I see a straw man here. It seems like you can argue against the theory or argue against the actual implementation. The latter was chosen...but with made-up parameters that make it easy to defeat. Examples
"...a UBI of just $1,000 per month would cost around $4 trillion per year, which is close to the entire federal budget in 2018. Without major cost savings, US federal tax revenue would have to be doubled, which would impose massive distortionary costs on the economy..."
So we need major cost savings or taxes to go up.
"Sacrificing all other social programs for the sake of a UBI is a terrible idea. Such programs exist to address specific problems, such as the vulnerability of the elderly, children, and disabled people. Imagine living in a society where children still go hungry, and where those with severe health conditions are deprived of adequate care, because all the tax revenue has gone to sending monthly checks to every citizen, millionaires and billionaires included."
This came our of nowhere as social programs were not mentioned before this line. It's basically fearmongering at this point.
Maybe someone can help me understand what the argument here is. Perhaps I'm being harsh on the author but I just don't see how you can make this argument with genuine intentions.
> This came our of nowhere as social programs were not mentioned before this line. It's basically fearmongering at this point.
Perhaps he did not spell it out explicitly, but this is what Andrew Yang's policy proposal is. Since he is the leading candidate on UBI at this point, it makes sense to address how he plans on handling it.
What makes you say that? His website lists current social programs as the first source of money for this program. People either switch over and see a marginal benefit, or they do not switch and they get nothing from the Freedom Dividend:
> The means to pay for the Freedom Dividend will come from 4 sources:
> 1. Current spending. We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like. This reduces the cost of the Freedom Dividend because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.
This felt like a purely semantic argument to me; as he is actually suggesting we do something rather similar to UBI:
"Besides, a more sensible policy is already on offer: a negative income tax, or what is sometimes called “guaranteed basic income.” Rather than giving everyone $1,000 per month, a guaranteed-income program would offer transfers only to individuals whose monthly income is below $1,000, thereby coming in at a mere fraction of a UBI’s cost."
It's a substantially different thing with quite different incentives.
For a particular example, someone receiving guaranteed basic income is in some sense "stuck" as a noncontributing member of society as it makes no sense for them to start working e.g. a part-time job since whatever money they earn would simply reduce their GBI payment with no benefit to them.
GBI helps solve some problems, but it's not really a solution to the type of problems that UBI wants to solve, it's something quite different.
The GBI would have to decline gradually as your income rose, not all at once, as marginal income tax brackets do now.
Say it gives 1000 a month to someone earning 0 a month, and grants 500 a month to someone earning 1000 a month, and nothing to someone earning 2000 a month (shortly followed by the positive tax rates for income beyond that).
>The GBI would have to decline gradually as your income rose, not all at once, as marginal income tax brackets do now.
By itself it works, but not when combined with other programs.
For example, take someone on 2 different forms of help. Both give $1000 a month, but for every $1 you earn, they decrease benefits by $.50. So each slopes off at 50%.
So a person gets a part time job making $800 a month.
The first program cuts its benefits by half of that value, giving only $600. The second program does the same. Either way they take home $2000, meaning they earn nothing for working part time.
Now, this is a simple scenario and can be fixed by making the decline very gradual in this case. But it shows one immediate problem, this solution doesn't apply at scale. So as long as you have enough sources of benefits the decline still ends up making working not worth it. Adding in taxes and private charity can end up complicating this further but the general result is that it produces local maximums that act like a trap.
Also, if you fix this my making each one decline slower, you end up with it not being as easy to sell because of how high it kicks in. For example, instead of 50% decline, making it a 20% decline. So someone making $4,500 a month still gets $100 in benefits (1000 - .2 * 4500). That can be a hard sell politically regardless of how much benefit it is because it allows people to make the true claim that those earning $4900 a month still benefit from this benefit, despite it being only $20 a month.
There is another complication with marriage and how it impacts this benefit (and if that creates an incentive for or against marrying).
Lastly, even if you do design a system that works well enough, will the public even understand it? Look at how many people, even people who have jobs dealing with money, struggle with tax brackets.
As such, I think it seems much easier to just say everyone gets $1000 (though there are still other questions, such as anything involving children).
That would work, but it makes the GBI much more expensive. If you did the decline gradually enough such that there was no effective disincentive for 99% of the population, you'd have something that looks and costs very similar to a UBI.
