Financing Universal Basic Income

It's Monday evening. I had a four-day weekend, because I took Friday off (for a college exam), and today was an official, government-mandated holiday in Hungary, celebrating Pentecost. Tomorrow, the nightmare (work) begins again, so what better way to cope with the dread, then to write about a well-known alternative to wageslavery?

As everyone who reads my articles should know, I am a big advocate for Universal Basic Income. If I'm being intellectually honest, my main motivation is for supporting it is not necessarily because of economical concerns about automation (though, they do play a part), but a desire to return to my old life, from before I was a wageslave - or even just have a bit of a breathing room to take a break from life and re-evaluate what I want to do and what my options are.

Still, to put an end to that two-paragraph segue, I am here to explore how financeable Universal Basic Income is, and how financeable is one of its alternatives.

So, I am going to present four countries, with three different evaluations. All of these will be made under the assumption, that only citizens with voting rights will be eligible for the Basic Income. Let's go!

The United Kingdom

I am starting with the UK, because this whole article was inspired by a recent discussion with a friend of mine, who is a Hungarian living in the United Kingdoms, Scotland to be specific. He doesn't support UBI, or rather, doesn't support any UBI, that is below £1500 per month.

So I did some calculations. The UK has a population of 67.8 million people, but only 47 million registered voters. Thus, I'll go with the 47 million figure, since the earlier number also includes children and non-citizens, neither of which have the right to vote.

To give £1000 per month to 47 million people would cost a yearly £564 billion per year. £1500 would increase it to £846 billion. £2000 would increase it to £1.128 trillion.

Just for comparison, in 2020, the expenditure of the UK government was £928 billion, and with a revenue of £873 billion, this resulted in a deficit of £55 billion. Of this revenue, roughly 37% came from personal income taxes, (roughly £323 billion), while out of those £928 billion...

• £256 billion were spent on social programs

• £166 billion on healthcare

• £103 billion on education

• £52 billion on military

• £43 billion on debt payments

• £37 billion on transport

• £35 billion on public order and safety

• £34 billion on personal social services

• £32 billion on housing and the environment

• £25 billion on agriculture and industry

• £58 billion on everything else

With a deficit of £55 billion, it's obvious, that even a modest UBI of £1000/month - when just added into the budget without deducing from anything else - would increase the deficit from £55 billion to £619 billion.

However, if we throw out social programs altogether, deficit would increase to just £328 billion year. If we threw out healthcare and education too, that would just be £60 billion. We can nullify the deficit altogether halving military spending (60 billion -> 34 billion), halving the spending on "everything else" (34 billion -> 5 billion) and reducing the transport spending by 5 billion.

Alternatively, the government could print money. While I could not find precisely how many British Pounds are in circulation worldwide, I know for a fact that as of the time of writing the article, each British pound can exchanged for 1.42 USD, and there are $1.2 trillion floating around the globe. Thus, my assumption is that there are around £845 billion in circulation.

This means that if the aforementioned UBI was financed by printing money, it would create a hyperinflation of 66.74% per year. Sheesh! That's a far cry from the current 1.4% yearly inflation, which implies the UK government printing just £11 million per year.

Thus, another problem is that we can't count on government revenue being £873 billion - out of that£323 billion comes from personal income taxes, and if UBI is implemented, people likely won't be paying those taxes anymore. WIth UBI being a thing, many people would quit their jobs, thus no longer having taxable income. Thus, it is arguably more realistic to budget with £550 billion in mind, which is a smaller number than our £564 billion per year. Even if government spending was nullified in every other area (even military and police), the government would still be in a 16 billion pounds per year deficit without personal income taxes.

So, as much as it pains for a "taxation is theft" libertarian like me to say, personal income tax would have to stay, at least for people who make at least twice as the UBI. It's likely that to make financing UBI realistic, pretty much every spending - besides police and military - would have to be nulled, turning the UK into a night-watchman state. However, the British people are too statist for that.

Speaking of Night-Watchman state.... What if, instead of a UBI, we just abolished personal income taxes? Reducing the yearly budget by £323 billion means that unless we reduce spending on things, we just added £323 billion to the yearly deficit, which was already £55 billion. Reducing that £373 billion would require completely cutting social services (£256 billion), personal social services (£34 billion), and halving healthcare spending (£166 billion -> £83 billion).

