Is Universal Basic Income More Affordable Than You Think?

US Can Afford Universal Basic Income

A new study using 57 years of Census data finds the cost of a poverty-eliminating UBI has fallen sharply over time.

One of the most common objections to universal basic income is simple: we cannot afford it. A new peer-reviewed article published in Basic Income Studies challenges that assumption, and the numbers behind it are worth understanding.

The study, by Jack Rossbach and Karl Widerquist of Georgetown University, asks what it would actually cost to give every adult and child in the United States enough money to live above the poverty line. Using data from the US Census Bureau dating back to 1967 and continuing through 2024, their answer is more modest than most people expect.

What the study calculates

The researchers estimate the cost of a UBI set at $16,000 per adult and $8,000 per child each year, which is slightly above the federal official poverty line. These would be unconditional payments, meaning everyone receives them regardless of income or employment status.

The authors highlight an important distinction between gross and net cost. Gross cost is calculated by multiplying the payment amount by the number of recipients, yielding a large figure often used by critics. However, this can be misleading, as recipients would also pay income taxes on the payments, which then flow back into the government. The net cost reflects this return of funds to the public budget.

Using a 50 percent marginal tax rate in their model, the authors find that the program’s net cost in 2024 would be approximately $783.7 billion per year. That works out to about 2.67 percent of US GDP.

The long-run trend

The authors find that the cost of a poverty-eliminating UBI relative to GDP has been falling for over 50 years. In 1967, when guaranteed income was actively debated in Washington, the equivalent program would have cost around 9.35 percent of GDP. By 1995, that figure had dropped to 4.95 percent. By 2015, it was 3.70 percent. Today it stands at 2.67 percent. In other words, the current cost is less than one-third of what it would have been in 1967.

Why has the relative cost to the GDP fallen so much? The main driver is that the US economy has grown significantly over the decades. GDP has risen faster than the poverty threshold, so the transfers needed to bring everyone above the poverty line represent a smaller share of national income than they once did. The country has become richer, and that relative wealth makes the program more manageable fiscally, even though the dollar figure has grown.

How does this compare to other spending?

To put the 2.67 percent figure in context, current US defense spending runs at roughly 3.5 percent of GDP. Medicaid costs approximately 2.5 percent of GDP. The proposed UBI would be larger than Medicaid but smaller than defense, and comparable to what other wealthy countries spend on various social programs.

The researchers are careful to note that their estimate uses a simplified model. Real-world implementation would involve interactions with existing tax and benefits systems, administrative costs, and design choices that could raise or lower the final number. Their estimate is best understood as a floor on the cost under specific assumptions, not a complete budget plan.

What the study does and does not claim

The paper does not argue that the US should adopt a universal basic income. It does not weigh in on whether such a program would be the best use of $783.7 billion, or how it should be paid for, or what its effects on employment or economic growth would be.

What it does argue is that the standard dismissal of UBI as fiscally impossible is not well-supported by the evidence, at least when net cost is considered. The program that seemed unaffordable in 1967 looks considerably more manageable in 2024 than it did then, measured against what the country produces each year.

The full article, “The Falling Cost of Basic Income in the United States, 1967–2024,” is published in Basic Income Studies and is available via the Basic Income Earth Network website.

Soomi Lee – US BIG Blog Editor