You misunderstand tax brackets. You don't get taxed on your entire income for a higher rate if you get bumped into a new bracket, only the income that is over the threshold.
This creates an issue where jobs that pay only slightly more than $1k a month end up not being worth it. For example, someone working 30 hours a week at $10 an hour would see their income only go up ~$200. You could phase it, but that only weakens and does not remove the underlying issue and there are already existing cases where multiple problems with phasing stack, ending up in the same problem. Going with a simpler form of UBI that gives everyone $1k no matter what completely eliminates the issue (well, there is a minor issue given that money have a diminishing returns in value, but the impact of this is so far weaker than the issue of cut offs or phasing out benefits).
It's economically quite different. Much less is spent, but lower income people end up facing very steep marginal tax rates. If you make 12k or under, you might as well not work or work in an unpaid role. Even if you make more than that, given a choice of working 40 hours/week for 24k or 0 hours/week for 12k, many or most people will go for the 12k. With a UBI, you're paid the 12k, and if the job's salary is 24k, you get paid 36k total, which is a much more attractive proposition. A similar effect keeps some SSDI recipients in a poverty trap.
All that said, there are lots of nonlinear effects, and any solution will have to be phased in slowly to account for and respond to them. There are also ways to make the guaranteed income have much better marginal effects, though doing so also makes it more expensive. In fact, those mitigations if taken to an extreme lead to a UBI.
Yeah, that basically is semantic. UBI would achieve the same thing, but, instead of negative tax, would just credit everyone and then alter the tax rates to achieve equilibrium.
Personally, the improved efficiency from simply collapsing the existing apparatus which is focused on preventing people from cheating seems likely to work. If the goal of the program was to fairly allocate a resource, rather than to prevent people from cheating it would consume a lot less overhead. that is where you can actually find some of the efficiency that the author wants.
Honestly, if you cut a check to a millionaire for $1000, and then tax that person on that $1000, it doesn't work that differently from the fact that we get taxed on the value of our tax returns. it ends up being recursive anyway.
> This came our of nowhere as social programs were not mentioned before this line.
Wasn't the entire prior paragraph his justification for it?
> Perhaps I'm being harsh on the author but I just don't see how you can make this argument with genuine intentions.
I come at this entirely from the other side of the political spectrum, I think his facts are wrong and his ideology worse, but he appears entirely sincere to me.
> It's basically fearmongering at this point.
All arguments that a policy will entail bad results are logically equivalent to fearmongering. You're just saying you doubt his intentions using another synonym.
It's interesting to observe any UBI discussion and a total neglect of the most developed theory about UBI - the georgist economics - where UBI is refered to as a 'citizens dividend'.
They state that the only and sufficient financing scheme to make UBI work are the so called monopoly taxes. Simply because if you hand out free money to the people, the monopoly service providers could hike up prices by exactly that amount given out freely to people in aggregate. Other non-monopoly providers would still be trapped in a competition so it would be more difficult for them to increase the prices after UBI implementation. Monopolies would set the prices exactly to the point where they would optimize their income by eating away all the free money suddenly given to people.
This is well described by Ricardo's law of rent (1809) in the context of land rents (which are essentially land monopolies). In other words the landlords would increase the rents exactly to the aggregate amount of UBI money handed out.
Interestingly enough the present day proponents of UBI don't understand this basic law. Some od them are aware of the UBI inflation problem but are not aware of this monopoly inflation problem.
Andrew Yang proposes Value Added Tax to finance it, which proves he has no clue.
If you print money to pay UBI you get inflation, yes.
If you're paying it with VAT or Income Tax or something else you're not increasing the money supply, so broad inflation should stay unchanged.
Local prices will go up and down as you reduce demand for rich person goods and increase demand for poor person goods.
This would imply rent going up but one of the promises of UBI is to increase the ability of people to move to places with cheap rent, taking power from landowners.
>This is well described by Ricardo's law of rent (1809) in the context of land rents (which are essentially land monopolies). In other words the landlords would increase the rents exactly to the aggregate amount of UBI money handed out.
Thanks. I keep asking the same question without knowing there is actually a Law of Rent. And I have yet to see a convincing argument.
people arent as tied to a location anymore if they are receiving guaranteed income. They can go live somewhere with a lower cost of living and dont have to worry about income, rent, medical expenses while they are moving and getting settled.