However, there is still one question that could change everything: corruption. How much money is lost to corruption, to embezzlement each year? How much money is actually spent on what it is intended to be spent on? Yes, 256 billion pounds are spent each year on welfare, but a lot of that cost is eaten up by administrative overhead, or the salary of people involved giving out the welfare. I reckon, that if corruption was reduced, the government was downsized and all those kleptocratic bottom-feeders were fired, financing UBI would not be an issue.

The Netherlands

I have two Dutch friends who advocate for UBI, so it'd be interesting to explore UBI in the Netherlands.

The Netherlands have 16 171 304 people eligible to vote. In 2021, the Dutch government's income was €293 billion (or $357.46 billion), while expenditures were €336.6 billion (or $410.652 billion). Out it, €97.8 billion was spent on social programs and welfare, €86.7 billion was spent on healthcare, €40 billion was spent on education.

If every Dutch citizen eligible to vote was given €500 per month, that would cost the Dutch government €97.02 billion per year, or $118.3644 billion. If it was €1000 per month instead, it would be €194.04 billion per year, or $236.7288 per year.

What's surprising, is that this €97.02 billion per year is actually lower than the cost of social programs and welfare, so a UBI of €500 for every Dutch citizen eligible to vote would be cheaper than welfare. But if we wanted to give them €1000 instead, obviously, corners would have to be cut in other places, such as healthcare and education.

Out of the Dutch budget €293 billion - it seems that only €64 billion, so if we kept the UBI at a modest €500 per month, we could also eradicate personal income tax too, and would only have to slightly cut down on healthcare and education to compensate.

Overall, the Netherlands seem very promising for implement UBI.

The United States

Out of 328.8 million Americans, roughly 245 million have the right to vote. Andrew Yang intended to give all of them 1000$ per month. How much would that cost? Well, $245 billion per month, obviously. Per year, that would be $2940 billion, or $2.94 trillion, which is certainly no drop in the bucket compared to the $4.4 trillion federal budget expenditures of 2019 - especially with a revenue of $3.5 trillion, resulting in a deficit of $984 billion. In contrast, the sum of the budgets of all US states was just $1935.30 billion.

Out of the aforementioned $4.4 trillion, roughly $1 trillion went to social security; $1.1 trillion went to a combination market subsidies, medicare and medicaid; $697 billion went to military spending, $361 went on social safety not programs; $375 billion on debt payments, and the rest ($867 billion) on various public services.

Can we squeeze UBI Into it? Well, sure, but if we don't want to increase deficit any further, then only at the expense of social security, medicare, medicaid, market subsidies, safety-net programs, halving the military spending, and cutting down a little on some public services. And that still leaves us with the same deficit as before.

Okay, so how do we even finance the federal budget in the US? Well, half of it comes from personal income tax (so around $1.75 trillion), 7% from corporate tax ($245 billion dollars), 36% from social insurance tax ($1.26 trillion).

Under the assumption that many will just stop working and no longer have a taxable income if UBI happens, the worst-case scenario is having to account for the loss of $1.75 trillion missing from the US budget, which just wouldn't be possible even under the aforementioned cuts to the budget. And no, we can't just increase corporate tax, as that'll just make all the corporations leave the US.

But what if instead of implementing UBI, we simply abolished federal income tax? Then we'd have to also cut $1.75 trillion from the US budget, which would most likely mean at least halving military spending, halving social security, halving medicare, and heavily cutting down on public services. And that would still leave us with our original 2019 federal budget deficit of $984 billion.

And no, Communists, we can't just "tax the rich". They'll simply leave the country, and then you'll have no one to tax.

Hungary

I am Hungarian, so I couldn't finish this without exploring the possibility of UBI in my own country.

First of all, there 8.312 million people qualified to vote in the Hungarian elections, but those also include Hungarians living abroad, so I am limiting it only to the 7.933 million out of those who actually live in Hungary.

With a UBI of 100 000 HUF (roughly 350 USD) per month, that would be a spending of 9519.6 billion HUF (33.3186 billion USD). With a UBI of 200 000 HUF (700 USD) per year, that would be double that - 19039.2 billion HUF (66.6372 billion USD) per year.

