"But a $12,000 a year per adult basic income is another matter. The Roosevelt paper finds that paying for it would require increasing household tax revenue by 120 percent — a more than doubling. To do that, it assumes that all but the poorest 40 percent pay more in taxes. The middle quintile (households with an income between $48,300 and $85,600, per the Tax Policy Center) would see their average tax rate go from 14 percent to 25 percent; the top one percent would see its average tax rate go from 32.9 percent to 67.9 percent."
It's not just "the rich" that wouldn't want this. Do the simple math, if I make 100k a year, which is middle class in most of the US, I would be paying >25% in taxes, which would be at least over 25k. It's a heavy burden to the middle class, and the people it really only benefits are the ones in poverty.
It's weird how my comment really struck the nerve that it did since it's partly in jest. But I will say this much, historically the rich have always favored military solutions rather than economic (or social) ones in dealing with class warfare. If the rich of today want to take a page out of history, they should be more like Otto von Bismarck and pay off the poor and disenfranchised. Meaning that some kind of reformed and expansive welfare state is something that's needed more than Uberizing every facet of life (the most recent one that's really annoyed me is the monetization of game mods by Bethesda; it's a hobby, not a job.). Whether or not that includes basic income remains to be seen, but the fact is all the opposition to any kind of welfare under capitalism will doom capitalism to be overthrown more violently than it had been in the early 20th century by communists.
It has nothing to do with nerves being struck and everything to do with your 150 year out of date social analysis being so absurd that it's not even wrong.
By the way, the lower class is striking back, but it looks more like a fake tan and a combover than the image of St. Petersburg in 1917 you seem to lust for.
>By the way, the lower class is striking back, but it looks more like a fake tan and a combover than the image of St. Petersburg in 1917 you seem to lust for.
Are you implying the lower class is "striking back" by electing a NYC real estate billionaire as president? Who are you thinking they are striking against, themselves?
>It has nothing to do with nerves being struck and everything to do with your 150 year out of date social analysis being so absurd that it's not even wrong.
Tell that to the US DSA which is seeing record membership increases. And tell that to Kamala Harris who's an astute politician that co-signed Sander's single-payer bill. If the winds of change aren't blowing leftward then explain the current trend.
Also, Trump's ascendancy is the result of the capitalists not the working class. Robert Mercer (one of Trump's key supporters) has as much in common with you and me than does a mouse with a moose. Essentially, Trump is the carefully created result of decades of right wing propaganda and concerted destruction of the welfare state. Want to see less of Trump? Then tax the living heck out of the super rich and/or ban their right to fund any kind of think tank or PAC forever (down to a constitution amendment if necessary).
The winds may blow leftward, but that's a far cry from a 1917-style workers uprising.
Some bad news: Bernie Sanders' support is substantially middle class. His policies are only very generously described as socialism at all, crucially he does not even begin to propose a fundamental break with private property or capitalism.
The rise of Bernie Sanders may be a nice development, and his hypothetical election might well bring benefits. But it's not going to be a workers revolution in any meaningful 20th century sense of the word.
Trump may be all that, but he was elected by appealing to the working class. Bernie Sanders has as much in common with you and I as a mouse has with a slightly smaller moose. Few of the revolutionary icons of the 20th century were themselves working class (Marx himself was remarkably posh). The important metric for a working class uprising is what the working class does (specifically, that it rises up), not the class background of the person they rise behind.
85,600 * (.25 - .14) = a $9416 tax increase, which is less than the $12,000 per year for a single adult, so the top of the middle quintile would net slightly more money after taxes and transfers (way more for two person households).
Am I misreading this? (It does seem a little too good to be true).
Not necessarily. I wouldn't be surprised if this model meant leaving capital gains taxes low and making the middle class pay for it. If that's the case, then politicians wouldn't have much of an issue with it since it doesn't really harm their donors. In fact, I'm sure there are a lot of companies that would be excited about all that new consumer spending.
