The Other Side of the Ledger: What Basic Income Really Costs

When the Free Money Runs Out

In the first part, Anna, the Budapest marketing professional, still had a job — even if she was no longer creating anything, merely supervising. In the second, she learned what a basic income promises: 150,000 forints (≈€420, at roughly 360 forints to the euro) a month, unconditionally, for everyone. It is a reassuring thought. But what if the promise is never kept? What if the money the state hands out loses precisely the purchasing power it was meant to deliver?

Rather than asking what a basic income promises, this part looks at what happens once it is introduced: the budget arithmetic, the inflation trap, the social cost of losing work, and the political logic lurking behind the promise that "everyone is entitled to it".

Hungary's Fiscal Reality — the Numbers That Hurt

Part two sketched the rough arithmetic: if every Hungarian over 18 received 150,000 forints a month, the annual bill would come to roughly 13.32 trillion forints (≈€37 billion). That is 35–40% of everything the Hungarian state spends in a year. But it is worth looking more closely at what that means in practice.

Hungary currently spends roughly 5 trillion forints a year on pensions. The rest of the welfare bill — child benefit, unemployment benefit, disability payments, GYES (a flat-rate allowance for parents of small children) and GYED (its earnings-related counterpart) — comes to a further 2–2.5 trillion. Abolish all of it and pour every forint into a basic income, and a 6.5–7.5 trillion-forint hole would still remain in the budget.

Where could the money to fill that gap come from? Consider the options:

• Higher taxes: Hungary's GDP is roughly 82 trillion forints (≈€228 billion). Closing the gap would require extra tax revenue equivalent to 7–8% of GDP. In practice, that means increasing VAT from 27% to 35%, or personal income tax from 15% to 30% — or raising both substantially.
• Spending cuts: Education, health, defence and transport together cost the state roughly 8–10 trillion forints a year. Filling the UBI gap would therefore mean deep cuts to every other function of the state.
• Deficit and debt: The state could borrow. But Hungarian public debt already stands at around 73% of GDP (KSH, 2025). An extra deficit of 6.5–7.5 trillion forints a year would, within a few years, end in sovereign default — or in the kind of inflation that would strip the UBI itself of its value.

The Inflation Trap — When Money Loses Its Value

Supporters argue that a basic income is not inflationary as long as the economy is operating below full employment and the scheme is funded out of higher taxes. In theory, that holds — but only until the money actually enters the system.

In practice, a deficit-funded basic income relies on the state creating new money with no revenue behind it. (Where a UBI is funded out of taxation, the Cantillon effect described below is milder, because the money supply does not grow overall — it is merely reallocated.) As we set out in our Altar of Efficiency series, newly created money does not spread evenly. It reaches those "closest to the printing press" first — the banks, the technology companies, the large investors. They buy property, equities and luxury goods before prices catch up. By the time the money trickles down to the average person in the form of UBI cheques, inflation has already pushed up rents, food prices and utility bills. Economists call this the Cantillon effect: new money reaches the wealthy first and only then trickles through to everyone else — and by then it has already driven prices higher.

Calculations by researchers at the University of Bath show that a basic income fixed in nominal terms loses its purchasing power over time. A UBI of £500 a month, an acceptable sum in 2015, was worth 18.8% less by 2022 once inflation had done its work. Anyone who only just got by on it in 2015 was going hungry by 2022. An important piece of context: that erosion happened under normal market conditions, with no UBI in place at all. If a fixed sum sheds a fifth of its purchasing power in seven years even in those conditions, imagine what the extra inflation set off by a deficit-funded UBI would do to it.

In Hungary, the effect would be more severe still. Funded out of the deficit, the 150,000-forint UBI described in part two would quickly set off an inflationary spiral:

1. January: Everyone receives their 150,000 forints. Rents are flat.
2. March: Landlords realise that their tenants have more money. Demand rises, supply does not. Rents go up by 10–15%.
3. June: The extra demand begins to show in the supermarkets. The price of staple groceries rises.
4. December: The 150,000 forints is worth only 130,000 in real terms. The state has to raise the UBI to keep purchasing power intact.
5. The following year: The higher UBI pours still more money into the system. Higher inflation still. The spiral continues.

Losing Work — Not Just an Income but an Identity

Economics textbooks depict the labour market as the place where "people" and "jobs" meet. In reality, work provides more than an income. It gives structure to the day, social standing, self-worth, a community, a sense of purpose.