Landlords partly have power because people want to be near jobs that pay well. If you dont have to have a job or can take a lower paying one elsewhere, there may be less local demand.
It's a good thing people are discussing UBI, but the author does not seem to understand the concept. He says:
> Besides, a more sensible policy is already on offer: a negative income tax, or what is sometimes called “guaranteed basic income.”
Negative income tax (NIT) and UBI are not alternatives; NIT is one possible model for implementing UBI; they become just alternate ways to describe the same math.
In both cases, someone with zero income receives, say $1000. Someone with $500 in income gets something between $500 and $1000, because taxes start to kick in. The benefit continues to be positive until some inflection point, say $5000, where higher taxes end up overwhelming the initial benefit.
By playing with the tax curves you can get any payout model you like and describe it as both NIT and UBI.
> NIT has a major flaw which is a disincentive to work.
NIT in general does not, other than the extent to which progressive income tax provides a progressive reduction in incentive for additional work. The particular NIT-inspired policy in the US (EITC) has a weak form of it because of the phaseout, but not as strong as other means-tested welfare programs.
That's not a major flaw, it's part of the whole idea. We don't need as many people working, and we don't want people working for shitty "$1000/month or close" gigs...
In fact part of the reasoning of UBI is "we're automating all kinds of jobs, and we wont need as many people working in the future, not to mention we already have tons of busywork just to keep up appearances"
I think the pretend/appearances work is necessary. If we look at Price's Law, it suggests that 50% of the work is done by the square root of the population doing that job. Really, all the work could get done by just having the top productivity percentile do work. The problem is, the top percentile isn't going to do work if everyone else is getting to not at least pretend to work. I know I wouldn't.
Interesting (conceptually
similar to Pareto principle but interesting root law)
I wonder if there is some other function at play - i mean would Stephen King sell so many books if bookshops only has stephen long books? Or would the bottom drop
out of the book market.
Do great sales people only make sales when their clients mostly meet rubbish ones?
$1000/month jobs aren't just limited to cashiers and janitors... They're also starting youtubers, musicians, artists, models, freelance programmers and designers etc, startups and small businesses. A lot of people would be more empowered to become entrepreneurs and start their path to joining the capital owning class if there wasn't a disincentive to work.
>$1000/month jobs aren't just limited to cashiers and janitors... They're also starting youtubers, musicians, artists, models, freelance programmers and designers etc, startups and small businesses.
How that plays into the UBI/NIT discussion?
A person in a shitty $1000 job might quit because of UBI, and that's OK.
An entrepreneur starting a "startup and small businesses" obviously doesn't do it to just get to make $1000/month or close. So UBI wont be a deterrent for them to not start and keep going at their business idea.
If anything, it would help MORE people try out business ideas, with the knowledge that even if they fail and lose all their money, they'll still have the UBI to fall back to.
And musicians/artists do it for the passion. If $1000/months allowance stops someone from trying to be a musician, then they shouldn't be a musician in the first place. Where they in it just for the money, and for so little money in fact that they're OK to not be musicians for $1000/month?
As for $1000/month preventing aspiring "youtubers" and "models" from attempting a career, that would be a net benefit of UBI!
Of course there's a difference. In NIT you literally get less money as you make more money. UBI you don't. No people do not consider UBI a disincentive to work and it's the major argument for UBI.
Not all startups are by people like you and me. Sometimes there are people who poor and trapped in a scarcity mindset and whose economic thinking is governed by fear. Those people could never reach their full potential. UBI really helps.
> $1000/month jobs aren't just limited to cashiers and janitors
So?
> A lot of people would be more empowered to become entrepreneurs and start their path to joining the capital owning class if there wasn't a disincentive to work.
UBI (or NIT, which is equivalent) doesn't have a disincentive to work. That's actually central to the concept as an alternative to means-tested welfare.
You are the third guy who's trying to debate me like I'm arguing against UBI when my comment that you are replying to is for UBI. I wonder if there's something confusing about my comment.
Or maybe people really think NIT == UBI when it really doesn't. There's a dramatic difference.
Some people think NIT is UBI, and EITC is different. Some people think EITC is NIT, and UBI is different.
I'm loosely in the first group. While the goals and rhetoric and proposed levels are different, the math is pretty much the same for UBI and NIT, provided the UBI is funded by an income tax (which isn't all UBI, and IIUC isn't Yang's proposal, but is one sort of UBI). The cutoff observed in EITC was a compromise that (in my reading) made it no longer NIT.
