Ray Dalio addresses benefits, pitfalls of universal basic income

Bridgewater Associates’ Ray Dalio, the founder of the world’s largest hedge fund, is analyzing the social and financial viability of a widely debated program aimed at reducing the wealth inequality.

“Universal Basic Income is one of several ideas floating around for dealing with the income/opportunity gap,” Dalio wrote in a LinkedIn blog post Thursday. “I won’t give you my conclusions because I don’t want to bias you. I’d rather you form your own opinion after you are informed.”

Proposals for universal basic income programs vary, but the most common one is a system in which the federal government sends out regular checks to everyone, regardless of their earnings or employment.

Dalio’s firm estimated the cost to give every American citizen $12,000 per year, the current poverty threshold, would be roughly $3.8 trillion annually. The figure represents 21 percent of US GDP or 78 percent of tax revenue.

Source: Bridgewater

Bridgewater also looked at other scenarios that could lower the cost of UBI by replacing social programs or lowering payouts depending on income.

In February a Northeastern University/Gallup survey of more than 3,000 U.S. adults showed 48 percent of Americans support universal basic income.

Dalio noted the supporters of the program say UBI lowers inequality and “empowers” individuals to decide what to do with money to best suit their specific needs. In addition, compared with current social programs such as unemployment benefits, UBI reduces the bad incentives of not pursuing jobs because the money is given to everyone.

On the flip side, the hedge-fund manager said UBI may lower the incentive to work and is seen as “prohibitively expensive” by its detractors.

Dalio founded Bridgewater Associates in 1975. The hedge fund now manages about $160 billion, according to its website. The investor has a net worth of $18.9 billion, according to Forbes.

Read the full Dalio LinkedIn post here.