"Matt Zwolinski, a philosophy professor at the University of San Diego, has responded to Bryan Caplan’s critique of a Universal Basic Income. His defense is deficient.

I’ll highlight three things.

First, on the effect of a UBI on children.

Zwolinski states:

For instance, Bryan argues that cash transfers to parents of young children would be a bad idea, since the fact that such parents require taxpayer assistance is evidence of their irresponsibility, and “they may spend it on alcohol.”

He responds:

But this is a case where Bryan is the one who is not paying enough attention to empirical evidence. We actually know a good deal about how cash transfers affect children. In particular, evidence from the 2021 temporary expansion of the Child Tax Credit shows that cash transfers led childhood poverty to fall to their lowest level on record: 5.2%. When that expansion ended in 2022, child poverty more than doubled almost immediately, rising to 12.4%.

Matt’s response tells us nothing about how cash transfers affect children and shows a misunderstanding of what the federal government’s data on household income show. The data are on household income where there are children present; they tell us nothing about how the income is spent. Take two households with the same income. In household A, the parents spend the money in ways that Matt approves. In household B, the parents spend a huge amount of the income on alcohol. Both show the same income. The income data do not distinguish between the two households.

Matt’s mistake is akin to one that one advocates of government spending often make: We must be doing good things; look at the large amount we’re spending.

Second, on the added cost of a UBI.

Matt considers a lot of versions of a UBI: with seniors but without children or teenagers; with children but without seniors; without seniors or children. He also considers two levels of a UBI: $500/month or $1,000/month. He then quotes from Universal Basic Income: What Everyone Needs to Know, a book that he co-authored with Miranda Perry-Fleischer, a law professor at the University of San Diego:

[T]he cost of a $500 per- person per- month UBI that replaced most current welfare programs in the United States would be roughly 7% of GDP. Government spending in the United States is currently around 38% of GDP, compared to 49% of GDP in Norway and 50% in Sweden. A $500- per- month UBI would keep the ratio of US government spending to GDP below Nordic levels, while a $1,000- per- month UBI would vault us ahead of Denmark (55%) and just behind Finland and France, both of whom clock in at 57%.

There are two things to note. First, the authors don’t tell us what they mean by “most current welfare programs” in the United States. Presumably it would include SNAP (food stamps), TANF (temporary assistance to needy families), and housing subsidies. Would it also include Medicaid? My sense is that it wouldn’t.

Second, and even more important, notice how the authors seem to be at ease with the idea of moving us much closer to European levels of spending. That’s what I found most shocking about their defense of the UBI.

Third, on taxes.

Matt writes:

Note that the cost estimates above assume zero means-testing, either on the front-end or back-end. The net costs of either a Negative Income Tax or a UBI with a phaseout/surtax would thus be considerably lower.

That statement is correct for a phaseout but incorrect for a UBI with a surtax. But the phaseout also has problems.

Let’s look at the phaseout. Assume that a couple with no children would otherwise make $40,000 a year and gets $2,000 a month, which is $24,000 a year. Past the $40,000, there’s a phaseout. It can’t be too steep or we’re back to really poor incentives to make money. So let’s say it’s a loss of 25 cents for every additional dollar earned. That couple will reach a zero subsidy when it gets to $136,000. (It takes $96,000 in additional income to drive the UBI down to zero.) There will be tens of millions of people in that income range getting subsidies. So Matt is right that the subsidy won’t be as large as the no-phaseout subsidy, but it will be substantial.

Also, there will be a 25-percentage-point diminished incentive to work for tens of millions of people. Many of them will be in a 12% federal tax bracket and a 4 or 5% state tax bracket, along with a 7.65% payroll tax bracket. (We really should count much of the employer’s portion but I’ll leave that out.) So that’s a marginal tax rate of 24 to 25%. Add in 25 percentage points and you get a whopping 49 to 50%. In other words, they will net $1 for every additional $2 in income.

In saying that the net cost of a UBI would be considerably lower with a surtax, Matt almost seems to be treating a lump-sum subsidy as equivalent, but in opposite direction, to a higher marginal tax rate. But they aren’t equivalent. When the government is trying to get hundreds of billions of dollars back by imposing probably about a ten-percentage-point increase in marginal tax rates on tens of millions of high-income people, that definitely affects their incentives to work, to buy tax-deductible items (a more expensive house, for example), to buy tax-free municipal bonds (as high-income people did before the 1986 Tax Reform Act), and to hide income.

Finally, I’ll just make a point that I saw Bryan Caplan make in a debate on UBI some years ago. He pointed to his father, who is not close to being a libertarian but who strongly objects to putting tens of millions of additional adults on welfare. Bryan said, “Libertarians should be at least as libertarian as my father.”

Two additional points.

First, note that this discussion is happening at a time when we are seeing federal deficits equal to over 5% of GDP for many years. There’s only starting to be a discussion of which programs to cut or pare and which taxes to raise. So advocating a massively expensive new program with accompanying tax increases is irresponsible.

Second, for a detailed look at the case against a UBI that has held up well, check my “A Philosophical Economist’s Case against a Government-Guaranteed Basic Income,” Independent Review, v. 19, n. 4, Spring 2015."