Yes, of course giving people money makes their lives better. It especially works when a very small subset of the population receives such treatment, such that their relative income is higher than those outside the experiment.
The issue with UBI is that enacting it at scale has two huge problems:
1. Financing it. These programs are monumentally expensive. You need to get the money from somewhere. The easiest place to take it is via the money printer and the second is from the rich.
If you do it via the money printer, it's a self-own in terms of inflationary impact.
If you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens. Look at China's economic situation right now to see how ultimately unproductive that can be.
2. Diminishing effects. A bit more money is great when everybody else in your local economy didn't get it. But when everybody gets it, things just become more expensive.
The USA did this during the COVID era. We basically implemented UBI. We expanded the M1 money supply from $4T to $18T and largely handed it out in a diffuse way. For the first 6 months it was awesome. And then shortages started spiking and inflation started creeping in. We ultimately had to roll it back.
I don't think these problems are fundamentally solvable.
Instead, we should foster competition, incentivize innovation, and let markets do their thing. This will create lower prices for basic goods and create employment opportunities so people can have what they need for cheap, under the financing of their own effort.
> If you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens
We may have different definitions of "rich" here. I don't think you can call them the most productive citizens. I think most extractive would be the more accurate label.
And the stimulus checks were short lived, not universally distributed, and came in under $1T. The majority of the money spent was on other sources, even if you want to include the boosts to unemployment in the "UBI" category. As others mentioned it's also conflated with other factors like supply chain failures and massive business loan fraud.
> Financing it. These programs are monumentally expensive. You need to get the money from somewhere. The easiest place to take it is via the money printer and the second is from the rich.
This is not actually that hard because they're only expensive on paper.
Right now you have a slew of means tested programs with phase outs that amount to high marginal tax rates on the poor. Meanwhile we try to do the opposite with the tax system and have higher marginal rates on the rich. These largely cancel out, if not impose higher marginal rates on the poor than the rich.
With a UBI you can use a flat tax system because the UBI rather than the tax system is what makes it progressive, which has the added benefit of simplifying the tax system. Then everyone is paying the same tax rate, which puts a higher "tax rate" on low and middle income people but only on paper, because you've eliminated the benefits phase outs and they get to keep the UBI, which more than offsets it.
The result is that you have a small tax increase on the rich and a small increase in transfer payments to the poor/middle class, but the main benefit is the dramatic increase in simplicity and the reduction in bureaucracy and administrative overhead for administering all of the separate programs it would replace.
> Diminishing effects. A bit more money is great when everybody else in your local economy didn't get it. But when everybody gets it, things just become more expensive.
Except that the average person doesn't actually have any more money, since it's all transfer payments. Someone making $30,000 got some additional money but someone making $70,000, even though they do receive the UBI, has still received less money than they paid in tax to fund it.
And this is what already happens, but much less efficiently, through various existing means-tested programs that would no longer be needed.
What you're saying might be true. My sense is that the political project of doing a full-on tax-and-entitlement reform that results in a more sane system is impossible in the US.
At the ideological/theoretical level, I absolutely believe that there exists a radically more optimal way distribute the existing tax burden and funds.
But at the practical level, I think we have to do the equivalent of a long-term refactor. Any changes we make must be within the existing system and make sense on their own. Our only real option is to steer our way, digestible diff-by-digestible diff, to a better future.
Don't start off with a $12,000/year UBI, eliminate SNAP and instead give everyone a tax credit in the same amount. Adjust the tax brackets to make the math work out. Then do the same thing with housing subsidies, and Medicaid, until all the largest programs are gone. At which point you can see the results and start asking why we shouldn't just do everything that's still left at once.
Maybe you could help me with this because I never understood it. It seems like the tiered rates of our tax is the least of our worries.
I can see an argument that mathematically it's more complicated than flat, but it's just arithmetic. And practically speaking, nobody does it anyway. The computer figures it out, or they look in the tax table. And that's the same thing they're going to be doing if we have a flat tax, right?
