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This issue brief is part of a series examining a variety of controversial local and national issues, focusing on specific policy proposals that are under active consideration.
The premise of these essays, as outlined here and here, is that many important public policy issues are more complicated than the most fervent adherents to either side usually acknowledge, a dynamic that often hinders our ability to engage in thoughtful debate. (Earlier essays in the series have addressed proposals for free community college; free MBTA service; right-to-shelter; rent control; supervised injection sites; school library books; reparations; voter ID requirements; a moratorium on prison construction; and limiting investments in natural gas infrastructure.)
The Proposal
Enact a universal basic Income plan to ensure that every household in Massachusetts has a minimum monthly income to cover essential living expenses.
Background
Universal basic income (UBI) is an anti-poverty and income stability proposal intended to ensure that all households have a guaranteed income with few, if any, strings attached.
Five cities in Massachusetts have launched limited pilot programs with monthly stipends up to $500, to evaluate the impact on recipients, especially with regard to food security, health, and employment. State Sen. Jason Lewis has introduced a bill to establish a five-year state-sponsored pilot for 1,500 people to ensure recipients have a monthly income from all sources that is “at least equal to a living wage,” which for a single-adult with two children would average about $11,250 (pre-tax) in Massachusetts, according to the MIT Living Wage Calculator.
A form of UBI, called the negative income tax, was proposed by free-market economist Milton Friedman in the early 1960s as a way to put cash in the hands of poor people without the need for large bureaucracies to manage anti-poverty programs. President Richard Nixon, with advice and advocacy from Daniel Patrick Moynihan, borrowed Friedman’s idea as the basis for his Family Assistance Plan, which would have replaced Aid to Families with Dependent Children, but it was rejected by Congress in 1972.
A related approach, called the earned income tax credit, was first enacted by Congress in 1975 to provide low-income workers with supplementary income through a refundable credit against their federal tax bill. Similarly, in 1997 Congress passed the child tax credit to help pay for childcare to enable parents to work or go to school.
The EITC and CTC have been expanded over the years and some states, including Massachusetts, have enacted their own versions to supplement the federal benefits. The federal EITC is worth up to $7,800, with Massachusetts adding up to $3,100. The maximum federal CTC benefit is $2,000 per child ($1,400 of which is refundable for families that don’t pay federal income taxes), to which Massachusetts adds up to $440.
Although the idea of a universal basic income has resurfaced periodically over the years, it has gained political traction over the past decade, especially during the COVID pandemic when the federal government provided billions of dollars in additional cash assistance and tax credits to displaced workers and low-income families.
Bumper Stickers and Sticking Points
End Poverty, Now!: Poverty is not a bug, but a feature of American capitalism. The free market is inherently rigged against poor people, limiting their opportunities for employment or forcing them into low-wage, mostly part-time jobs with no benefits. The accelerating pace of technological change is making a bad situation worse, not just for poor people, but for the middle class, too. As a result, the only solution to poverty and financial instability is to ensure every family has a government guaranteed income.
No More Handouts!: Cash welfare payments inevitably discourage people from working and create patterns of dependency that are passed on from generation to generation. Increasing the size of welfare checks and extending them to people who are already self-sufficient only serves to undermine personal responsibility and deepen a sense of entitlement, sapping the country of the hard-working, entrepreneurial spirit that has made it the world’s most successful economy.
Evidence-Based Case in Favor
The animating idea behind a universal basic income is that by establishing a financial floor under every household, federal and state governments can simplify the current patchwork of cash and in-kind benefits for low-income households, thereby increasing participation of eligible families and reducing the negative impacts and perverse incentives of “cliff effects,” wherein recipients lose public benefits as their income rises.
At the same time, a guaranteed income promises to create greater household financial stability and security, especially in light of long-term wage stagnation and the ongoing disruption of labor markets due to technology and globalization, thereby enabling families to better plan for their future while reducing food and housing insecurity and creating a better environment for raising children.
To date, the largest and longest running guaranteed income programs have been implemented in economically developing countries with high levels of deep poverty, such as Prospera in Mexico and Bolsa Familia in Brazil, both of which have produced positive results in terms of health indicators, educational outcomes, employment, and inter-generational economic mobility.
More recently, a growing number of pilot programs have been launched in US cities, typically providing families with monthly cash grants of $400-$1,000. From this pool of data points, some promising findings are emerging.
Importantly, the majority of expenditures resulting from UBI payments go for basic needs, like food, housing, transportation, and health care, according to aggregated data from over 30 US pilots compiled by Stanford University’s Basic Income Lab. In no case does it appear as if cash grants have been used for frivolous purposes, let alone self-destructive ones, such as drugs or alcohol.
Here in Massachusetts, the Shah Foundation sponsored a 2020-21 pilot in which 2,000 Chelsea residents received $400 per month via debit cards. A study of the program by Harvard’s Rappaport Institute for Greater Boston found that about three-quarters of the funds were spent at supermarkets or grocery stores and other food retailers.
A similar program in Cambridge provided low-income, single-parent households with $500 per month for 18 months. Recipients “reported higher incomes and lower income volatility” than a control group, according to a study conducted by the Center for Guaranteed Income Research at the University of Pennsylvania, contributing to a lower housing cost burden and greater food stability.
Besides the positive direct financial effects associated with UBI, researchers consistently find indirect benefits related to mental health, family stability, and educational outcomes. For example, according to researchers at the Penn center, the children in the Cambridge UBI “treatment group” saw positive educational effects, such as higher grades and fewer absences.
All these studies point to consistently positive effects of these UBI pilots, even though the monthly stipends have been relatively small, and the duration of the pilots has been short.
A more recent large-scale example of the potential impact of cash grant programs is the expansion of the federal child tax credit during COVID. In 2021, low-income families received a fully refundable tax credit of up to $3,600 per child and child poverty dropped by over 40 percent, lifting over 2 million children out of poverty. After the CTC expansion lapsed in 2022, child poverty rates doubled.
Evidence-Based Case Opposed
Universal basic income proposals can be terribly expensive and perhaps more important, most studies of UBI programs have shown little, if any, positive impact on employment and earnings. Similarly, although there is strong evidence that these initiatives raise household income and improve living conditions, they do not appear to help families escape poverty.
According to a 2019 analysis, a nationwide UBI program that pays $12,000 per adult per year, phasing out at the median income level, would likely increase the annual fiscal impact of the federal social welfare programs they replace (excluding health care and Social Security retirement benefits) by over $900 billion or 250 percent.
Here in Massachusetts, the Department of Transitional Assistance estimates that there are about 700,000 recipients in the Commonwealth of SNAP (Supplemental Nutritional Assistance Program) and/or TAFDC (Transitional Aid to Families with Dependent Children) cash grants. Taken together these programs provide the average participating household with about $12,500 per year in benefits – not counting additional funds low-income households can access through federal and state CTC and EITC refundable tax credits, which average over $5,000 combined. |