A couple of things right off the bat. This study assumes that:
- There is zero effect on propensity to work
- The national debt has no secondary effects on the economy
- Changes in taxation do not affect consumption or investment behavior, at any tax level.
Those first two right there are incredibly massive assumptions, and they amount to two of the biggest criticisms of these proposals in the first place. And the third is flat out wrong, with enormous amounts of data available to debunk it.
Moreover, the third assumption ("Increasing government revenue by increasing taxes levied on households does not change household behavior") is actually at odds with their end conclusion! If there were truly no change in household behavior (whether at the margin or in the aggregate), then there could be no primary mechanism for this policy to have an impact in the first place. (And because this study explicitly ignores secondary impacts, without a primary impact, what are they actually claiming to measure?)
So I'm not sure what the value is in a study that basically says, "If we ignore the biggest and most commonly criticized negative effects, the effect of this policy will be positive".
Exactly, and no mention if this would affect welfare and other social programs. So if someone still gets all the aid they do today and $1K per month, then there is more money to spend but are there more people who want to work where that money is spent?
I think it likely that this would cause low end job wages to rise, not necessarily increase employment.
Well, the price of goods and services will go up because everybody suddenly has more money and the owners of the businesses that sell those goods and services have just had their taxes doubled, so we're back to square one anyways.
I worry about this too. Who cares if you have more money if it has less buying power per dollar? This is also why I worry about drastically higher minimum wage. Poor people have more money but all the places they spend it have higher costs that lead to higher prices. Rich people don't spend the majority of their money at Wal-Mart so it affects them less. EITC and other tax reductions on the poor seems more effective and doesn't reduce buying power.
Increased demand for some goods will create competition and prices will stay the same or fall. Commodity goods providers don't have pricing power so they can't raise prices without losing sales to competitors. There is also the "menu cost" which is the resistance of businesses to react in real time to economic events. A restaurant won't reprint menus everyday and the $1.99 cleaner won't change prices very often.
In addition. The total money supply isn't growing, it is being redistributed to people more likely to consume. The velocity of money will increase but the total amount won't. This will keep prices relatively stable.
Most proposals do away with welfare programs, reducing enforcement costs with it. No need to ensure a person is unemployed and looking for a job or unable to work due to a medical condition.
Sure, but the cost of enforcing who receives benefits is orders of magnitude less than the cost of paying $12k net of income taxes to the large number of working age people who for whatever reason (usually existing wealth or partner/parent income) aren't currently interested in working.
This isn't just common sense; the data on working age economically inactive people, working age economically inactive people receiving benefits and admin costs is free and open for most countries.
There is good indication this reduces income disparity, create more opportunities for entrepreneurship (you can quit your job or go part-time while you do your thing) and, in general, more people consume more. The incentive to work more is there: with a sensible basic income you and your family won't starve and you won't need to work yourself to death, but you may want to have a nice vacation from time to time. With better economic security your freedom to move to better paying markets is increased.
The only reason not to back an idea like this is how much the top earners will be able to evade paying their part, overburdening those who can't dodge taxes as efficiently.
> and no mention if this would affect welfare and other social programs.
Which is quite surprising because every, and I mean every, UBI proposal talks up how much money we'd _save_ because welfare would be eliminated. I just don't see how that's possible, because inevitably there are going to be a lot of people with real or self-imposed crises crying about how they don't have enough money to pay rent or buy food, and what is the government going to do, tell them "tough shit, you should've managed your UBI better"? Uh, I doubt it. We'll end up stuck with welfare programs as a UBI safety net and then people will inevitably game the system by crying broke every single month.
This whole thing is such a ridiculous leftist fantasy, the biggest giveaway is that it completely ignores basic human behavior.
Trying to maximize earnings is basic human behavior, sorry to break it to you. Welfare scams occur regularly, and that's before UBI.
And you're dodging the bigger question: I'm on UBI and my money runs out, can't afford to feed the kids. Multiply that by at least several thousand people every month. Now what?
The difference is it's earmarked money today. There's no potential to spend your food money on a phone and then claim you can't buy food at the end of the month.
