SINGAPORE (July 1): Owing to the inadequacy of the social safety net in the US and other developed countries, proposals for a universal basic income (UBI) are gaining in popularity. The gap between the rich and everyone else has expanded significantly in recent years, and many fear that automation and globalisation will widen it further.

To be sure, if the only choice is between mass impoverishment and a UBI, a UBI is preferable. Such a programme would allow people to spend their money on whatever they value most. It would create a broad sense of ownership and a new constituency to shake up the system of big-money politics. Studies of conditional cash-transfer programmes in developing economies have found that such policies can empower women and other marginalised groups.

But UBI is a flawed idea, not least because it would be prohibitively expensive unless accompanied by deep cuts to the rest of the safety net. In the US (population: 327 million), a UBI of just US$1,000 a month would cost around US$4 trillion a year, which is close to the entire federal budget in 2018. Without major cost savings, US federal tax revenue would have to be doubled, which would impose massive distortionary costs on the economy. And, no, a permanent UBI could not be financed with government debt or newly printed currency.

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