In 2017, the total expenditure of the Hungarian state was 15400 billion HUF (53.9 USD), of which

• 20.10% (3095.4 billion HUF = 10.8339 billion USD) was spent on pension

• 11.10% (1709.4 billion HUF = 5.9829 billion USD) was spent on other welfare programs

• 10.50% (1617 billion HUF = 5.6595 billion USD) was spent on education

• 9.60% (1478.4 billion HUF = 5.1744 billion USD) was spent on banks and law courts

• 9.40% (1447.6 billion HUF = 5.0666 billion USD) was spent on various other economical activities

• 9.00% (1386 billion HUF = 4.851 billion USD) was spent on transportation and communication

• 7.10% (1093.4 billion HUF = 3.8269 billion USD) was spent on healthcare

• 6.60% (1016.4 billion HUF = 3.5574 billion USD) was spent on foreign debt

• 5.00% (770 billion HUF = 2.695 billion USD) was spent on law enforcement (police)

• 2.30% (354.2 billion HUF = 1.2397 billion USD) was spent on wildlife management

• 2.10% (323.4 billion HUF = 1.1319 billion USD) was spent on cultural activities

• 2.00% (308 billion HUF = 1.078 billion USD) was spent on military

• 1.40% (215.6 billion HUF = 0.7546 billion USD) was spent on housing

• 0.80% (123.2 billion HUF = 0.4312 billion USD) was spent on sports

• 0.80% (123.2 billion HUF = 0.4312 billion USD) was spent on environmental defense

• 0.80% (123.2 billion HUF = 0.4312 billion USD) was spent on energy. industry and mining

• 1.40% (215.6 billion HUF = 0.7546 billion USD) was spent on everything else (source)

Sure, a UBI of 100 000 HUF for 7.933 citizens eligible for vote - 9519.6 billion HUF (33.3186 billion USD) - wouldn't be a drop in the bucket. It would have to be counterbalanced by removing the removing the pension (3095.4 billion HUF), other welfare spending (1709.4 billion HUF), education (1617 billion HUF), transportation (1386 billion HUF), healthcare (1093.4 billion HUF), cultural activities (323.4 billion HUF), sports (123.2 billion HUF) and halving the money spent on wildlife management (354.2 billion HUF -> 177.1 billion HUF).

However, if you ask me, it would be worth it. As a healthy and ablebodied individual who is already an adult but not old enough to be retired, I don't benefit from pension or any other welfare, education or healthcare, have no interest in sports or cultural activities, etc. So I'd be perfectly willing to make that sacrifice for no longer having to work.

In 2017, the Hungarian state's income was 13400 billion HUF, which is roughly (46.9 billion USD). Out of that, just 13.3% was personal income tax, which is basically 1782.2 billion HUF, or 6.2377 billion USD.

If, instead of having UBI, we sought to eliminate personal income tax, all we'd have to do would be to simply get rid of welfare spending and the spending on sports. Or education and sports.

However, it is, once again, important to note: the Hungarian government is very corrupt and a lot of money gets lost in the cracks. Thus, UBI would still be a better idea than welfare.

Final Verdict

Out of all the four countries I explored, it seems that the Netherlands has the biggest potential for the implementation of Universal Basic Income, as it's one example of a country, where UBI could be potentially cheaper than welfare, and it would take minimal effort to balance the budget and eliminate deficits.

In Hungary and the United States, UBI would be doable, but would have to come at the expense of existing social programs, and would only be possible under a Libertarian government (quite ironic, isn't it?), and that's not even accounting for the loss of taxable income, which would have to be compensated somehow.

The hardest case seems to be the United Kingdom, where UBI would almost completely throw government spending out of whack.

The biggest problem is that UBI would come with the unintended side effect of depriving the state of a lot of personal income tax revenue, as many people - such as myself - would simply quit their jobs if UBI was implemented. Even if we completely erased welfare programs and cut down on spending in other areas too, this loss of tax revenue would still have to be compensated by something, whether an increase in sales taxes / value-added taxes (making everything more expensive), a progressive taxation scheme targeting the rich (which would simply make the rich leave the country), increased corporate tax (corporations would simply leave) or anything else.

Alternatively, the government could simply run everything on a for-profit basis. But that would mean that we'd be working towards two conflicting goals: reducing government spending, while simultaneously growing government-controlled industry to generate profit to finance UBI.

The government could also privatize everything and tax those privatized industries, but that would drive the cost of healthcare into the sky.

Despite all this, I remain adamant that UBI is the way of the future. Not just because I'm lazy and hate work, but also because automation is inevitably going to drive out the workforce.

Final Final Verdict?

Maybe the solution wouldn't be wealth redistribution, but collectively owned robots?