Why universal basic income costs far less than you think
The Universal Basic Income (UBI) movement has a major problem: nobody really knows how much it would cost to implement it.
Want to get rid of poverty, lessen inequality and provide financial stability in a world of precarious work? Well, why not simply give everyone enough money to ensure basic sustenance?
This is the deceptively simple solution proposed by advocates of universal basic income (UBI). Just transfer enough money to everyone, every month, to guarantee a basic livelihood. The policy is universal and unconditional (you get it no matter who you are or what you do).
This means no bulky bureaucracy to administer the programme, or onerous reporting requirements on the poor. Nor do you have to wait to file paperwork to benefit: whether you lose your job, decide to strike out on a new career path or take time away from work to care for a family member, the money is already there.
But the UBI movement has a major problem: both critics and even many supporters don’t understand how much the programme would really cost. To calculate the cost, most people just multiply the size of the monthly income (say, $1,000) by the population (it’s universal, after all) and – voilà – a number that seems impossibly expensive.
But this is not how much UBI costs. The real cost – the amount of money that actually needs to be taken from someone and redistributed to someone else – is just a small fraction of these estimates.
The key to understanding the real cost of UBI is understanding the difference between the gross (or upfront) and net (or real) cost. Here’s a simple example: imagine a room with 15 people who want to set up a UBI for the room of $2 per person. The upfront cost of the policy would be $30. The ten richest people in the room are asked to contribute $3 each towards funding it. After they each put in $3, raising the total $30 needed, every person in the room gets their $2 universal basic income. But because the ten richest people in the room contributed $3, and then got $2 back as the UBI, their real, net contribution is in fact $1 each. So the real cost of the UBI is $10.
Estimates that just multiply the size of the UBI by the population of a country do the equivalent of claiming that the cost of UBI in the room above is a whopping $30. But the real cost in this scenario – the money redistributed from the wealthy – is only $10.
The billionaire’s dilemma
It’s important to understand who will be gaining money through a UBI and who will be contributing to it. The common mistake is to double count the net contributors. Yes, they get a UBI, but in contributing to the UBI pot they first return their UBI, and then throw in some money on top of that. So it’s incorrect to count them when calculating the true UBI cost.
This is a fundamental point that often gets missed: those that are taxed to pay for the UBI will get some of that cost back – by getting their UBI. You can also think about it in reverse: while the UBI goes to everyone, the rich in effect give it back in the first chunk of taxes they pay, so you don’t need to count their UBI in cost estimates.
This also resolves UBI’s “billionaire’s dilemma” – why give someone like Bill Gates a basic income? The answer is that Gates would simply return that UBI through his taxes – and help pay for others. But if Gates becomes suddenly destitute, the UBI will still be showing up for him to use every month. And since his tax bill will drop, he’ll become a net beneficiary rather than contributor.
Any UBI estimate that just multiplies the size of the UBI by the population is a red flag that the cost has been over-inflated. A true cost estimate will always discuss who the net beneficiaries will be, who the net contributors will be, and the rate at which we gradually switch people over from being beneficiaries to being contributors as they get richer (this is sometimes called the claw-back rate, the withdrawal rate or the marginal tax rate – which is not an overall tax, but simply the rate at which people start to return their UBI to the communal pot as they earn more).
Cost estimates that consider the difference between upfront and real cost are a fraction of inflated gross cost estimates. For instance, economist and philosopher Karl Widerquist has shown that to fund a UBI of US$12,000 per adult and US$6,000 per child every year (while keeping all other spending the same) the US would have to raise an additional US$539 billion a year – less than 3% of its GDP. This is a small fraction of the figures that get thrown around of over US$3 trillion (the gross cost of this policy). Karl’s simplified scheme has people slowly start contributing back their UBI in taxes to the common pot as they earn, with net beneficiaries being anyone individually earning less than US$24,000 a year.
This point still holds if you’re raising money for UBI from other sources than income or wealth taxes. If you use a corporate or data tax, or a natural resource or carbon tax to finance a UBI, you are still redistributing money that would otherwise ultimately be profits that go to Google shareholders or BP executives. And you’re taking less away from them than you would think – because they too get a UBI. So the money they end up losing through the new tax is offset by the UBI they receive. The same holds if you’re paying for a UBI by reshuffling your budget.
Some people get confused and question whether UBI is really universal if only a portion of the population actually ends up with extra income, while another portion pays for it. But any policy that is universal yet redistributory works this way. Public transit, roads and schools are all universal benefits, but some people pay a lot for their funding through their taxes, while others enjoy them for free or at a lower cost.
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- Medical professionals are currently using 3D printers to create prosthetics and patient-specific organ models that doctors can use to prepare for surgery.
- Eventually, scientists hope to print patient-specific organs that can be transplanted safely into the human body.
- Northwell Health, New York State's largest health care provider, is pioneering 3D printing in medicine in three key ways.
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- The study involves four experiments that measured individuals' socioeconomic status, overconfidence and actual performance.
- Results consistently showed that high-class people tend to overestimate their abilities.
- However, this overconfidence was misinterpreted as genuine competence in one study, suggesting overestimating your abilities can have social advantages.
Is this proof of a dramatic shift?
- Map details dramatic shift from CNN to Fox News over 10-year period
- Does it show the triumph of "fake news" — or, rather, its defeat?
