The problem with universal basic income

BY:Lee Fazekas| May 4, 2020
The problem with universal basic income


The idea of each U.S. citizen getting a check once a month simply for existing has been around for a while, but it was popularized by 2020 Democratic presidential candidate Andrew Yang, who made it a central issue of his campaign. The logic went that simply paying out cash to people would stimulate economic activity and therefore improve the overall economy, resulting in a higher quality of life for everybody. Who wouldn’t like to see an extra $1,000 or even $2,000 a month in their bank accounts? Many figure that under these trying times, it probably wouldn’t hurt—which makes it all the more essential for Marxists to study what the outcome of such a policy implemented under the wrong conditions could be.

Many popular criticisms of universal basic income (UBI) come from the right: Wouldn’t giving out money to everyone cause fewer people to work? Why would workers be compelled to take low-wage jobs when they could fall back on their UBI? Others say that UBI simply isn’t fair, since it would give money to each person regardless of their present income. A person who made only $1,000 a month would consider an extra $1,000 or $2,000 a month a real game changer for their living conditions, but for the 14 million people in the United States who make more than $100,000 a year, an extra $10,000 or even $20,000 might not make such a difference. Such a cash release program would also be expensive, costing trillions per year—and if the U.S. government claims they couldn’t find that sort of money to pay for Medicare For All, how could UBI be funded?

The $1,200 that was paid to most people in the U.S. as part of the government’s response to Covid-19 might be considered by some as a first go at UBI. The extra money that was tacked onto unemployment insurance could also be considered a try. Yet, for most families, this money isn’t working the magic that it promised. Banks like USAA are stepping in to seize money as soon as it hits checking accounts, saying that since these account holders have outstanding debt, it should go to pay that down first. Others saw their $1,200 evaporate into rent or mortgage payments. Many more were left questioning how $1,200 could meaningfully make a difference when the economic outlook from here on out seems so broken.

UBI enables shrinking the size of the “welfare state.”

Federal, state, and city governments are already saying that a new round of austerity measures will be needed after this crisis: cut after cut to social spending, layoffs, and letting infrastructure rot will be necessary sacrifices to save capitalism. When asked about the possibility of raising taxes on the very rich instead, New York Governor Andrew Cuomo said: “I don’t believe [in] raising taxes on the rich. That would be the worst thing to do. You would just expand the [tax] shortfall,” he said. “God forbid if the rich leave.”

If shrinking the size of the “welfare state” is what’s needed for the rich to stay, then UBI offers that opportunity. And in fact, UBI is promoted by the right as a way to undermine entitlement programs. If housing vouchers, SNAP benefits, or infrastructure improvement projects are going to dry up under these budget shortfalls, then UBI will enable the slashing of state employment while also putting the onus of personal responsibility on each and every individual to survive, whether they receive UBI or not. Of course, undocumented people, those here on work visas, and prisoners would be exempt from UBI but would still suffer the economic outcomes in the interest of shrinking the welfare state.

Why would one need food stamps or universal healthcare, the reasoning goes, if the government is giving everyone free money? Why would one need public transportation when they could hire an Uber or Lyft with some of that free money? It seems that this UBI would come at a cost. As we can see, under capitalism there really is no such thing as a free lunch.

Because of class tensions and the necessity for ever-increasing profits, the longer-term outcome of UBI would likely be an increase in prices. More money floating around in the economy would lead struggling capitalists to increase prices. UBI proponents argue that since UBI money would not be new money, just money shifted from other programs, inflation would not be a result. Bourgeois economists additionally say that UBI could simply be pegged to inflation. Yet, this assumes that the decimation of social programs and even UBI itself is not part of a wider class project.

When workers enjoy close to full employment, they often have the power to form unions and agitate for themselves higher wages and better working conditions. The bosses, in turn, will end up raising prices to capture some of this “lost” surplus value. So long as the workers have the upper hand, this will ensure a raise of wages. It’s a cyclical thing, and reflective of the balance of class forces.

Workers prefer higher rates of employment because, if our class is strong and organized, that equals better wages. The ensuing inflation doesn’t bother workers much, since they don’t have a ton of money saved to begin with and can use their class power to organize for wages that keep track with inflation. It’s the banks that get furious, as they see the return on their outstanding debts begin to vaporize and the value of their assets shrink.

Big businesses also can’t stand inflation because it makes it harder for them to sell goods for higher profits. If they manufacture a car and it only costs them $5,000, what happens when suddenly that rate of investment is swallowed up by inflation? They are also not as able to plan for the future. The profits they make today might mean nothing in six months.

Neoliberals like Thatcher and Reagan thought that higher numbers of unemployment would be a good thing. It would “discipline” the labor force, as we could see after globalization picked up steam in the post-Soviet era and unions were smashed left and right. They actually wanted higher rates of unemployment, but only one of the reasons was to control inflation. It was really all about restoring the class power lost to them since World War II.

What really had bourgeois economists scratching their heads was that the high employment rates Trump bragged about didn’t lead to higher rates of inflation. Why was that? Simple. The new jobs people have access to now do not pay high wages, have few if any benefits, and are not union jobs. The shredded safety net doesn’t offer much to workers, so they’ll do anything to keep their jobs. Their meager pay keeps them in debt. These factors provide the labor discipline necessary to keep workers scared of speaking up at work. This is why the balance of power is affected by not only “full employment” but also the quality of the employment itself. If inflation is just displaced class conflict over the distribution of surplus, then why would prices rise when workers are on the defensive, fighting for their lives, and unorganized?

UBI might work under different conditions in different countries. But other countries have different relations of power in which workers have stronger unions and more bargaining leverage. What does UBI mean for us when workers don’t hold that leverage? It would be great to say that UBI could be introduced in tandem with rent freezes and price controls, but do workers currently have the power to demand that?

If workers are crying out for universal basic income, what is it they are rallying for? They are rallying for housing, healthcare, and basic necessities. They are rallying for debt payments and transportation. Under capitalism and the tyranny of the wage relation, all of these things must be paid for. But why not use this as an opportunity to agitate for a rent freeze, universal healthcare, and free basic necessities? We must be wary of falling into traps that the right sets for us. Perhaps once we have organized around these essentials, organized our working class, and gained the ability to implement price controls and freeze evictions for good, we may find that UBI is not necessary.

Image: Poor People’s Campaign, Facebook.


Related Articles

For democracy. For equality. For socialism. For a sustainable future and a world that puts people before profits. Join the Communist Party USA today.

Join Now

We are a political party of the working class, for the working class, with no corporate sponsors or billionaire backers. Join the generations of workers whose generosity and solidarity sustains the fight for justice.

Donate Now

CPUSA Mailbag

If you have any questions related to CPUSA, you can ask our experts
  • QHow does the CPUSA feel about the current American foreign...
  • AThanks for a great question, Conlan.  CPUSA stands for peace and international solidarity, and has a long history of involvement...
Read More
Ask a question
See all Answer