland, have tested UBI programs on sample sizes of a few thousand people. Though the programs saw some success—such as reduced doctor visits and improved mental health—the programs were canceled for varying reasons, Vox reports.
During the COVID-19 pandemic, when a large part of the country was shut down, many Americans could not work, resulting in unpaid bills, rent, and trouble buying necessities. As a response, the U.S. federal government released $814 billion in stimulus checks.
The stimulus checks were released in three rounds at differing amounts. In March 2020, each tax filer earning $75,000 or less received up to $1,200 plus $500 for each child in the household. Later that same year, each taxpayer received $600 plus an additional $600 for each child. The final round in March 2021 distributed the highest amount of $1,400 for each taxpayer and $1,400 for each child.
After releasing these stimulus payments, some pointed out that this could serve as a test for UBI, and perhaps the stimulus payments should continue.
In 2021, Representative Ilhan Omar (D-MN) responded to a tweet showing the benefits of stimulus checks by saying the stimulus checks could “be a case study for implementing #UBI.”
Though the stimulus checks did provide benefits for Americans struggling through the pandemic, more recent reports have shown that the program was wrought with widespread fraud. A recent Internal Revenue Services (IRS) investigation revealed that fraud related to COVID-relief funds has cost taxpayers more than $3 billion.
The fraud tends to be in one of three categories: Paycheck Protection Program (PPP) fraud, Economic Injury Disaster Loans (EIDL) fraud, and Unemployment Insurance (UI) fraud.
PPP fraud, one of the most common types, involved business owners inflating their payroll expenses to receive more considerable funds. Some fraudsters even created fake companies to pocket money intended to pay employees.
The inability of the government to prevent COVID fraud calls into question its ability to avoid a similar type of fraud on a much larger scale during a program like UBI. In addition to fraud concerns, opponents also question where UBI payments would come from, how those payments would affect business, and how payments would drive up inflation. The COVID stimulus programs have been primarily blamed for the current high inflation rates in the U.S.
Support for UBI among lawmakers has also appeared to die down now that the country has opened back up. Americans also are largely unsupportive of the concept, as a Pew Research report found that 54% of Americans say they would not support a UBI program.
