HOW TO IMPLEMENT A UNIVERSAL BASIC INCOME WITH LOW RISK

Establish a New Authority to Manage the UBI

This Authority would be given sole responsibility for:

  1. setting the target amount for the UBI and timing to get it to the poverty line, and then keeping it at or above that level.
  2. ensuring payment of the UBI was managed to limit its inflationary impact and to keep the labour market in dynamic balance, as explained below.

Start Small

First, we propose starting at just $10/week. Increasing the UBI amount gradually over 5 years — to give the supply chain time to adapt without causing shortages that drive inflation.

Using the UBI to Help Manage the Economy

If interest rates are raised imprecisely (almost inevitably) and lending reduces too quickly, the rates can be dropped again.

Integration with Welfare

Also, we propose treating the UBI as income for welfare, so that benefits and costs would naturally go down as the UBI is increased, without adversely impacting anyone’s entitlements under the current system. This would also have the effect of reducing the inflationary impact of the UBI

Recovering the UBI Based on Income

To further offset the injection of new money, the new Authority responsible for managing the UBI would be empowered to recover 32.26% of the UBI from gross income — up to an income of $80,600 pa. Above that, the full UBI would be recovered.

Net Benefit to Those Who Need It

By giving the UBI to everyone, we ensure the universal and unconditional nature of the payment. By recovering a fixed percentage based on income, and by treating it as income for welfare, we greatly reduce the net cost, while ensuring the money goes to those who need it.

Basic Income Insurance

Also, by paying it to everyone, it would act like basic income insurance.

Summary of Offsets and Strategies to Limit Inflation

At $500/week/adult, the total UBI could amount to an injection of $520 billion per year. In a $2 trillion economy this would be unsustainable. Hence the decision to target the net benefits to zero/low income earners.

Overall Impact

The estimated net amount of money to be injected into the economy would be around $100 billion per year. This is a big number if compared to government spending. However, as suggested, this money should not form part of the government deficit, as it is really spending by the people.

The correct comparison is with total GDP.

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