What I don't understand is how people can support Fannie Mae/Freddie Mac/Sallie Mae loan guarantee programs and not UBI-style welfare programs.
They're almost the same thing. The government is essentially providing a subsidy, and middlemen suck up most of the value, leaving the presumptively intended beneficiaries with almost nothing.
Government encourages mortgages with loan guarantees. Home prices rise. Existing builders, owners, and lending institutions benefit, and the new buyers are less able to afford the higher prices and debt loads.
Government encourages student loans with loan guarantees. Tuition prices rise. Universities and lending institutions benefit, and the students are less able to afford the higher prices and debt loads.
UBI encourages purchase of lifestyle necessities with monthly checks. Rent, gas, and grocery costs rise. Landlords and business owners benefit, and people still have to work in addition to the monthly check they are now utterly dependent on.
You can't move the supply curve by fiddling around with prices or demand. You can't provide everyone with their lifestyle necessities independent of work or trade just by sending out checks.
If you want to make home ownership increase, you have to build more affordable (and more-affordable) homes. If you want higher education to expand, you have to build more universities and hire more professors. If you want more unemployed people to not starve and not be homeless, you have to acquire and distribute more food and beds. Why do people persist in thinking you can solve problems by just printing/taxing more money and transferring it to certain groups?
The old "prices will rise to absorb UBI" argument. That takes a profound distrust of the free market to even imagine.
As for supply curve, wake up and notice how industry is changing. In the last 10 years, automation has been explosive. Factories coming back to America from overseas don't do it because somehow labor has become affordable. They do it because robots are cheaper than even Chinese and Indian labor.
The robots are ready to lift the yoke of labor from humanity. As expected, folks are reacting with panic and alarm. Yes, it'll be different. But perhaps not the apocalypse that keeps getting threatened.
And yes, we can provide everyone with necessities by handing out checks. We've been able to over-produce food, clothing and many other things essentially without limit for decades. The rest is not going to be far behind.
> And yes, we can provide everyone with necessities by handing out checks. We've been able to over-produce food, clothing and many other things essentially without limit for decades. The rest is not going to be far behind.
I don't think this is accurate. You can provide everyone with money by handing out checks. You can't make them buy necessities with it. We seem to still have a social welfare problem in those cases.
I'm not distrusting the free market. I'm counting on it.
Subsidy does not shift supply and demand. It moves the price/quantity equilibrium point and introduces a deadweight loss.
Every time consumers can pay more, suppliers will charge more. The more competitive an industry is, the less value suppliers will be able to capture by doing so. The less competitive it is, the more value suppliers can extract from any change in equilibrium.
Cash subsidy does not change the increasing consolidation and pricing power of companies like Monsanto, BASF, Bayer, Dow, Dupont, and Syngenta; Deere, CNH, Kubota, AGCO, CLAAS, and Deutz-Fahr; Tyson, JBS, Cargill, and Leucadia National; ADM, Bunge, Cargill (again), Glencore, and Dreyfus; Nestle, Coca-Cola, General Mills, Pepsi, Unilever, Mondelez (Kraft), Danone, Kellogg's, ABF, and Mars.
The world is a big place. Only ten companies stock the majority of its grocery shelves. A handful of companies dominate grains and meats. Only a few rule over agricultural equipment. A tiny number controls pesticides, herbicides, fertilizers, and specialty seeds. 7 billion people need to eat.
If you give every one of them $5 to buy a sandwich, you can be damned sure that the local spot price of a formerly $5 sandwich is going to rise somewhere between $0.01 and $5. If you're standing between Subway, Jimmy John's, Quizno's, Blimpie's, McDonald's, Burger King, Arbys, and a dozen other sandwich-sellers, that price won't jump by much. But if you're eating at The Only Game In Town Deli, enjoy your $9.49 pastrami.
Nobody works for free. We have been able to over-produce without limit for decades, but we haven't, because we ration resources with the price system. Someone only produces something if you can prove that you want it badly enough, by sacrificing some of your own market alternatives. At some point, someone will turn off their robot rather than give a pair of boots to a person who isn't even going to do so much as to bend over and kiss their ass in exchange. And that's when you have to pick up the rifle, and say, "you turn that machine back on, because we don't want to live in a world that runs on dominance and humiliation." If you want to provide everyone with necessities, you must be prepared to use force to encourage that excess production.
If we talk about Finland, there's definitely an aspect of raising prices due to transfers. It is particularly apparent in the price of housing in Helsinki region. Anyone living or moving here who does not have enough income is guaranteed a certain amount of money monthly, plus "reasonable housing expenses" (plus some medical expenses and such if needed). For a family of two parents and two small children, living cost 1419.77 €, plus rent on top of that, with a ceiling rent (known as "reasonable housing expenses") of about 1000 €.
This means that for owner of a flat, there is no point in letting out an apartment of any size or condition below the ceiling rent.
So it's not so much that we have a profound distrust of the free market; it's that the market is not so free.
For Finland, one problem of handing out checks is that we can't print money, so much of the commonly presented monetary and economic theories won't work at all.
> What I don't understand is how people can support Fannie Mae/Freddie Mac/Sallie Mae loan guarantee programs and not UBI-style welfare programs.
The guarantee programs are different because if someone defaults on a loan, presumably you can repossess the house and recoup some of the investment. If you distribute basic income and someone blows it all on garbage - what then? Do we let the person die? Do we subsidize further welfare programs to provide food/shelter/healthcare?
I am not an economist - just a person trying to understand. At my current understanding of UBI I don't think I support such a program.
They're almost the same thing. The government is essentially providing a subsidy, and middlemen suck up most of the value, leaving the presumptively intended beneficiaries with almost nothing.
Government encourages mortgages with loan guarantees. Home prices rise. Existing builders, owners, and lending institutions benefit, and the new buyers are less able to afford the higher prices and debt loads.
Government encourages student loans with loan guarantees. Tuition prices rise. Universities and lending institutions benefit, and the students are less able to afford the higher prices and debt loads.
UBI encourages purchase of lifestyle necessities with monthly checks. Rent, gas, and grocery costs rise. Landlords and business owners benefit, and people still have to work in addition to the monthly check they are now utterly dependent on.
You can't move the supply curve by fiddling around with prices or demand. You can't provide everyone with their lifestyle necessities independent of work or trade just by sending out checks.
If you want to make home ownership increase, you have to build more affordable (and more-affordable) homes. If you want higher education to expand, you have to build more universities and hire more professors. If you want more unemployed people to not starve and not be homeless, you have to acquire and distribute more food and beds. Why do people persist in thinking you can solve problems by just printing/taxing more money and transferring it to certain groups?