>A lot of people would be more empowered to become entrepreneurs and start their path to joining the capital owning class if there wasn't a disincentive to work.
OR if those people could survive on UBI and didn't have to work whatever menial job they could find just to live, they could spend their time freely doing whatever entrepreneurial thing they would rather be doing.
You can get more than enough food for 2 people with like $300/month. We get that in Europe, and in comparison the food in the US is dirt cheap (not to mention wholesale/bundle deals like in CostCo etc).
One should be able to get a basic house somewhere and only pay like $600 - $800 month. Doesn't have to be Manhattan, Iowa or Missouri or Alabama would do.
Furniture you can buy dirt cheap, you can have a house full of IKEA furniture for $3000 (one off cost), and IKEA is not even the cheapest option (second hand, etc).
Are utilities (electricity, water, internet, mobile I'd say) more than $200/month in the US?
What would the costly "entertainment" be? If you have internet you have movies, games, reading, social media, and music for free or next to free (e.g. a couple subscriptions at $20/month).
Since you don't have to work, you can also entertain yourself in all kinds of ways impossible for an office drone during regular hours, including daily walks, treks, sports, painting, music practice, creative cooking, etc... Most are close to free to do.
These add to $1400 or so a month, for a couple of to. They could surely do some stuff with the rest. And if they can do an occasional work gig, they can easily take vacations, put some money in the bank, etc.
You missed the whole point of my post. NIT and UBI are not different models! When you take into account taxes from earnings, they are just different interpretations of the same model.
Why would you pay for UBI through an income tax instead of a sales tax or a corporate tax. Only such a poorly designed tax would make UBI also a disincentive to work. It's a strawman because real life UBI doesn't work like this.
I don't know why you think a state would get rid of income taxes at the same time as creating a UBI. But it doesn't matter because you could also do the same thing with NIT.
What disincentives work is positive income taxes and nobody is talking about getting rid of them.
Too many bad arguments to count here... for example, he argues:
"Rather than giving everyone $1,000 per month, a guaranteed-income program would offer transfers only to individuals whose monthly income is below $1,000, thereby coming in at a mere fraction of a UBI’s cost."
Can you not see the obvious problems with giving someone $1,000 so long as they aren't making above $1,000? Why would anyone making $1k continue working for zero benefit?
With UBI, a minimum wage worker is still incentivized to work, as they don't lose benefits. That's kind of the point. Social safety net without getting trapped in the "net".
UBI has plenty of issues, but he's not making a good case.
>Can you not see the obvious problems with giving someone $1,000 so long as they aren't making above $1,000? Why would anyone making $1k continue working for zero benefit?
No reason, they could stop and get the free $1000. That's not a problem, that's part of the whole idea: we don't want jobs where people make just $12/K annual salary, let them disappear...
Indeed, the "at a mere fraction of a UBI’s cost" claim is outright ignoring the economic cost associated with very high marginal tax rates. But Acemoglu also mentions the NIT, which would work a lot better than either. And, to be fair, the best-known economic models of non-linear income taxation imply that marginal tax rates on a NIT should actually be fairly substantial (60% or so would not be out of the question!), so as to keep the break-even point from getting too high; the rates just shouldn't be as high as 100% or more!
I still don't understand why the US hasn't switched to a single payer system yet. We'd be paying 0 premiums for a 2-4% tax hike. I personally would love not having to worry about my health benefits between jobs!
Because of "You'll take more money out of my pocket over my cold dead body!" mentality of a lot of of the lower middle class and poor voters who still seem to think the system works for them!
Most upper middle class / rich people don't want to increase their tax burden 2-4% for something they already have.
Also ignorance. A lot of people in that realm don't even understand the burden healthcare is on most people because they have never had to worry about it.
The entire article just reads like hand-waving with no real substance.
> UBI advocates would argue that non-universal transfer programs are less attractive because voters will not embrace them as enthusiastically. But this criticism is unfounded.
Why is it unfounded? Am I just supposed to take that on faith? The author probably should've written more than 2 sentences after this statement before moving onto his next assertion.
Here is a radical idea, with some math as an initial take at backing it up.
First, let's assume we cannot solve the problem now, or in the short term. Short term here is < 50 years. What then?