- A closer look at the map's legend allows for more complex analyses
Dramatic and misleading
Image: Reddit / SICResearch
The situation today: CNN pushed back to the edges of the country.
Over the course of no more than a decade, America has radically switched favorites when it comes to cable news networks. As this sequence of maps showing TMAs (Television Market Areas) suggests, CNN is out, Fox News is in.
The maps are certainly dramatic, but also a bit misleading. They nevertheless provide some insight into the state of journalism and the public's attitudes toward the press in the US.
Let's zoom in:
- It's 2008, on the eve of the Obama Era. CNN (blue) dominates the cable news landscape across America. Fox News (red) is an upstart (°1996) with a few regional bastions in the South.
- By 2010, Fox News has broken out of its southern heartland, colonizing markets in the Midwest and the Northwest — and even northern Maine and southern Alaska.
- Two years later, Fox News has lost those two outliers, but has filled up in the middle: it now boasts two large, contiguous blocks in the southeast and northwest, almost touching.
- In 2014, Fox News seems past its prime. The northwestern block has shrunk, the southeastern one has fragmented.
- Energised by Trump's 2016 presidential campaign, Fox News is back with a vengeance. Not only have Maine and Alaska gone from entirely blue to entirely red, so has most of the rest of the U.S. Fox News has plugged the Nebraska Gap: it's no longer possible to walk from coast to coast across CNN territory.
- By 2018, the fortunes from a decade earlier have almost reversed. Fox News rules the roost. CNN clings on to the Pacific Coast, New Mexico, Minnesota and parts of the Northeast — plus a smattering of metropolitan areas in the South and Midwest.
Image source: Reddit / SICResearch
This sequence of maps, showing America turning from blue to red, elicited strong reactions on the Reddit forum where it was published last week. For some, the takeover by Fox News illustrates the demise of all that's good and fair about news journalism. Among the comments?
- "The end is near."
- "The idiocracy grows."
- "(It's) like a spreading disease."
- "One of the more frightening maps I've seen."
- "LOL that's what happens when you're fake news!"
- "CNN went down the toilet on quality."
- "A Minecraft YouTuber could beat CNN's numbers."
- "CNN has become more like a high-school production of a news show."
Not a few find fault with both channels, even if not always to the same degree:
- "That anybody considers either of those networks good news sources is troubling."
- "Both leave you understanding less rather than more."
- "This is what happens when you spout bullsh-- for two years straight. People find an alternative — even if it's just different bullsh--."
- "CNN is sh-- but it's nowhere close to the outright bullsh-- and baseless propaganda Fox News spews."
"Old people learning to Google"
Image: Google Trends
CNN vs. Fox News search terms (200!-2018)
But what do the maps actually show? Created by SICResearch, they do show a huge evolution, but not of both cable news networks' audience size (i.e. Nielsen ratings). The dramatic shift is one in Google search trends. In other words, it shows how often people type in "CNN" or "Fox News" when surfing the web. And that does not necessarily reflect the relative popularity of both networks. As some commenters suggest:
- "I can't remember the last time that I've searched for a news channel on Google. Is it really that difficult for people to type 'cnn.com'?"
- "More than anything else, these maps show smart phone proliferation (among older people) more than anything else."
- "This is a map of how old people and rural areas have learned to use Google in the last decade."
- "This is basically a map of people who don't understand how the internet works, and it's no surprise that it leans conservative."
A visual image as strong as this map sequence looks designed to elicit a vehement response — and its lack of context offers viewers little new information to challenge their preconceptions. Like the news itself, cartography pretends to be objective, but always has an agenda of its own, even if just by the selection of its topics.
The trick is not to despair of maps (or news) but to get a good sense of the parameters that are in play. And, as is often the case (with both maps and news), what's left out is at least as significant as what's actually shown.
One important point: while Fox News is the sole major purveyor of news and opinion with a conservative/right-wing slant, CNN has more competition in the center/left part of the spectrum, notably from MSNBC.
Another: the average age of cable news viewers — whether they watch CNN or Fox News — is in the mid-60s. As a result of a shift in generational habits, TV viewing is down across the board. Younger people are more comfortable with a "cafeteria" approach to their news menu, selecting alternative and online sources for their information.
It should also be noted, however, that Fox News, according to Harvard's Nieman Lab, dominates Facebook when it comes to engagement among news outlets.
CNN, Fox and MSNBC
Image: Google Trends
CNN vs. Fox (without the 'News'; may include searches for actual foxes). See MSNBC (in yellow) for comparison
For the record, here are the Nielsen ratings for average daily viewer total for the three main cable news networks, for 2018 (compared to 2017):
- Fox News: 1,425,000 (-5%)
- MSNBC: 994,000 (+12%)
- CNN: 706,000 (-9%)
And according to this recent overview, the top 50 of the most popular websites in the U.S. includes cnn.com in 28th place, and foxnews.com in... 27th place.The top 5, in descending order, consists of google.com, youtube.com, facebook.com, amazon.com and yahoo.com — the latter being the highest-placed website in the News and Media category.
If you thought your mother was pushy in her pursuit of grandchildren, wait until you learn about bonobo mothers.
- Mother bonobos have been observed to help their sons find and copulate with mates.
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- Why do mother bonobos do this? The "grandmother hypothesis" might hold part of the answer.
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