The Lancet research cited earlier in our series finds an unmistakable link between long-term unemployment and the suicide rate: a rise of one percentage point in unemployment brings with it a rise of roughly 0.9 percentage points in the suicide rate among the working-age population. Work by the Nobel-laureate economist Angus Deaton and Professor Anne Case has established that when a section of society loses its secure jobs, the number of "deaths of despair" rises sharply — driven not by starvation but by alcoholism, drug overdoses and suicide.

Supporters of a basic income claim that "free time" leads to intellectual growth. The experiments suggest otherwise. In Sam Altman's Open Research programme, part of the participants' extra free time went on passive screen time, and the rate of business formation did not rise appreciably. Time spent with family and access to health care did improve; taken together, though, the findings are mixed rather than unambiguously positive. In the Finnish trial, participants' life satisfaction and mental health improved while the employment indicators held up: according to Kela, the Finnish social-insurance institution, those receiving the UBI found work at a slightly higher rate than the control group.

The question is not whether people are lazy. It is how the human psyche copes with social irrelevance. When the alarm goes off in the morning but there is nowhere to go. When friends talk about work and you talk about "the cheque". When your child asks, "Dad, why don't you work?", and there is no good answer.

The Political Economy — Who Hands Out the Money?

A basic income assumes that the state can distribute many billions of forints a month to millions of people efficiently, accurately and without corruption. That is a formidable challenge in itself — but the political incentives are the bigger problem.

If one party promises 150,000 forints a month and another promises 200,000, who wins? Because electoral cycles are short, the incentive is always to raise the figure. A party that declines to promise more loses votes. A party that promises wins — and the national budget collapses.

Centralised income distribution also raises a fundamental information problem. An office worker in Budapest has different needs from a pensioner in a village in Borsod-Abaúj-Zemplén, a poor county in Hungary's north-east. Anyone familiar with rural life knows that 150,000 forints buys a different basket there than it does in the capital. A central bureaucracy cannot make that distinction — and if it tries, the system becomes as byzantine as the very welfare apparatus a basic income is meant to simplify.

The Dark Side of the International Experiments — Why Did They Stop?

Part two set out the successes. The failures are worth knowing too.

Finland (2017–2018): The trial was not extended. Participants' well-being and mental health did improve, and there was no fall in employment either — but set against the enormous cost, the overall effect fell short of expectations. On the Finnish government's own calculations, a nationwide rollout would cost several billion euros a year and swallow a large share of the entire welfare budget. The political will ran out.

Stockton, California (2019–2021): The coverage focused on the benefits of the $500 monthly payments, made to 125 participants — less stress, more food on the table. The studies found that participants moved into full-time work at a higher rate than the control group over the life of the programme. But the scheme ended in 2021 — not because Stockton's municipal coffers had run dry, but because the philanthropic money had. SEED — the Stockton Economic Empowerment Demonstration — was never funded from local taxes: the cash came from the Economic Security Project, founded by the Facebook co-founder Chris Hughes, and from other donors. On top of that, Mayor Tubbs, the programme's chief political champion, was voted out at the 2020 local election. The open question remained: can a permanent, nationwide programme be sustained once the philanthropic money is gone and taxpayers have to foot the bill?

The point: The experiments worked because they were temporary and because they were paid for from outside — by foundations and research funding. The moment local taxpayers were asked to pick up the bill, political support evaporated.

There Is No Cheating the Arithmetic

This article is not an economic treatise. But one basic truth has run through the argument from the start: money is not a resource, only a unit of account.

If the state hands out 13.32 trillion forints but no extra 13.32 trillion forints' worth of goods and services is produced, no wealth has been created. There is simply more money chasing the same scarce goods. And when more money competes for the same goods, prices rise. This is neither politics nor ideology. It is arithmetic.

The other hidden truth: work is not only a cost, it is also information. Market prices — wages included — tell the economy what is needed, what should be produced and where resources ought to flow. Switch that information system off, hand everyone a fixed sum instead, and the economy is flying blind. It no longer knows what is in demand or what is worth producing. The result: waste, shortages and accumulating chaos.

The Question for the Final Part

The promise of a basic income is a fine one. The criticisms are merciless. But what if there is a third way? What if the answer is not a UBI but something else altogether?

The next part examines Hungary's position in detail: what are the options for a country that cannot afford a UBI while the machines are taking the jobs? What alternatives are there — from a negative income tax to a job guarantee, from retooling education to a "human economics"?

And finally: what becomes of Anna if she really is let go? How does she survive next Monday morning?