Second, let's commit ~$100bn to the problem annually for that 50 years, and make that our max investment per year, not counting administrative costs. This amount would increase slightly each year as population increased.
Third, divide that $100bn among the babies born that year (~4million in 2018), using trust funds to get 7% interest, compounded annually at the start of the year with no additional contributions, and untouchable until they turn 50. Do this for the babies born each year.
Fourth, institute a fiscal responsibility education program with the vigor that sex ed was approached with, at elementary, middle, and college levels. No idea what the cost of this would be, but it would have to be factored in.
Fifty years later the first babies born under this program will be able to access their money. Each will have roughly $1.4million, and able to live off 5% annual interest without decreasing that amount ($70k per year). Since a couple will have roughly two people, each of their children should get roughly the same amount. In other words... in fifty years there could be little to no poverty in this country, if only we could think long term.
To put the $100bn into perspective, the annual defense budget for 2019 is $617bn with another $68bn for war funding. So, we could possibly eliminate poverty for $32bn more than what we are spending on the war.
I don't understand (or understand, but despise) the urge to misrepresent data. For instance $1000 UBI will cost 4 trillion if given to every single American, but people under 18 constitute 25% of the population, take that out, and you have 3 trillion. It's really trivial and I heard no one planning to give people starting from age 0 $1000 dollar every month.
It's not a stretch to say 3 trillion is way too much but why does author feel the need to be deceiving and just make that number slightly larger is beyond me. This really discredited him in my eyes as trying to have an objective discussion about the matter.
This is an observation on the politicians and theorist that proposed UBI, I'm not an expert but I imagine the problem would be that they're not fully independent individual, and you don't want to simply reward parents for having more kids.
> ...a UBI of just $1,000 per month would cost around $4 trillion per year, which is close to the entire federal budget in 2018. Without major cost savings, US federal tax revenue would have to be doubled, which would impose massive distortionary costs on the economy...
Last time I checked the going effective tax rate across all corporations was something like ~17%. How about corporations stop fucking us all out of the revenue they owe us; because I'm pretty sure doubling that to the expected rate of 35% would fix the funding problem.
I generally agree with you, but not if you add escape routes for the money so that people of means can avoid said personal income tax. See capital gains rate, owner-operated business rate, all the non-taxed perks that businesses provide to execs (e.g. using corporate jet as private jet). You also have to staff the tax collector appropriately to enforce the boundary between corporate and personal income.
A bit of a clickbait title. Acemoglu does say that a 'UBI' is a bad idea, but then advocates for the NIT (Negative Income Tax), which actually works in much the same way. What he actually seems to be saying is that way too much UBI advocacy makes unrealistic claims about what a UBI-ish system might look like - and it's hard to disagree about that!
Note that the headline cost will be very high because much of it ends up being a partial rebate on higher taxes. (This would be true of most people with a middle-class or better income: you'd have higher taxes, but get some of the money back.)
With any redistribution program, just looking at direct costs and not its effects on the economy, the average person breaks even. That's what redistribution means - there's no money being created or destroyed. The numerator and denominator don't change.
But most of us are not average. Like with insurance, most people end up paying most of the time, but if you're out of work for any reason, or just working a low-paying job, then you'll benefit. And like most other insurance, the advantage is security rather than actually saving money, most of the time.
Along with that security comes greater freedom. The question is a philosophical one: do you trust that most of your fellow citizens can handle freedom? Will they live in near-poverty rather than strive for more? Do you trust that if someone decides not to work, they usually have good reasons? And do you think it's worth paying in during good times in order to ensure everyone has somewhat more freedom to choose where to live and how to make a living?
Or do you think that people cannot be trusted and must be controlled via the threat of financial ruin?
UBI is especially a terrible idea if you don't want people like Gates and Torvalds and Stallman to emerge naturally from an environment that enabled and fostered their genius every step of the way. Multi-gig-economy workers are eagerly waiting to subsidize the next generation's computers and connectivity and years needed for learning the steps between Hello World and writing software that changes the world.
> UBI is especially a terrible idea if you don't want people like Gates and Torvalds and Stallman to emerge naturally from an environment that enabled and fostered their genius every step of the way.
The Pareto principle applies, regardless of UBI. High performers will emerge naturally, regardless of the system. Manipulation of systems is an element of their prominence.
