The Universal Basic Income, Introduction

A proposal for just distributions and macroeconomic stimulus

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Aug 22, 2025

In our recent Q&A with Glenn McMahan of Upriver Press, regarding our soon-to-be-released work Inequality by Design, my co-author Ben Johnson and I brought up the Universal Basic Income (UBI). Since then, Ben and I have been pondering UBI as it may be (mis)understood by our readers and the general public. Over the next week or two, we will discuss the concept of the UBI, some caveats, shortcomings and perceived pitfalls, then flesh out our ideas on UBI as a practical tool. If restoring some degree of economic equality is a necessary condition to the survival of America as a functional, constitutional democracy, restoring the distribution of wealth to something more akin to the early 1970s would all but require a UBI in some form. Furthermore, UBI offers the potential for using UBI as a fiscal and monetary policy to moderate the boom and bust of the business cycle.

As mentioned in the Q&A with Glenn, and in our book, the last fifty years saw a gargantuan transfer of wealth, at least $50 trillion, from the bottom 98% to the top of the economic pyramid.1 If we want to reverse this trend, what tools are at our collective disposal? A few methods spring to mind, though each has a dicey, legal basis, and could easily spiral out of control.

One obvious method would be the expropriation (confiscation) of wealth from the top 1%. Of course, this would almost certainly involve coercion and likely some violence. Even if expropriation remains guillotine-free, what happens to the value of those assets if their value is predicated on a stable economic and legal system when that stable system has just been thrown out the window? How much value will a couple shares of stock retain when the mob has stolen it from the owner and given it to the poor? Further, what happens if significant numbers of Americans decide to liquidate those assets to pay off credit card, medical or student loan debt all at once? In all likelihood, we would see a sell off which would drive down the value of the assets, and return many of the assets to the ownership class. We would have robbed Peter to pay Paul, and the jokes on us, because in this parable, Peter and Paul are part of the one percent. Say that three times fast.

Another option might be to nationalize, break up, then turn ownership of large companies over to the employees that work at them. This has a certain appeal, as it both makes Americans their own bosses, and ensures that profits made by those businesses go directly to the workers who produced them, rather than the capitalist, ownership class. While this solution is appealing for reasons of ownership and control over one’s economic destiny, an immediate problem presents itself: most Americans don’t work for the (most profitable) S&P 500 companies. According to Fortune magazine, about 18% of Americans work for S&P 500 companies, companies in the country. About 34% of the workforce is employed by small businesses, and in the current economic context, may not turn much of a profit. We discuss the viability of cooperative ownership in Inequality by Design, and in general we think it is a great model, but one that would make sense as a long-term treatment of the malaise of inequality. But it is not the only tool.

But as noted above, most Americans don’t work for the biggest, and often the most profitable, firms. We need a policy tool which will impact all Americans equally, to move some of that wealth back down the economic ladder. And that is where a UBI program could have the same effect as Social Security in the 1930s. In that case, Social Security benefits cut the poverty rate among the elderly from as high as 90% to 30% by the 1960s. If you want to read more about the value of Social Security in reducing poverty, check out this paper by the NBER.

And what is UBI? It is exactly what it sounds like, a program which would give every American a monthly income. Since we can hear you screaming through the keyboard BUT HOW CAN WE PAY FOR THAT AND WHY SHOULD WE PAY PEOPLE FOR NOTHING!?!?!?!, let us run through a few, straightforward ways such a program could be paid for and instituted. Keep in mind that this is a thought exercise and not a detailed, exhaustive program. We will waive magic wands and assume bold leaps in Federal policy to illustrate a broader point, rather present a nuts-and-bolts, step by step set of instructions about how to implement a UBI. If, in some shining utopian future, Congress wanted to call Dr Mattson and I to advise on methods of implementing a UBI, we would answer the call.

With those caveats out of the way, let’s look at one of the largest potential sources of revenue, and biggest transfers of wealth in America today: private health insurance.

Ryan

My own journey to a view on UBI stems from my readings on Milton Friedman’s concept of a negative income tax (NIT). Broadly, the NIT suggests that the federal government pay out money to people working low wage jobs up to a certain point. What is so fascinating about Friedman’s NIT is that he is not exactly a paragon of woke social justice regarding income inequality. Friedman defended markets and competition, and his views would be broadly described as ‘right wing.’ The NIT was a reaction to the inefficiencies he saw in the low wage markets. The correction can be made through cash transfers either directly to the worker in the form of a tax return, or through subsidies to the firms so that they can pay the higher wage (assuming these firms are honest enough to do that). Friedman recognized a place for regulation and federal government intervention, and his ideas heavily influenced the creation of the Earned Income Tax Credit.

The limit to Friedman’s proposal of a NIT is that it assumes workers can find low wage jobs to begin with. No work, no NIT. This cuts out the extremely poor who cannot find jobs, and let’s recall that these very extreme poor tend to be women and children completely shut out of the labor market due to various factors beyond their control. Does this weakness sound familiar to those of you with good health insurance but feel tied to your employer for fear of losing it?

What is overlooked often in Friedman’s proposal of NIT as a stimulus measure. It would become an automatic stabilizer of sorts as during recessionary times as wages go down (so the EITC kicks in and households make up some of that income), and during boom times it goes up. An NIT that is not tied to work, or that is to say “universal” in terms of labor provision, would be a more effective stimulus on the macroeconomic side of things. I’ll flesh that out in a later post.

What Friedman never addressed (to my knowledge) was the potential role of monetary policy and the Federal Reserve. Friedman, again the paragon of leftist ideology, places the blame for the Great Depression at the feet of the Federal Reserve. Was he Ron Paul-ing it and saying, “end the Fed?” Of course not. His main critique was the Fed did not act soon enough or “in accordance with those who founded it”. The Fed did not provide more liquidity which would have ended the Great Depression much earlier as it was too busy targeting a Gold Standard, which at the time necessitated tight money (something that makes recessions worse).2 What if the Federal Reserve were to adjust its monetary policy such that it could stimulate the economy more effectively while not tipping the scales toward the largest banks? What if the Fed could contribute to a UBI? And not only that, what if the Fed could use UBI as one of its tools of Keynesian macroeconomic stimulus? I will address the role of the Fed in the provision of a UBI in a later post, related to my recent post on the amount of Excess Reserves held by banks currently.3

Trends in Income from 1975 to 2018, by Price and Edwards (2020).

Why is it that I cite Friedman’s work so often, and yet get called a “Marxist” just as often? The Republican’s definitely took a hard right curve since the 1980s if they find themselves to the right of the author of Capitalism and Freedom. But I believe I also pointed out in a previous post that the Republicans are now coding as “State Capitalists”, which had a different name in the 1930s and 1940s. But I’ll try not to drop too many f-bombs. I suppose I’ll see Friedman’s zombie at the next communist party I go to.

See the post “Excess Reserves - Burying the Talents in the Backyard” from August 19, 2025.