This article was published in Governing.
Iowa policymakers did the right thing in prohibiting localities from creating UBI programs that would not only fail to resolve poverty but also create a fiscal nightmare for taxpayers.
The idea of a universal basic income (UBI), whereby a government provides everyone with a certain monthly amount to spend as they wish, is nothing new. Touted by its proponents as a way to reduce poverty and provide economic security, this endeavor is costly for taxpayers and a disincentive to work. It is a bad idea no matter which level of government does it.
In Iowa, several counties in the Des Moines metro area have been using COVID-era federal funds, along with foundation and private-sector support, to launch UpLift, a UBI pilot program. In response, the Iowa legislature recently passed a bill to prevent local governments from creating UBI programs. In Minnesota, where some localities are testing UBI programs, the Legislature is doing the opposite: considering legislation that would create a statewide UBI program.
These neighboring states are vastly different politically, and the debate over UBI is just one example. Iowa lawmakers seek to curb socialism, while Minnesota is attempting to advance this economic philosophy.
Individuals from across the political divide have advocated for UBI-related policies. Whether it was the free-market economist Milton Friedman’s negative income tax for low-income Americans or, more recently, Democratic presidential candidate Andrew Yang’s Freedom Dividend, UBI-type proposals are generating more debate, especially at the state and local level. The Wall Street Journal recently reported that numerous communities nationwide are experimenting with UBI programs. Most of these are in Democrat-run localities.
Some UBI advocates, as Friedman did, argue that this should replace existing welfare programs, while most progressives argue that it should be in addition to existing benefits, needed because too many Americans cannot break the cycle of poverty.
The massive spending by the federal government in response to the COVID-19 pandemic is driving the UBI programs launched by numerous local governments. The UpLift program provides “no-strings-attached basic income of $500 per month for 24 months.” Individuals selected in the Des Moines metro area “are free to use the monthly payments to meet their needs best.”
In Minnesota, the Legislature is considering a proposal to appropriate $100 million to provide hundreds of dollars every month to as many as 10,000 people. Specifically, recipients of the proposed UBI program would receive $500 a month for at least 18 months in addition to any existing social welfare benefits. Minnesota would provide grants to local and tribal governments, which would then redistribute those funds to UBI recipients.
A UBI would not just create a new entitlement program; it is a form of socialism as it would essentially take ownership of some people’s work so that government can redistribute it to others.
Further, most UBI grants are currently from federal COVID-19 funds — one-time money. When these funds expire, it will be the responsibility of state and local governments to continue to fund the UBI programs. And it is doubtful that UBI would replace existing social welfare programs. This would be an additional costly entitlement, which would result in increasing state and local spending and higher taxes.
The objective of UBI is to conquer poverty, but advocates do not realize that many people are struggling to make ends meet because of persistent inflation resulting from the Federal Reserve’s monetizing of reckless COVID-19 spending. This is why Iowans are struggling with real average weekly earnings down 3.9 percent since January 2021 as high grocery and gas prices continue to weigh on them.
The cost of UBI would also place further pressure on already heavy tax burdens. A major concern for Iowans is the increasing burden of property taxes, driven by local government spending.
A UBI program brings up some moral concerns as well. UBI, especially with no strings attached, becomes an incentive for not working. During COVID-19, many able-bodied individuals stayed out of the workforce due to generous stimulus payments. The objective of social welfare policy should be to provide for those who need help, but these policies should be short term and designed to encourage people to be in the workforce and move beyond poverty.
The social safety net consists of numerous programs at all government and private-sector levels. Iowa policymakers did the right thing in prohibiting localities from creating UBI programs that would not only fail to resolve poverty but also create a fiscal nightmare for taxpayers.
The best approach to reducing poverty is to create an environment that fosters economic growth and job creation, which leads to economic opportunities.
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