Providence mayor Jorge Elorza recently announced a pilot guaranteed income program is coming to the city, with 110 randomly-selected households receiving $500 a month. The program is great — but only because it’s privately funded.
The $1.1 million price point for the program is being footed by local nonprofits, including the United Way of Rhode Island, Amos House, the Rhode Island Foundation, One Neighborhood Builders and the Dorcas Institute. Twitter CEO Jack Dorsey will also be contributing $500,000 to the program as part of the $15 million he committed to universal basic income (UBI) projects across the US.
That’s why this pilot program in Providence is so great — it comes at no cost to the government. It’s a risk-free way to improve the lives of people in Rhode Island and does nothing to increase taxes.
The best part is that UBI programs work in theory. They eliminate need-based targets that can cause problems in other welfare programs, although that pitfall isn’t being totally eliminated in Providence’s pilot, which requires participants to be at or below 200 percent of the poverty line.
They also help people at or below the poverty line to improve their living standards. Guaranteed income was recently experimented with in Stockton, California, where 40 percent of the $500 a month given out was spent on food.
The project in Stockton also found that people receiving the guaranteed income were 2.5-times more likely to join the workforce full-time than those who didn’t receive the funds.
But the classic problem that UBI faces is the problem it attempts to solve: money. If government-funded, UBI would need to ultimately be footed by taxpayers. That’s why 54 percent of Americans opposed the federal government providing $1,000 a month to all US adults when they were asked by Pew Research Center in 2020.
If UBI was $10,000 a year per adult citizen, it would cost the US government $3 trillion each and every year. That’s three-fourths of the entire yearly federal budget and nearly 100 percent of all tax revenue the government collects, according to the Center on Budget and Policy Priorities.
“A UBI that’s financed primarily by tax increases would require the American people to accept a level of taxation that vastly exceeds anything in U.S. history,” CBPP founder Robert Greenstein wrote. “It’s hard to imagine that such a UBI would advance very far, especially given the tax increases we’ll already need for Social Security, Medicare, infrastructure, and other needs.”
So while we can celebrate the potential successes of guaranteed income — especially on a limited scale like Providence — the ultimate problem is how to pay for it. That’s why Providence’s experiment should be viewed as something positive, but not sustainable or realistic in the long-run.
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