Steve Forbes recently came out against the idea of universal basic income with this video followed by this article. The following is the transcript of my response which I made into my own video.
Steve Forbes just released a video of him talking about how adopting a universal basic income in the US will destroy us all, so I thought I would film my response to his warning of a world of UBI where apparently no one would work but him.
As someone who has been researching and writing about UBI since 2013, I can tell you that Steve expresses a ton of assumptions here that are either a complete misunderstanding of how UBI works or factually incorrect based on the evidence we already have. His first claim is that UBI is corrosive to the work ethic, but that's wrong because UBI pays people to do anything, not nothing. The existing system pays people on the condition they don't work. Does Steve really believe that fewer people will work if they can work and keep their benefits, instead of losing their benefits with employment as happens right now? This is actually what Finland just tested in their experiment focused on 2,000 unemployed people, and it turned out that hours worked increased in the basic income group compared to the traditional welfare group. A lot of other positive things happened too, like increased well-being, trust, and mental health among others, all of which carry their own costs in their own ways when lower.
Another common finding in UBI experiments is increased entrepreneurship. In Namibia, self-employment quadrupled, and in India, it tripled. Lots of people have lots of great ideas, but lack the capital and time to make them real. Or they create something and then it fails due to lack of customers, not because their idea was bad, but because people lacked the money to pay for it. UBI solves both the lack of capital problem, and the lack of consumer demand problem. Also, Alaska has had a UBI since 1982, and the dividend has had no impact on full-time employment, but has increased part-time employment by 17%. Finally, let's talk about what we mean by work, because UBI experiments have also shown that students reduce their employment hours to focus on education, as do mothers of newborn children who use it as maternity leave, but do either count as working less? Of course not. School is work and an investment in future earnings. Child care is work and an investment in future adults. By the way, the unpaid work of child care if calculated into GDP, is worth over $1 trillion a year. There is A LOT of unpaid work going on, and people are doing it because it's important to them, not because they're getting paid to do it. In fact, on average, unpaid workers pay $7,000 a year to perform unpaid work. Work doesn't just happen. Work requires calories. Work requires that people have full stomachs. As Steve well knows, it takes money to make money, and that's what UBI is, just like it is in the game of Monopoly where everyone starts with money and gets more money for passing Go.
Steve also claims UBI would break the link between effort and reward, but most of Steve's income is generated passively through ownership, not work. He doesn't need to work to live, but he does anyway. I don't know how much dividend income Steve gets from the stocks he owns, or the interest he earns, or the rent he earns from property ownership, but I can guarantee you that it exceeds $1,000 a month. So has Steve's passive income disconnected from work resulted in working less? Of course not. He always wants more, and he's not special either. Most people want more money to spend more money. People don't just stop wanting to earn money because they have enough to eat and have a home. They want to go out to restaurants and ballgames. They want to buy PS5s and concert tickets. They want to go on vacations and buy new shoes and everything else there is to buy.
The fact people want to buy stuff leads to another problem that Steve didn't mention, which is what happens as automation increases, and people are less able to buy stuff? What happens during an unemployment crisis when people are less able to buy stuff? Our economy is 70%-consumer based. It requires spending. Wages have been stagnant for decades while productivity has more than doubled. All the gains have gone to Steve and others at the top. That's good for him, at least in the short-term, but Steve can't buy everything the economy produces. If we're producing stuff and people aren't buying it, production goes down, which means fewer jobs, which means less money to spend, which causes production to go down more. That's a deflationary spiral, and that's what we're in the middle of right now, and that's what automation causes, because robots don't buy anything.
We have to decouple income from work. That should already be obvious in a time when people are in massive lines for food banks while farmers are plowing stuff under and pouring milk down drains. Our problem is not a lack of supply. Thanks to automation our economy is creating more than enough. We have plenty of food and even half of it is thrown away. We have 31 vacant houses per homeless person. Our productive capacity is operating at about 70% and economists believe that lack of spending power is actually holding back GDP growth. If we simply got more money to people to get closer to 100% capacity, GDP would increase 10%. That's more wealth for everyone, including Steve.
As long as we don't have UBI, demand will continue to fall as wages fall, which will hurt the economy. Poverty is also extremely expensive, costing trillions of dollars a year in avoidable health costs, costs of crime, and lower productivity. WE ARE PAYING MORE TO NOT HAVE UBI THAN TO HAVE IT. UBI isn't expensive. It's a great deal. The net cost of a poverty level UBI in the US would cost well under $1 trillion a year, and could be done by just adding a 10% sales tax to everything, and replacing current programs like TANF and tax expenditures like EITC and the home mortgage interest deduction.
Steve uses an example of a car and gets the math wrong. A $30,000 car would cost $33,000 with a 10% VAT, and that means you've still got $9,000 more dollars in disposable income, which can also be seen as a $9,000 reduction in taxes. The UBI is a giant national tax rebate, where the only people who would see decreased disposable incomes would be those spending more than $120,000 a year, and that's if the VAT is fully instead of partially passed on to consumers.
There is simply no good economic argument against UBI, because it improves incentives, increases entrepreneurship, increases spending, increases productivity, decreases poverty, decreases insecurity and instability, improves health, reduces crime, and despite what Steve claims, there is indeed a moral argument for UBI.
As Thomas Paine said, no one created the Earth. If we had never invented private property, everyone would have inherited their share of the Earth. But we did invent private property, and in so doing, we created a world of the dispossessed, where people no longer have free access to the land to work it themselves for their own survival, and instead must work for those who have claimed the Earth as theirs, one of whom is Steve Forbes. What Steve is doing is immoral. What Steve is doing is withholding what people need to live, and then agreeing to let them live if they do what he wants. That's not freedom. That's enslavement. UBI creates a free market for labor, where because everyone's basic needs are met as a human right to life, everyone sells their labor to each other voluntarily according to conditions both agree upon.
What Steve is saying here is that he wants everyone to continue to not have free access to what they need to live, so that they will agree to be willing employees at a cheap price. He's arguing for the control he has that he wants to keep. UBI is the power to say no to Steve, and I guess he doesn't want that. He doesn't believe in consent when it comes to work. He believes that people should be forced to work for their own good, for cheap, for his benefit.
Don't fall for this crap. Steve doesn't know what's best for you. Only YOU know what's best for you, and you know damn well that $1,000 a month is not going to eliminate purpose from your life just as Steve's billions don't eliminate purpose from his.