You mentioned the additional complexities of the tax code, which I agree are titanic, but doing away with those doesn't mean we need to do away with tiered tax rates.
I guess in my mind, flat tax isn't really much of a gain. And we have to be extra careful to not make it regressive (with something like, as you suggest, UBI.)
> I can see an argument that mathematically it's more complicated than flat, but it's just arithmetic.
No, it's more complicated because then you need to keep track of things at all.
Suppose you go to your job and make a salary and they withhold some of it for the IRS. Then you take a side gig and make a little extra money, or you owned some stock and got a dividend, or anything else that changes your taxable income. Now you have to file taxes to reconcile all of this and determine what your tax rate even is.
If there was a single rate then your employer takes out that much and gives it to the IRS and your side gig takes out the same percent and gives it to the IRS and your brokerage takes out the same percent and gives it to the IRS and you don't even have a tax return because there is nothing to calculate. Or you can just use VAT and not even have to do withholding.
One of the other big things to keep in mind here is that a lot of the conventional wisdom on taxes is PR from rich people/corporations, e.g. claiming that consumption taxes don't tax the rich because they don't spend most of their income. It sounds plausible until you realize that what the super rich and international corporations actually do is keep their money offshore so they don't have to pay income tax on the interest until they repatriate it, which they then never do and instead take out a loan when they want to buy something. So it's actually the income tax they don't pay and a consumption tax they would have to whenever they buy things.
> doing away with those doesn't mean we need to do away with tiered tax rates.
Tiered tax rates are a hideous hack to begin with to avoid people having to do calculus. What you really want is a continuous curve where effective tax rate starts off negative and increases up to some maximum rate with increasing income or spending. Which is exactly what you get with a flat tax + UBI.
1. It's important to remember that having struggling poor people is expensive for the system. Emergency shelters, health issues that go untreated until they need emergency intervention, desperation crimes like theft (affecting policing and prisons), foster care, drug use intervention. These are all expenses that are reduced by a system like UBI. If you keep people healthy and fed, you can keep them peaceful and working and the program pays for itself.
2. I don't see the inflation effect as purely linear. Having $10 when things cost $10 is better than having $0 when things cost $5. There are thresholds that affect peoples ability to even engage with the market that you put your trust into. Also the market wants people to buy things, so it should welcome more people participating in it. And lets not forget that most of the price gouging over the past few years went straight to shareholder profits instead of increased supply costs, we can try to decentivize systems like that that profit off of economic crises.
> we should foster competition, incentivize innovation, and let markets do their thing
"letting markets do their thing" is contradictory to "fostering competition". Markets fundamentally drift towards consolidation. Source: the past sixty years. Markets do not fundamentally organically move towards progress. Often times the profitable thing is to pay workers shit wages and raise prices, and if you try to wait it out for a magical class of well financed competitors to come along and disrupt that status quo, millions of people will have been put into poverty in the interim.
Sixty years is perhaps too long, neoliberalism really kicked off in the 80s/90s with an increase in globalisation, and corporate consolidation through M&As ramped up quickly in the 2000s after financialisation of the economy went in high gear. If we backtrack to the last thirty to forty years and check which top 20 companies got to that spot through M&As it might paint a different picture.
Again, Exxon Mobil is the only overlap with 2020's list. (I presume that the references to "Exxon Mobil" in the 1990 and 1960 lists actually refer to pre-merger Exxon, since Mobil by itself is also on both lists).
I checked, and of the 2020 list, only AT&T, McKesson, and Exxon even existed in 1960 (Berkshire Hathaway kinda did, but they made shirts. Warren Buffet didn't come along and turn it into an investment operation until 1965.
While I agree with many of your points, I feel like blaming item shortages on COVID payments is ignoring the massive impacts that panic buying and shutting down ports and factories had on the situation. Yes there was more money floating around, but people were purchasing items like it was the end of days and we had factories worldwide shuttering randomly due to COVID outbreaks and various government mandates which threw supply chains out of wack.
