Roosevelt Institute Study: Universal Basic Income Would Generate Economic Growth

A unique study from the Roosevelt Institute that will of course have flaws. The overall premise that a universal basic income would help a lot of people and be a general positive economically is quite possibly correct, however.

Ultimately though, the key part of a universal basic income will be how the means of production (namely capital on this note) are controlled. If it’s still overwhelmingly concentrated in a small fraction of the population, the universal basic income may not last long. The economic system needs to be “unrigged,” so that there isn’t egregious upwards redistribution to begin with.

A universal basic income could make the US economy trillions of dollars larger, permanently, according to a new study by the left-leaning Roosevelt Institute.

Basic income, a proposal in which every American would be given a basic stipend from the government no strings attached, is often brought up as a potential solution to widespread automation reducing demand for labor in the future. But in the meantime, its critics typically allege that it is far too expensive to be practical, or else that it would spur millions of Americans to drop out of the labor force, wrecking the economy and depriving the government of a tax base for funding the plan.

The Roosevelt study, written by Roosevelt research director Marshall Steinbaum, Michalis Nikiforos at Bard College’s Levy Institute, and Gennaro Zezza at the University of Cassino and Southern Lazio in Italy, comes to a dramatically different conclusion.

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And the Levy Institute model and Roosevelt Institute researchers make some big assumptions that many macroeconomists and public finance economists are likely to disagree with.

Perhaps the single most important assumption is that the economy is suffering from a lack of demand — consumers and businesses aren’t buying enough stuff. This is traditionally the problem in recessions, and it’s typically addressed through monetary or fiscal policies meant to boost demand. Governments can spend a bunch of money on infrastructure or tax breaks, which juices demand by having the government buy more or giving consumers more money to spend; this was the approach of the 2009 stimulus package. Or central banks can print a bunch of money and bring down interest rates, which makes it easier for businesses and individuals to borrow and spend money.

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Thomas Piketty’s book Capital in the 21st Century has prompted research tying this decline in aggregate demand to the surge in high-end inequality; if the rich control more and more money, and aren’t spending it, that helps explain sluggish demand.

The Roosevelt Institute has done a bunch of work on this theme, arguing that a shortfall in aggregate demand, tied to inequality, is strangling the economy.