The major reason why I think UBI is a bad idea is that money is a unit of measurement, not a quantum of consumable production. The flow of goods and services from producer to consumer is lubricated by money, not entirely controlled by it.
That economic fluid, like blood, has to circulate in order to be useful. In many places, the flow is very asymmetric. A region has natural resources, or a cultural significance, or a coincidental concentration of skills. But for whatever reason, the value is then extracted and sent elsewhere, rather than staying in the community that produced it. Absentee landlords take their rents and spend them in a different city. Chain and franchise businesses send their profits to distant owners that spend their dividends and distributions elsewhere. Worker wages are sent to families that live in another city. Local money is spent mostly on consumables instead of development capital.
When owners don't spend money where they earned it, it becomes a circulation problem. The work that people do in their own communities is then being used to develop and improve someone else's community. Coal miners in West Virginia are actually digging up million-dollar houses in Washington DC metro area. Farmers in Iowa are actually growing luxury cars in Chicago. Software developers in New Mexico are actually launching a new live-act auditorium in Las Vegas. All the work done, everywhere around the world, is developing mostly the places where the owners live, and those people don't want to live in undeveloped places, even if those places are only undeveloped because all the development potential is continually sucked out to be sent to the owners.
So what is needed is universal basic ownership. If you just dump helicopter cash onto an undeveloped area, the owners can suck harder on their rent straw until they drain away all the excess. Live in a home you own, with no mortgage, and there are no checks being sent out of town for rent or interest. Buy fiber-to-the-home network access from the municipality, and the service fee is not being sent to Comcast or AT&T headquarters; it's being spent on local capital and jobs. When most of the ownership is local, it's much easier to balance the production that the community exports with the consumables that it imports. The only way to unbalance it from there is to make the community want more imports, without buying more of its exports.
That extra cash in the mailbox isn't going to fix the economic problems inherent in locally unbalanced earning and spending. It is only a short term fix to tax the high-ownership individuals and move the money to where it should have been spent. It's like performing a cardiac bypass without also attempting a lifestyle intervention with the patient. That new flow route will work for a little while, and then it too will get clogged with calcified plaques, just like the others. UBI treats a symptom, instead of curing the disease, which is that too few people own too much property, and thus they literally cannot spend enough in all the communities in which they own that property to keep them all healthy.
UBI shifts money from concentrations of income to concentrations of people, where those differ. That seems like it makes the circulation better, not worse. A similar view is why I very much support UBI.
It makes the circulation temporarily better. The concentrations of income and the concentrations of people should be geographically coincident. If you look at poor neighborhoods and rich neighborhoods very closely, you will see all the little pumps operating that move money from one to the other. The apartment building residents live here, but they send their rent checks over there. They consume water, electricity, and telecoms here, but send their utility checks over there. The socialize here, but then send licensing and royalties over there. When they need to find extra cash, it isn't here; it's all gone over there. And they can't get over there, because there's an admission fee at the gate, and guest fees for every hour they stay, that the members don't have to pay.
The reason the people that UBI would help most don't have additional productive capacity to improve their own lives is not because they are lazy or unfit, but because they are already attached to a system to siphon off their excess and shunt it elsewhere, whose capacity is currently limited by the amount of excess there is.
You can't pump enough money into UBI to overwhelm the system. So if you create an artificial excess by cutting $1000 checks to people, the siphon can just be dialed up from 2 to 3, and that excess gets (mostly) drained, too. If you start sending $100000 checks to people, that's probably more than the existing systems can drain away, but it's also more than the government revenue system can generate without annihilating the regular economy.
In order to solve the problem that UBI seems to want to solve, you have to disconnect people from the siphoning machines. That means owning the homes they live in, owning the tools they use, owning the businesses that use their labor, owning the culture they live in, and owning the infrastructure.
No matter how much money you put in a UBI check, if someone pays rent on their home, pays utility bills to private companies, shops at businesses that don't spend where they earn their money, and lives under a government that does not respect their interests, they will have just as much trouble saving or investing that extra cash as they had with the paychecks from their job(s).
