What Is UBI?

You've read about UBI in your text. You'll eventually see Kai-Fu Lee expand upon the concept
and add to it. You'll also examine how Nobel Prize winning economist, Joseph Stiglitz,
questions it. We'll also examine it through the lens of Conscious Capitalism. For now, let's
define what UBI is.
As proposed by Andrew Yang, UBI involves every US citizen 18 years old and above receiving
a check of $1,000 per month, every month with no strings attached. The check goes to
millionaires and billionaires as well as the lowest income earners in the country. The
millionaires and billionaires will, assuming revisions to tax law, pay that check back at tax
time. Those who need it the most will use the check to supplement their current income, perhaps
go back to school or start a new business. Of course, there are a variety of ways to introduce
UBI.

UBI History
To the surprise of many, President Richard Nixon, advised by conservative economist Milton
Friedman, attempted to pass UBI back in 1971. The bill actually passed the House of
Representatives twice but then lost momentum in the U.S. Senate. How unusual is it to list
supporters of a concept that includes a Revolutionary War hero Nathan Hale as well as Richard
Nixon, Martin Luther King, Jr., Bernie Sanders, and Barak Obama? Although UBI feels like a
"new" concept, it has been around for some time, periodically receives some renewed support,
and currently is a positive potential for 50% of those polled. Once the selling points are
presented, UBI seems to overcome the objections and offer us a much brighter
future. Why? Because it both improves the financial health of lower-and-middle income wage
earners and protects the abilities of the very wealthy to maintain and expand their wealth, UBI
has the potential of being a win/win solution if presented clearly.
Of course, you'll be the ones to make that decision for yourselves. You'll expand upon the idea
of UBI or critique it and even attack it.
One of the most interesting aspects of UBI is the wide range of proponents, a diverse
group including a diverse Richard Nixon, Martin Luther King, Jr., Bill Gates, Milton Friedman,
Elon Musk, Mark Zuckerberg, and Warren Buffet. It has drawn proponents from all political
perspectives, primarily because it puts money in the hands of the people. The assumption is
those receiving the checks will use the money more wisely than the government would
do. Instead of a "trickle down" economy, UBI would develop a "trickle up" economy. The state
of Alaska, for over 30 years, has sent a check to every citizen from the oil revenue received by
the state. The program was introduced into a "red" state by a "red" governor and is very
popular.

Objections and Responses to UBI

1. How will you pay for it? Or we can't afford it.
Isn't it going to cost over $1 trillion and more every year. Yang suggests that technology
(including AI, robotics, etc.) is the oil of the 21st century. The primary beneficiaries of the
AI/tech economy are some of our biggest, best known companies -- Amazon, Facebook.
Google. And, over the next 15 years or so, those companies and others will see the biggest
expansion of wealth in the history of the world. Yet, they currently are more effective at
avoiding taxation or any type of financial support to compensate for the jobs being displaced
than they are at helping solve the problem. UBI can be developed in such a way that the wealthy
can continue to grow their wealth while those with low or middle incomes can benefit as
well. One approach is a VAT or Value Added Tax on technology. VATs are common to every
major industrial country and generally are at 20%; if we had a VAT or consumption tax that is
half or 10%, we could fund UBI. A combination of the revenue from the VAT as well as the
projected growth in the economy and increases in the labor force and, therefore, more tax
revenue, will more than pay for UBI. (The Roosevelt Institute study of the $12,000 per year UBI
would "grow the economy by 12.56 to 13.1 percent. )
While the VAT will result in higher prices for some goods and services, AI and automation are
generally introducing cost savings at the same time and, to some degree, counter-balance each
other. If you're wealthier and buying more expensive goods and services then you'll be adding
significantly to the income from the VAT to support UBI.
UBI is projected to have a positive impact on the economy. It will smooth out the difficult
challenges "normal people" face during job loss, recessions, down turns, replacement by robots
or other advancing technology. UBI will create new jobs, add new tax revenue, lower hostility
toward those at the top of the wealth pyramid. New business and economic activity, better
educational outcomes, improved health and preventative care, better mental health, reduced
crime and incarceration, reduced services for homelessness, and many other social
benefits. There are currently 126 government bureaucracies addressing the needs of lower
income, homeless, and jobless people. Many of these can be reduced or even replaced by the
implementation of UBI. As Andrew Yang suggests, "You know what's really
expensive? Dysfunction. Revolution. Keeping people and families functional will largely pay
for itself."
2. Won't people take advantage of the "free money" and quit working? Won't it
destroy people's incentives to work?
There are 2 groups that appear to work less if receiving UBI: a) Single mothers tend to spend
more time with their children and fewer hours at work; b) young people tend to go back to school
or start a business. While $12,000 a year can be beneficial, it hardly enables a person (or at the
least the vast majority) to avoid work. Aside from that, people use the money to start
businesses, go back to school, pay for health care. The ricochet effect is that graduations
increase, domestic violence is reduced, depression, addiction, and crime decrease. With hope
and an ability to take care of the basics that keep people alive, people turn their attention most
often to improving their lives.
3. Wouldn't UBI cause rampant inflation?
One of the pluses of advancing technology and globalization (the source of our problems) is the
tendency to reduce the costs of many products and services. We've listed in Supplemental
Reading a book which outlines how AI and other technology actually contributes to deflation and
a reduction in the use of natural resources. If this area is of interest to you, we recommend you
read Andrew McAfee"s More From Less: The Surprising Story of How We Learned to Prosper
Using Fewer Resources -- and What Happens Next. (See complete information in Supplemental
Reading)
4. Wouldn't people spend the money on stupid things, like drugs and alcohol?
The data does not indicate that this happens. In every basic income study, there has been no
increase in drug and alcohol use. If anything, an improved sense of the future motivates people
to figure out a plan for how to improve their lives. Will some use the money in irresponsible
ways? Yes, there will be some. Most people who need some minimal assistance will decide to
improve their lives. They will respond more responsibly than the financial institution executives
who took the billions of dollars of bail out money during the Great Recession and paid
themselves huge bonuses. Instead of helping those losing their homes because of their
irresponsible business practices, these "responsible leaders" misused the emergency funds
provided by the American people. We're assuming, based upon studies completed thus far, that
the average American will behave more responsibly than these executives and spend more
wisely.
5. What about the creation of a new government bureaucracy?
If you happen to receive Social Security, then one thing the government does with extreme
efficiency is to send out a check once a month on time. There will be little required in terms of a
bureaucracy and will lead to a reduction in total bureaucracies. Just imagine there are
approximately 126 bureaucracies, many or all of which could be replaced by UBI.

What Are the UBI Positives?

• A massive stimulus to lower-cost areas.

• It would empower people to avoid making terrible decisions based on financial scarcity and
month-to-month needs.
• Provide a boon to creativity and entrepreneurship.
• Facilitate the transition of people from shrinking industries and environments to new ones.
• It would reduce stress, improve health, decrease crime, and strengthen relationships.
• It would support parents and caretakers for the work that they do, particularly mothers.
• It would give all citizens an honest stake in society and a sense of the future.
• It would restore a sense of optimism and faith in communities around the country.
• It would stimulate and maintain the consumer economy through the automation wave.
• It would maintain order and preserve our way of life through the greatest economic and
social transition in history.
• It would make our society more equitable, fair, and just.