He's Got My Vote: An Atypically Productive Exchange on the UBI

After receiving this email from an anonymous reader, I was pleasantly surprised by how productive our dialogue became. If most aspiring politicians were this numerate, the Great Political Stagnation would already be over.

Here is the whole exchange, reprinted anonymously with the sender’s permission.

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Reader

Professor Caplan,

I'm a practicing attorney in [redacted], and I want you to tell me where my plan stops being libertarian.

I've been developing a comprehensive policy framework for a libertarian president whose sole objective is maximizing well-being for the bottom 50th percentile of Americans. Six executive orders, six bills. The libertarian mechanisms are real: deregulation, occupational licensing reform, housing supply deregulation, drug decriminalization, civil asset forfeiture moratorium, FDA reciprocal approval, criminal record expungement. These are standard libertarian policies that happen to disproportionately benefit the poor because government-imposed barriers fall hardest on those with the fewest resources to navigate them.

But the framework also includes a UBI ($12,000/year, consolidating seven programs, phasing out at 20 cents per dollar above $50,000), an expanded EITC, a payroll tax exemption funded by lifting the payroll cap, a 36% APR cap on payday lending for FDIC-insured institutions, postal banking, and federal spending conditions on local zoning reform. A purist would say at least three of those cross the line from libertarian reform to progressive redistribution with a liberty label.

You've written books on three of the plan's domains (Open Borders, Build Baby Build, The Case Against Education). You're the person who follows the logic to its conclusion regardless of political palatability. So I'm asking directly: is a framework that combines genuine deregulation with a UBI, a payday lending cap, and federal zoning spending conditions still libertarian in any meaningful sense? Or is it liberaltarianism (Lindsey's term), which is to say, progressive policy that borrows libertarian rhetoric?

The libertarian case I make is that every dollar currently flowing through the welfare bureaucracy that reaches a recipient as unrestricted cash is a net increase in individual autonomy, even if the cash itself is a transfer payment. Is that coherent, or am I defining libertarianism down until it means nothing?

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Me:

That UBI will probably end up dwarfing the cost of the seven programs you're abolishing, so it's not even really liberaltarian. Think about the math. Under your plan, a family of 4 would pay no taxes at all until it's earning $290k ($48k/.2 + $50k).

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Reader:

Professor Caplan,

The math is right and I hadn't run it to the end. A family of four receiving benefits until $290K isn't a safety net. It's a universal entitlement that costs multiples of what it replaces.

The design trap I walked into: a 20% phase-out avoids the poverty trap (which was the whole point) but extends benefits so far up the distribution that the program becomes unaffordable. Steepen the phase-out to 50% and you solve the cost problem but recreate the marginal rate problem the plan was designed to eliminate. The poverty trap and the cost problem are the same variable viewed from opposite ends.

Is there a phase-out design that keeps marginal rates below the current 60-80% implicit rate without extending benefits to the 95th percentile? Or is the honest answer that a UBI generous enough to replace the programs it consolidates and gradual enough to avoid poverty traps is inherently more expensive than the programs it replaces, which means the "consolidation saves money" claim is false?

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Me:

My compliments for listening! I’ve been reviewing this math for over a decade without getting UBI proponents to take it seriously.

The truth is that the only way to make a UBI affordable is to make it very small. See this and this for starters.

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Reader:

Professor Caplan,

Read both. Dolan’s $4,452 ceiling settles it. If that’s what consolidation can fund, then $12,000 isn’t a consolidation. It’s a new entitlement three times the size of what it replaces, and the entire premise of Bill 1 is false.

Your thesis 9 (welfare states provide the rationale for immigration restriction) is the one I hadn’t connected. Cutting the welfare state and opening immigration aren’t separate proposals. Each makes the other politically sustainable. That changes how I sequence the framework.

Thank you for being the person who made me run the numbers to the end.