A universal basic income could make the US economy trillions of dollars larger, permanently, according to a new study by the left-leaning Roosevelt Institute.
Basic income, a proposal in which every American would be given a basic stipend from the government no strings attached, is often brought up as a potential solution to widespread automation reducing demand for labor in the future. But in the meantime, its critics typically allege that it is far too expensive to be practical, or else that it would spur millions of Americans to drop out of the labor force, wrecking the economy and depriving the government of a tax base for funding the plan.
The Roosevelt study, written by Roosevelt research director Marshall Steinbaum, Michalis Nikiforos at Bard College's Levy Institute, and Gennaro Zezza at the University of Cassino and Southern Lazio in Italy, comes to a dramatically different conclusion. And it does so using some notably rosy assumptions about the effects of large-scale increases to government spending, taxes, and deficits, assumptions that other analysts would dispute vociferously.
Their paper analyzes three different models for a universal basic income:
A full universal basic income, in which every adult gets $1,000 a month ($12,000 a year)A partial basic income, in which every adult gets $500 a month ($6,000 a year)A child allowance, in which every child gets $250 a month ($3,000 a year)
They find that enacting any of these policies by growing the federal debt — that is, without raising taxes to pay for it — would substantially grow the economy. The effect fades away within eight years, but GDP is left permanently higher. The big, $12,000 per year per adult policy, they find, would permanently grow the economy by 12.56 to 13.10 percent — or about $2.5 trillion come 2025. It would also, they find, increase the percentage of Americans with jobs by about 2 percent, and expand the labor force to the tune of 4.5 to 4.7 million people.
They also model the impact of the plan if it's paid for with taxes. That amounts to large-scale income redistribution, which, the authors argue, would stimulate the economy, because lower-income people are likelier to spend their money in the near-term than rich people are. Thus, they find that a full $12,000 a year per adult basic income, paid for with progressive income taxes, would grow the economy by about 2.62 percent ($515 billion) and expand the labor force by about 1.1 million people.
These are extremely contentious estimates, borne of controversial assumptions about the way the economy works and the effects that a basic income would have on it. Many, if not most, economic modelers would come to very different conclusions: that a basic income discourages work, that raising taxes to pay for it could have profound negative economic impacts, and that not paying for it and exploding the deficit is a recipe for fiscal and economic ruin.
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