Instead of dropping all that UBI cash from helicopters, use it to build or renovate houses that are sold at 10% over cost, regardless of what the market will bear. Use it to create municipal-owned utilities wherever private utilities are the only option. Use it to build municipal-owned health care facilities. Use it to build municipal-owned community colleges that can grant bachelor's degrees in at least one locally-relevant discipline, or grant educational credit that is transferable to any other college. Use it to keep public libraries, public radio, and public television operating. Use it to build separate passenger rail and cargo rail links to the nearest big city. Use it to promote small, locally-owned businesses in the community. Use it to smash political corruption in local government. Use it to pry all the money-draining machines off of the people that want to invest in themselves and their neighbors, instead of being human resources to be mined dry and then discarded. If more money stays in the community, the opportunities to earn money will stay in the community, and there will be less need to inject money back in via tax-funded government spending.
You don't need to go Marxist and seize the means of production. You just have to dismantle the mechanisms that automatically siphon off excess production and send it off to someone else. Hammer away the props that hold up the rentiers, and make the easiest path to great wealth to be providing great value to society--by seeking out win-win propositions, rather than playing a zero-sum game. Fewer people get rich, but more can climb up out of poverty, and more can be middle-class with reasonable working hours and retire with enough to maintain their previous lifestyle.
You will not see this proposed by any politician in 2019, because implementing it would be exceedingly difficult, and require a sharp political focus, that has not existed in the US since 1968. It is far easier to promise that checks in your mailbox every month will make it all better.
If your thesis is "UBI will be insufficient to get us where we want to be, we will need to make other changes" then at that vague level I can't really object - I certainly don't imagine UBI will fix everything forever.
But I don't think the improvement is temporary in the sense you mean. There are limits to how much UBI can inject at the lower end of the economy, but there are also limits to how much can be "siphoned away" - a raise to the cost of a good or service increases money saved by finding alternatives, some of which may be offered locally. Consider rent as a common example - even in the (extreme, unrealistic) case where all lodging is is owned by a single person and no new housing can be built, raising the rents demanded increases the benefit of cohabitation, enticing more people to do so.
> You can't pump enough money into UBI to overwhelm the system.
You aren't trying to, UBI isn’t an exogenous money flow into the bottom, it's a siphon that reverses the direction of the one you describe from poor to rich—you fund UBI with taxes on the wealthy (e.g., increased high-end income taxes, taxing capital as income) and tie the UBI level to the revenue from those taxes (with a bit of reserve so that you smooth out short-term revenue/population drops)
> So if you create an artificial excess by cutting $1000 checks to people, the siphon can just be dialed up from 2 to 3
Which just pumps more money into UBI, if it's funded as I suggest.
And then the siphons ramp up from 3 to 4. Which pumps more money into UBI. So the rentiers raise the rent again. Which pumps more money into UBI. Now the rentiers are in a game of Chicken with the Fed, with respect to hyperinflation. Their owned property has about the same value no matter what dollars are worth, so it is a game of Chicken with one person in a bespoke killdozer with front-impact armor, and the other player in an AMC Pacer with a floppy purple protuberance duct-taped to the hood--the owner-rentiers will win every time.
You can't beat the rentiers by taking their cash. You have to undermine the value of their ownership, by taking away the pricing power of their monopolies and oligopolies.
> Now the rentiers are in a game of Chicken with the Fed, with respect to hyperinflation.
No, they aren't. Because the money supply isn't increasing because of UBI (which is redistribution, not extra supply), and “the rentiers” aren't the whole basket of goods that determined inflation. If they are sucking up more money, there is less money chasing every good that's sold in a competitive market, and those prices are falling.
Also, at some point.the rentiers run into limits set by existing policies, or policies that their outrageous behavior provokes. E.g., the most major component of the rent-seeking siphon is the thing that inspired the broad economic term “rent”, that is, real-estate (specifically housing) rental, which already is often subject to limits on increases in many major urban markets (and, potentially as of next year, under a bill with the backing of leadership of both state houses and the governor, statewide in California.)
Your thesis that it is necessary to attack the siphon by means outside of UBI is not entirely incorrect, but your suggestion that there is no political will to do that in the USA now (and further that there would be no greater will were rentiers try to counteract redistribution in the manner you suggest) does not seem consistent with the experience, which shows some mechanisms of the siphon you identify already subject to policy restrictions, and those restrictions likely to be escalated where the impacts of those siphons are most pronounced.
Interesting line of thought. What’s your take on Henry George? (Arguing for distributing land rent equally, which would counter your concerns somewhat)
I think Georgism has a calculation problem, and furthermore I don't believe one can model the supply of land as a perfect vertical supply curve.