You're right, the problem in the US was multi-causal. I mention that case because it is probably the best large-scale deployment of a UBI-like program any country has ever done.
While we can't completely untangle the exact contribution magnitude, I think we can deduce that at least some meaningful % of the shortage/inflation situation was caused by the UBI-like program.
I would agree with that. I wish there was a way to know how much though. There was an undeniable impact of giving people “free money,” but it doesn’t seem like most Americans received very much. Most of the people I know of received their 2-3 checks and that’s it. You’d see news articles two years into the pandemic saying things like “Americans finally running out of stimulus money.” It made me laugh because it seemed like most people spent that money crazy fast on their bills and very few people were able to actually pocket that cash.
It was the people working close to minimum wage that were most affected - it was common to see small business owners unable to get workers to return because these payments were higher than they were making on the job.
I think this would be the most likely outcome: basic income means no longer needing to work, and even if it just covers the essentials I think a lot more people are going to go that route than most expect.
> We expanded the M1 money supply from $4T to $18T and largely handed it out in a diffuse way.
This is often quoted and either comes out of ignorance or is intentionally misleading. Assuming it's the former, M1 in the US is not a good measure over the time span you are quoting, because there has been an accounting change that significantly expands of what kind of accounts are considered to be in M1.
Agreed, but this is such a red flag that a commenter is not thinking critically. Do they really think we quadrupled the money supply in a short time? And the only effect was 10% inflation? Usually that would disprove all of their other assumptions about the relationship between the money printer and inflation.
Fortunately, the result was "asset inflation", i.e. most of that money went to stock market raising stock prices. That's why consumer goods inflation was so low.
This is false, and is explained by the block of text below that chart. The definition of M1 was changed. Notice the addition of savings and money market accounts.
Thank you for demonstrating the lack of critical thinking I was describing.
> Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
> Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
> 1. Financing it. These programs are monumentally expensive. You need to get the money from somewhere.
Depends on the level it's set at, but as it's "Basic" it would just cover basic needs. It would replace unemployment benefit, the non-contributory portion of old age pensions, child benefit, and maybe a few other things. It would also simplify bureaucracy - no need to assess people's circumstances. There have been pilot programmes which showed other benefits, e.g. the Dauphin experiment resulted in improvements in people's health, and a recent experiment in Kenya resulted in people setting up businesses, boosting the local economy. Yes, rich people would get it too, but that would be paid for through increases in higher rates of income tax.
Basic needs are costly, and the programs you mention do not completely cover basic needs. For things like social security, people spend something like half a lifetime paying into it inorder to recieve relatively small payments for a short portion of their life. Child benefits and unemployment are also short duration.
I have no doubt that eliminating programs and bureaucracy will lead to better efficiency. However, I'm not convinced it will be cheaper. I also question the efficacy if the money is less targeted towards those who need it most. It seems the tests are not addressing the aspect of removing other services.
> Basic needs are costly, and the programs you mention do not completely cover basic needs.
If they don't cover basic needs they aren't fit for their intended purpose and should be increased so that they do cover them, if they aren't replaced by UBI.
There are other programs that in combination do cover basic needs for those that qualify by need. You're not going to be able to replacement CHIP and Medicaid with UBI. At least not without extensive bureaucracy on the tax side.
If your country has a national health service, paid for by taxes, medical treatment isn't paid for when you need it and so wouldn't affect the rate of UBI.
Your comment beats me to it! I used to be in favor of UBI, but every point you make is valid. And the so-called Modern Monetary Theory of printing unlimited sums of money without triggering inflation either doesn’t work conceptually, or requires too many ancillary policy changes to ever be an option.
I think a good solution looks more like good old-fashioned workers rights laws that we see in Europe, which includes sector-level wage bargaining. And I would also like to see a federal jobs guarantee that would cause upwards wage pressure in the private sector, while providing a livable minimum wage for all who are able to work.