How can maximising earnings be basic human behaviour when 'earnings' have only existed for a few thousand years, a tiny fraction of the history of our species?
> I just don't see how that's possible, because inevitably there are going to be a lot of people with real or self-imposed crises crying about how they don't have enough money to pay rent or buy food, and what is the government going to do, tell them "tough shit, you should've managed your UBI better"?
In the UK, many welfare payments go directly to the person, so this wouldn't be a new issue.
Many of them are designed really just to ensure a floor people don't drop below, but combined with exceptionally high marginal tax rates and odd conditions. The marginal tax rate in many cases is 100%, and can be above this.
> In the UK, many welfare payments go directly to the person, so this wouldn't be a new issue.
Not sure what you mean by this. The issue is that currently welfare payments are earmarked: this money can only be used for rent, this money can only be used for food, etc. By eliminating our existing welfare programs, as is the case with every UBI proposal, we would instead be giving a single check and saying "manage this money wisely and pay your expenses." The problem is that when the money isn't earmarked for a specific purpose you can't be sure that the basic necessities are actually paid for before the money runs out. Just ignoring the fraud angle (spend all the money and claim an emergency makes you unable to pay for rent), how do you deal with someone having a _real_ emergency, having to spend all their UBI, and then being unable to pay for rent? Tell them tough shit? That's not what's going to happen.
> Not sure what you mean by this. The issue is that currently welfare payments are earmarked: this money can only be used for rent, this money can only be used for food, etc.
I mean this is often not the case in the UK. We don't have food stamps and housing benefit is afaik generally paid directly to the person, not the landlord.
> Tell them tough shit? That's not what's going to happen.
That's what happens now, whether the person gets money from a job or from any kind of benefits. Why should it change? It's called 'Basic Income', not 'Basic Relax All Your Needs Will Be Met'.
It's not really a ridiculous leftist fantasy, it was originally a conservative idea as an alternative to the welfare state. And as for what to do when people say they can't afford X, you raise the payouts so they can (if they really can't afford it).
With additional pressure when both parents work and can't survive with one of them unemployed - they lack the freedom to seek better positions elsewhere because they are limited to both having jobs all the time.
We are constantly told that 7.25/hr isn't enough to live on, but people find a way to do so at the moment. 7.25 $/hr * 2000 hrs/year = 14500 which isn't far off from 12000. If the choice was between working for that and not working, I think the choice is easy.
Unless this program were to completely eliminate welfare spending, then you'd likely end up with people choosing not to work because they don't need to. This of course assumes that purchasing power doesn't change with the massive influx of cash into the economy.
A small percentage of the workforce is actually paid minimum wage and most get a better job once they have had the entry level experience. The idea that minimum wage should sustain an entire working life is a fringe one.
Considering that much of the democratic presidential platform this previous election cycle, I would have to disagree with the assertion that this view is a "fringe one."
If you want to eliminate the possibility of people who don't need to work choosing not to work, you should be in favor of a 100% estate tax before you should be against UBI. Make it impossible for children to inherit enough wealth to live without working, and get those lazy parasites into the workforce where they belong!
(or you could look at what happens when people are actually presented with realistic options for escaping the cycle of minimum-wage poverty, but that's a few steps of consciousness-raising away from where you currently are)
People can choose to work or not. I just don't want to be stuck with the consequences of it. The word parasite means that they are increasing their well-being by reducing another individual's well-being.
The number of children who are able to live off of their parents / grandparents money and don't work at all is so finite that it isn't really worth mentioning. Alongside that, they are a net gain for the economy.
Think about it - you have vast sums of wealth being dumped back into the economy through luxury purchases, and no impact to the labor force by them working. I may not agree with their decision to not work, but I really couldn't care less whether they do what I agree or not.
Also, a 100% estate tax would do one of two things: 1) create a disincentive for wealth accumulation as their is nothing to do with it afterwards thereby reducing their overall output 2) force those people into different investment vehicles where they can pass their wealth to their children as a "gift" prior to their passing.
