Would Basic Income Be Affordable in the United States?

In the Something to Consider forums, one of the most popular threads was a discussion about Basic Income: the Considerates discussed whether it might be an effective replacement to the current battery of entitlement programs in the US.

Basic Income (or BI) has been proposed as a way to make entitlement and assistance spending more efficient: rather than having a complex bureaucracy (for example: the US has 79 different means-tested welfare programs) to determine how benefits flow and how they are executed, the government would just deliver money, and the recipients would spend it on what they need: food, health, housing, etc.

It has some interesting proponents, including Milton Friedman, a fairly libertarian economist, and FA Hayek, another famous free-marketeer economist.

In Friedman’s view, the US would have a progressive “negative income tax,” in which those below a certain income would simply receive money rather than pay it; more money for lower income. In its most radical form, BI would include the dissolution of all means-tested welfare programs, assistance programs, Social Security, Medicare, Medicaid, etc: just checks at your door. Recipients would use that money in the marketplace to buy what they need. Because the IRS already calculates everyone’s income, it wouldn’t require a new agency to figure out how much money everyone got.

The biggest concern on the forum discussion was cost: would it be affordable to provide a basic income to everyone that needed it?

We decided to do some very quick math to get a rough idea. We’d love your input on refining it.

What We Spend Now:

Total US spending--federal, state, and local--on social programs is just over $3 trillion per year. This includes all Social Security, disability, healthcare, assistance/welfare, etc. "Pensions" includes payments like disability (which is a large and growing slice of the pie).

Of the 246.5 million adults in the US, 49% live in households that receive some form of this aid. (Many of those are the elderly, who all receive Social Security and Medicaid benefits, so this number doesn’t imply that half of the country is “on welfare.”) That’s 120 million adults.

Some Rough Calculations:

For some very rough math: what if, instead of government programs, we simply provided income to these people?

If the $3T spent on entitlement reforms was instead paid as cash to these 49% of recipients, each would receive about $25,135.

So that gives us a sense of how much money we’d have to work with to provide BI without increasing the amount of money already being spent, which could give us a ballpark of relative affordability.

There are a lot more questions to consider: what would it really look like if this money were distributed via any means-testing? For example: if we used Friedman’s scaled “negative income tax,” people would receive different amounts of money based on their current income; what would the “floor” income look like in that case? Does the amount of money change for parents with children?

What’s your initial reaction? How else can we look into the question? Let us know in comments below!

2 Comments

Erik Fogg

We do politics, but we don't do the thinking for you.