One huge hole in your plan: the shortages weren't because people suddenly had more money, they happened because a huge percentage of production and international shipping came to a halt. Demand helped but it was not a majority of the problem.
There's a third problem that people perennially ignore: once you institute it, even if circumstances change dramatically, it's politically untenable to stop the program. Even putting aside inflation, even putting aside financing it, this is a tiger you can't dismount.
I feel like that reality and its implications are missing from most discussions of UBI, not to mention the inverse: it becomes politically beneficial to give away more money, even if it isn't sustainable.
This strikes me (a total ignoramus) as the generally balanced and correct take.
One question I have is, how much of that inflationary period has been due to supply issues that would have occurred regardless of stimulus checks?
I share your skepticism about the "lol just tax the rich" approach. I'm not sure how true it is that taxes "hobble our most productive citizens" (what are you alluding to about china?), I generally just think rich people inevitably outmaneuver the government trying to tax them, and that rich people really shouldn't be "earning" that much to begin with (because I think their earnings in most cases has fuck-all to do with their actual "productivity"). I imagine there are plenty of smart people who have thought up other ways of socializing the fruits of economic growth in, idk, better ways.
>If you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens
It's a double stretch to say that (1) the "rich" are the "most productive" members of society, and (2) that imposing progressive taxation on them somehow harms the economy.
Japan’s story is different - Japan has been battling deflation for decades at least partially as a result of a rapidly aging population with zero desire to import workers. Which is not a judgment of Japan, which instead chose to provide a much higher per capita stimulus to its people with a focus on the quality of life of the average citizen.
Japan's ranking on the Human Development Index is ahead of the US. Do you think if they had charted a different economic course Japanese citizens would have a wildly better quality of life compared to US citizens rather than just being slightly better?
Yeah. The easier money is to get, the more willing people are to pay higher prices.
There might be a 0 to 1 issue (people stuck at 0 need some kind of traction) that is at least improved in a practical sense with a small UBI although we still need productivity to continue increasing in order to drive prices down
> The USA did this during the COVID era. We basically implemented UBI. We expanded the M1 money supply from $4T to $18T and largely handed it out in a diffuse way. For the first 6 months it was awesome. And then shortages started spiking and inflation started creeping in. We ultimately had to roll it back.
Yup. And don't forget where most of that money finally ended up - as absolutely massive corporate windfalls. That COVID money went through the economy like shit through a goose and ended up where it always does, in the hands of those that are good at making money.
>"Yes, of course giving people money makes their lives better. It especially works when a very small subset of the population receives such treatment, such that their relative income is higher than those outside the experiment."
I've never seen a UBI experiment which demands that the participants pay more in taxes and forfeit all other welfare benefits in exchange for the payment. Every "experiment" so far has been measuring the happiness impact of the upsides without any of the downsides that would be necessary to make the program work.
The payment would already disqualify you from a significant proportion of existing benefits, because they're means tested and now you have more money. Meanwhile the net tax increase would only be on people at higher income levels, but that would be offset by not having to fund those means tested programs anymore, and further offset by receiving the UBI themselves.
And maybe we could measure some negative impact if someone making $100,000/year had to pay $5000 more in net taxes than they do now, but maybe we're not that concerned about a small impact on someone who already makes a lot of money.
> Look at China's economic situation right now to see how ultimately unproductive that can be.
I’m confused why you think China taxes the rich to take over the poor? Their taxation system is less redistributive than most western developed countries.
> you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens. Look at China's economic situation right now to see how ultimately unproductive that can be.
It speaks volume that we assume that China's rich, who largely earned their wealth through nepotism and party connections are a unfairly taxed meritocratic elite.
the golden years of Western society happened during a period of intense competition with a socialist system , that resulted in large scale copying of socialist redistribution policies(unions, state controlled monopolies etc) without any decay of complexity always assigned to those policies. And many democrcies have now majorities of "rebellious" retro movements that try to reenact that past without grasping the core.