That is really only import for those who are amassing large sums of wealth though. For the regular person - or even top 10% - all the 100% estate tax would mean is that dad's classic car that you restored together gets sold at auction instead being passed down, or the funds that could have gone to their grandchildren's college is now funneled into the government, or other similar act of smallish amount of funds being siphoned off by the federal government.
Not trickle down, just that 1) there is a difference in economic impact between those who choose not to work and live off of inheritance vs. those who choose not to work and live off of government assistance, and 2) 100% estate tax has no relation to UBI.
The stated objection was that if people don't have to work, they'll choose not to.
If that's perceived as a problem, we already have that happening right now and aren't doing anything about it -- a complete confiscatory estate tax would solve it, though!
> vast sums of wealth being dumped back into the economy through luxury purchases
Which feed people in remote countries minimum wage at best and keeps what looks like slavery at worst while it generates handsome profits for others who brought in very little value.
> create a disincentive for wealth accumulation
Which is actually a great thing: all that money will hit the economy much sooner.
> force those people into different investment vehicles
Like giving their offspring an education that'll allow them to pursue well paid positions. Gifts are also taxed and an exponential tax on their market value would be a smart thing. Also, they can be sure their children, no matter how deplorable, won't starve.
> That is really only import for those who are amassing large sums of wealth though
So these people who make insane amounts of money while pressuring down compensation for the rest of society will bear most of the burden. Seems only fair.
Also, keep in mind these people are far too powerful now to freely give up their advantages. These ideas have the potential of getting very, very ugly.
> For the regular person - or even top 10% - all the 100% estate tax would mean is that dad's classic car that you restored together gets sold at auction instead being passed down
Regular people won't be affected, only a fraction of the richest 1%:
> a maximum amount, varying year by year, can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes:[2] $5,340,000 for estates of persons dying in 2014[3] and 2015,[4] $5,450,000 (effectively $10.90 million per married couple) for estates of persons dying in 2016.[5] Because of these exemptions, only the largest 0.2% of estates in the U.S. will pay the tax.[6]
> If the choice was between working for that and not working, I think the choice is easy.
You need to consider the humanitarian aspect of forcing someone to work multiple jobs and very long hours to avoiding starvation and sleeping on the streets.
If paying more taxes is the price to know no kid will sleep hungry and no family will have to live on the streets, I'll gladly do it. I don't care if they will or will not show up to work (I bet most will, because 12000+7000 is more than 12000).
As someone who made about that much a year recently, absolutely. I wouldn't have just sat on my ass though. I would've been able to go to school instead of wasting years of my life working minimum wage just to get by.
Or someone wasting their time working at one of 10 fast food places that are all right next to each other that no longer has to do that. How much is that job, or even that entire business, really contributing to the economy?
It's not like anyone is going to starve it a few of these places close. Once you factor in the negative health effects and the wasted potential of everyone staffing the place, I think the negative impact a basic income policy would have on the industry could actually be a good thing in the long run.
If you consider top-tier fast food chains have an average gross revenue > ~$2M and profits ~$100K, then that means The vast majority of that $2M is being dumped back into the economy in the form of purchasing supplies, equipment, and labor.
The other benefit for those not employed by or involved in the restaurant's supply chain is cheap and convenient food.
The propensity to work is more of a social matter than an economic one. Also, most people today in the lower economic classes are over worked. I remember when I was working out of a temp agency with someone who had been working three jobs (two full time and one side job). I'm not sure the exact reason for this other than he had a child and his wife was also working part time herself. It's just scary to imagine that people think working is a virtue onto itself. I'd rather pay a marginally higher tax rate to make sure people don't work more than 40 hours a week and were able to get their basic needs (housing, food, healthcare). At least then there wouldn't be the chronic issues that poverty brings to drag down the economy as a whole.