I don't think that it is possible to fairly assess the value of a location separately from the permanent improvements to the land. And I don't like systems that produce scenarios wherein a hostile party could potentially make adversarial plays to force a disadvantageous sale onto a cooperating person and profit from it.
I'm not entirely sure that the problem George was trying to tackle is even fixable. A human as an economic entity is a bundle of connections that are sometimes dependent upon distance, and sometimes dependent upon time, and other times dependent on information. These threads tangle in a way that cannot be easily unraveled. And frankly, I'm not convinced that land value is even the most significant keystone factor in modern economies any more. The new land rush seems to be in intellectual property. Having already perfected the extraction of rents from the biological necessities of breathing, drinking, eating, and sleeping, the rentiers have climbed higher on the hierarchy of needs by establishing privileged positions in education, social connections, and entertainment.
If you have to do universal basic income, do it with a no cash back debit card with detailed e-receipts. My thinking is that, if people know their spending is being tracked, they are less likely to waste it.
It's a bad idea for the same reason all other variants of socialism are a bad idea: it disincentivizes productivity. If it's possible to afford housing and food without working, some percentage of the population that would otherwise be working will choose to stop working.
Wake up! Jobs are disappearing as automation increases. The ultimate result is no jobs and lots of goods. If we don't do something, the transition will be a mess - less and less spendable money to buy more and more available goods.
>If it's possible to afford housing and food without working, some percentage of the population that would otherwise be working will choose to stop working.
Fine. Those are the people who don't actually care about their jobs beyond the bare minimum needed to get a paycheck - the people no employer actually wants to hire. Not having to work to live means having more flexibility to choose the work you want, and the labor pool consists of people who want to work. If you want to live in a meager apartment for subsistence, then you can do so on UBI. If you want a better place to live, more stuff, etc, then you can work.
There would be fewer people working, yes, but let's not forget that all industries are automating as much labor away as they can, regardless.
Capitalism and socialism exist on completely different axes - it was never the purpose of employment to provide employees with enough means to live, or a sense of purpose or the "dignity of honest labor." So let's stop pretending capitalism can or should provide for the social welfare.
UBI is just a concept, you'll have to look at some person/organizations specific implementation to figure this out. Try googling "Andrew Yang" if you want an answer to see how a current presidential candidate is tackling this.
Inflation would be very welcome right now. Zero interest-rate policy (ZIRP) seems to be the new normal, and I believe its largely due to increasing wealth inequality which is creating deflationary pressures in our economy (the wealthy can only consume so much, most of their money goes into savings).
Also hyperinflation seems very unlikely with the amounts being discussed. Under an ideal UBI. Existing welfare programs would get replaced with the UBI, so that would have a neutral impact on the economy (and if UBI eliminates the welfare trap it could actually be a positive for the economy). The UBI would be a net benefit for those that are currently severely under-employed or unemployed but don't qualify for any welfare programs. But the UBI amounts proposed are fairly small, so would likely only result in a very small increase in demand for food and housing. And we have more than enough food surplus, and plenty of housing surplus in poorer areas of the country that this seems like a non-issue.
Too high a UBI might lead to inflation. In that case, if we've indexed UBI to observed or predicted inflation we could indeed wind up with a positive feedback loop and hyperinflation.
So don't do that. Index to targeted inflation. If it's too high and we see more inflation than targeted, the UBI will fall in real terms. If inflation falls short of target, the real UBI will increase. Negative feedback loop - probably stability or oscillation.
"...a UBI of just $1,000 per month would cost around $4 trillion per year, which is close to the entire federal budget in 2018. Without major cost savings, US federal tax revenue would have to be doubled, which would impose massive distortionary costs on the economy..."
So we need major cost savings or taxes to go up.
"Sacrificing all other social programs for the sake of a UBI is a terrible idea. Such programs exist to address specific problems, such as the vulnerability of the elderly, children, and disabled people. Imagine living in a society where children still go hungry, and where those with severe health conditions are deprived of adequate care, because all the tax revenue has gone to sending monthly checks to every citizen, millionaires and billionaires included."
This came our of nowhere as social programs were not mentioned before this line. It's basically fearmongering at this point.
Maybe someone can help me understand what the argument here is. Perhaps I'm being harsh on the author but I just don't see how you can make this argument with genuine intentions.