Liberal free market always decays to gilded ages, decays to retro rebellions or a retry of socialism, resulting in a redistributing period. The liberal part of the policy loop has run its disastrous course. And It has produced very little, for the titanic scale it's been scaled too. A crispy planet for a electronic opiate system for everyone.
> The easiest place to take it is via the money printer
FWIW: the easiest way to get people to throw you into a "junk economics" bin is to use terms like this. "Printing money" is, at best, an inside-the-echo-chamber shorthand for macroeconomic finance policy that is only going to confuse real economists trying to understand what you're talking about. Most of the time, though, it's just a signal that you don't know what you're talking about.
This argument seems rather disingenuous. Are they literally printing money? No, not to any significant degree. They're not running the presses 24/7/365 or anything like that.
Perhaps, though, you'd care to explain how, if you grow M1 from $4T to $18T, it matters whether you do it with physical printing presses or pushing buttons on a keyboard. The overall effect is the same.
In fact, the printing press method would be less impactful. There's a physical limit on how fast a mechanical press can run. With the keyboard method, you just have to type in a few more zeros at the end.
> Are they literally printing money? No, not to any significant degree.
Right. So talk about what they are actually doing, be it routine deficit financing (not "printing" under any reasonable definition) or QE (arguably I guess, depending on how you want to spin the repurchase scheduling). Under no circumstances does the government actually create money "out of thin air".
Which under some circumstances is fine. If you're discussing a political topic with a bunch of like-minded gold standard fans (or whatever), then you can use this as a shorthand for "the fiat currency policy we all hate". And no one is confused.
But THIS subthread is actually talking about financing public policy. So trying to shorthand the issue away is just a rhetorical trick. If you want to argue against public financing of a UBI, you have to do more than just shout "Money Printing!".
Edit, because I missed this bit:
> if you grow M1 from $4T to $18T
I shouldn't have replied. That's a 100% bad faith argument, owing to a redefinition of the M1 money supply in May 2020 (to include "savings" accounts, which were previously ignored) that created a big discontinuity in the graph. You can argue that the new measurement is better or worse than the old, you can't use a delta between them as "growth". That's just a lie, and you should know better.
Actually, I'd forgotten about the redefinition. You pretending that when someone says "printing money" they mean physical printing presses with ink and paper, rather than a figure of speech, is the actual bad faith argument here.
No, I'm saying that when someone says "printing money" they're engaging in demagoguery instead of discussing the issue on merits. Which is fine, if you're making a political point about your enemies within the in-group that understands your shorthand[1].
But this subthread is an actual point about economics and public financing. You can't demagogue that.
[1] c.f. ACAB, etc... Every partisan subculture has its jargon.
Okay, since you're apparently never going to respond to the actual issue about why (e.g.) jacking up the money supply by pushing buttons at the Fed and Treasury doesn't have the same effect as running the printing presses (more so, in fact; as I pointed out there's a limit on how fast presses can run), I think we're done.
First you tried to deflect by going off on my mistake about why M1 increased so much, even though that was completely beside the point -- although it DID increase massively, just not as much. This is akin to your pedantic non-argument about how increasing the money supply doesn't generally involve running physical presses.
Now you're trying to deflect by calling me a "demagogue".
I will ask you one last time, and if you don't give me a straight, non-evasive answer (which you won't) we're done.
How, in actual effect, does increasing the money supply $n trillion by running the presses faster differ from the Fed/Treasury increasing the money supply by typing numbers into a keyboard?
Hint: it doesn't. But you can't admit it because that would demolish your entire thesis.
> although it DID increase massively, just not as much
It's shrinking very rapidly as we have this silly argument, even as you'd admit that no action was taken to reduce spending: https://fred.stlouisfed.org/series/M1SL
About 60% of the increase over the pandemic has disappeared, as people spend down the accumulated wealth. That's not "massive", and just not consistent with the idea of "money printing"; the analysis is complicated, and has as much to do with supply effects (not as much stuff to buy due to impeded production/shipping) as it does with pandemic relief aid.
