Book of the Week — “Give People Money”

Annie Lowrey’s book is a beautiful example of combining the power and insights that come from telling people’s stories (aka journalism) with a wide range of social science research, policy thinking and lots of passion for addressing injustice and making the world a better place. Her range is truly impressive: reporting from Maine to Kenya to India and on everything from AI to welfare programs to development economics. I learned new things even from the chapters I have thought a lot about (e.g., technological unemployment), was introduced to new ideas I have thought relatively little about (e.g., the intersection between this policy and race and gender), and it also made some aspects of the issue more vivid (e.g., the complexities of current welfare programs).

Perhaps understandably for a book that is part reportage but also part argument and manifesto, Lowrey is not always as critical as might be warranted of arguments for UBI and larger claims for its impact while providing an overly optimistic take on policies to pay for UBI. Moreover, Lowrey only considers the monetary cost and does not address issues like: should someone who is unemployed for longer get more money than someone that is unemployed for less time, should parents of newborns get more than parents of sixteen year olds, should disabled Americans get more than others, etc., none of which would go away in a world of UBI. And much of the framing does not consider the opportunity cost, for example even if UBI does not discourage work is there another way to spend $4 trillion a year — or a subset of that amount — that would actually actively encourage it?

Only in one spot did Lowrey’s analysis, and the economics underpinning it, rub me badly in the wrong way: her treatment of what economists would call the incidence of public benefits. In places she laments the complexity of signing up for SNAP and other benefits, but in other places criticizes corporations for helping their workers sign up for these benefits (I would note no one ever criticizes corporations for helping higher-income workers sign up for their retirement, childcare and other government benefits). She also describes the existing social safety net as a subsidy to corporations while arguing that UBI would help bargaining power and raise wages — hard to see how both of these could be true. Why is SNAP an excuse for company’s to pay workers less but UBI would be a strike fund allowing them to bargain for more?

Overall, I don’t think the idea of UBI is ready for prime time and until Americans are willing to pay European levels of taxes it will be hard to support a universalist vision. But many elements of the idea are ready for prime time and expanding the understanding of what we could buy with a more universalist approach is a conversation we should be having — and one that Lowrey does much to advance.

Indeed, a UBI is just one moon-shot policy gaining traction not just on the left, but on the right, in Silicon Valley, in the heartland, and around the world. Darrick Hamilton, the New School economist, has put forward a simple and grand proposal to eliminate wealth inequality and to close the racial wealth gap through something called baby bonds. “We should strive not for a race-neutral America but a race-fair America,” he writes. “For that to occur, the transmission of racial economic advantage or disadvantage across generations would have to cease. Public provision of a substantial trust fund for newborns from wealth-poor families would also go a long way toward achieving the ideal.” Such a proposal would provide bonds worth, say, $50,000 to children born to families in the lowest wealth quartile. The bonds would be invested and the money made accessible to those children at the age of eighteen, to help them buy a house, finance their educations, or start small businesses. The policy would be race-blind but would predominantly aid black and Hispanic families, who are far poorer than their white and Asian neighbors.

This paper discusses two common arguments for the adoption of a UBI; that it can be a more effective way of supporting low-income households when existing safety net programs are inefficient, and that it can generate broad support for structural reforms. Using India as an illustration, the paper discusses the trade-offs that need to be recognized in adopting a UBI in these contexts. It shows that replacing the 2011 Public Distribution System (PDS) with a UBI results in losses for many low-income households, although much of this can be reduced by recycling the “out-of-system” PDS losses and the fiscal savings from excluding the highest-income groups as higher UBI transfers. In contrast, replacing inefficient energy subsidies — raising energy prices to efficient levels to internalize the negative environmental externalities of energy consumption — could simultaneously deliver unambiguous distributional gains, help address fiscal pressures, and improve energy efficiency with associated environmental and health gains. Implementing such reforms would, of course, require careful communication and implementation to address political barriers to reform.



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