I'm happy to have this discussion and to educate you about these issues. But not if you insist on painting things with ridiculous smears like "printing money" (and especially when you start with outrageous claims that are clearly lies you picked up from partisan media).
> It's shrinking very rapidly as we have this silly argument, even as you'd admit that no action was taken to reduce spending: https://fred.stlouisfed.org/series/M1SL
That's not answering the question.
> educate you about these issues.
Oh, DO be quiet. You could "educate" me by actually answering the question, but (once again) you haven't.
What's your question, exactly? "Can inflation[1] be caused by other means than literally printing money?" Of course it can. That's not a license to call things like supply shocks or trade wars "printing money" though. Your hyperfocus on this one gotcha point is betraying your ignorance about the actual economics, which is my point you seem to be trying to ignore.
[1] Actually you started with money supply expansion, which isn't really the same thing. But I think you're really talking about inflation.
> You need to get the money from somewhere. The easiest place to take it is via the money printer and the second is from the rich.
universal basic dividends.
a % of shares in all companies should go into a public equity fund.
dividends from this fund are then distributed to everyone equally.
we already contribute to the wealth of these companies, if we search on Google or post on Twitter, why should we not get a share in the success of those companies?
Above Dunbar's Number[1], we require vast bureaucratic scaffolding. The purest example is the military. Ranks; uniforms; courts martial. People at scale tend toward tyranny. Every. Single. Time.
Our purported globalist saviors are not our friends, and ideas like UBI end in tears.
Decentralize. Empower individuals. Minimize the number of people whose job it is to boss everyone else around. And then ensure those bosses are traded out at a regular frequency.
Aristocracy in its explicit and implicit forms is an idea that is really no longer needed, so let's break the habit.
> If you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens. Look at China's economic situation right now to see how ultimately unproductive that can be.
What hogwash, if there's anything that's apparent today it's that the rich do not get there either by working hard or by being more smart. They just happen to have rich parents. Why are we ok with billionaires like elon musk who spend most of their day tweeting to control society changing amounts of wealth?
The richest families in the world pay 8% income tax. To pick a random rich guy, Bill gates makes $98M/year. You could literally tax him 90% and he'd still be making more per year than most Americans make in their lives.
> Instead, we should foster competition, incentivize innovation, and let markets do their thing
Tell me Atlas Shrugged is your favorite book without telling me Atlas Shrugged is your favorite book.
>If you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens.
Here's where I call BS.
>Look at China's economic situation right now to see how ultimately unproductive that can be.
Isn't it a wee bit apples/oranges to say this about a totalitarian communist country with a converging set of issues (population pyramid, needs to import food, stressed water reserved, pollution)... nah it's definitely the rich people, we need to protect them! /s
The issue with UBI is that enacting it at scale has two huge problems:
1. Financing it. These programs are monumentally expensive. You need to get the money from somewhere. The easiest place to take it is via the money printer and the second is from the rich.
If you do it via the money printer, it's a self-own in terms of inflationary impact.
If you do it by taxing the rich, you wind up hobbling and punishing your most productive citizens. Look at China's economic situation right now to see how ultimately unproductive that can be.
2. Diminishing effects. A bit more money is great when everybody else in your local economy didn't get it. But when everybody gets it, things just become more expensive.
The USA did this during the COVID era. We basically implemented UBI. We expanded the M1 money supply from $4T to $18T and largely handed it out in a diffuse way. For the first 6 months it was awesome. And then shortages started spiking and inflation started creeping in. We ultimately had to roll it back.
I don't think these problems are fundamentally solvable.
Instead, we should foster competition, incentivize innovation, and let markets do their thing. This will create lower prices for basic goods and create employment opportunities so people can have what they need for cheap, under the financing of their own effort.