> They find that enacting any of these policies by growing the federal debt — that is, without raising taxes to pay for it — would substantially grow the economy. The effect fades away within eight years, but GDP is left permanently higher. The big, $12,000 per year per adult policy, they find, would permanently grow the economy by 12.56 to 13.10 percent — or about $2.5 trillion come 2025. It would also, they find, increase the percentage of Americans with jobs by about 2 percent, and expand the labor force to the tune of 4.5 to 4.7 million people.
> They also model the impact of the plan if it's paid for with taxes. That amounts to large-scale income redistribution, which, the authors argue, would stimulate the economy, because lower-income people are likelier to spend their money in the near-term than rich people are. Thus, they find that a full $12,000 a year per adult basic income, paid for with progressive income taxes, would grow the economy by about 2.62 percent ($515 billion) and expand the labor force by about 1.1 million people.
So, borrowing and spending 300 million adults * $12,000/adult/year = $3.6 trillion/year would grow the economy by $2.5 trillion? And raising it in taxes would grow the economy by just half a trillion?
Or what am I missing?
Also this:
> because lower-income people are likelier to spend their money in the near-term than rich people are
But what about the long term? We can debate the finer points about when and how much etc, but it remains uncontroversial that rich people invest nontrivial amounts in long term stuff. With near-70% top average (not marginal!) tax rates, this will go down by a lot. How will this redistribution from long-term investments to near-term spending affect the economy over the long term? Yes, fewer yachts and private jets (there are also people employed supporting those, and the net employment benefit suggested is already quite modest), but would an Elon Musk or Jeff Bezos subject to a 70% tax rate invest in the next SpaceX/Blue Origin (not to mention thousands of other startups backed by angels and personal/friends&family savings)?
What else are they going to do with the money but invest it? Even if they let it sit in a relatively conservative investment, a bank is still probably going to be investing their money. In my opinion, the more important impact of higher taxes on investors is what that does to the total pool of investment money over time, since they are likely to reinvest a lot of their earnings. But that is also the exact thing a progressive tax system is meant to do -- shrink their wealth and redistribute it to others.
I did my bachelors in economics, and one of our textbooks taught that all other things being equal (ceteris paribus), more wealth equalisation (taking from the richer and giving to the poorer) means less wealth creation in the long term. Why? Wealth will naturally concentrate in the hands of those more capable of creating it: if Jo is making 2% per annum return and Jane is making 4% per annum return, and they both start with the same amount, then Jane's share of the total wealth pool will continuously increase relative to Jo. The key thing to note is that as Jane's producing twice as much from her wealth as Jo, if we take resources from Jane to give to Jo then they'll be used less effectively, slowing overall growth.
To illustrate, imagine they both start with $1000 each. The total wealth pool is hence $2000, and they both have 50% each, perfect equality. Now, let's look 50 years in the future, assuming the previously mentioned interest rates per annum compounding annually. According tohttp://www.moneychimp.com/calculator/compound_interest_calcu..., Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is $9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less equal, but they're also both wealthier, and the overall wealth pool has increased.
Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane will have $50,504.92 and Jo will have $7,244.65, with the total wealth pool being $57,749.57. If we equalise wealth, however, such that both have $4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have $13,186.44, for a total wealth pool of $48,003.01. This is 83.12% of the total wealth pool that there would be if no wealth transfer took place. This effect is applies similarly if wealth redistribution happens every year through redistribution of income.
In this sense there is hence a direct tradeoff between economic growth and wealth transfers from richer to poorer in the long term (all other things being equal).
This argument breaks down in a couple of different ways but lets just look at one:
Assuming there is no wealth redistribution then you had Joe and Jane have $19.128.28 and $69,330.20 respectively. Lets say they both die on the same day and leave all their wealth to Joe Junior ($19,128.28) and Jenny ($69,330.20).
Now it turns out that Joe Junior works hard and is really smart. He can get a 5% per annum return. Meanwhile Jenny is a bit of a flake but can still get 1% per annum from her investment.
After 50 years Joe Junior has $219,351.63 and Jenny has $114,022.65. So the hardworking Joe has turned his more modest beginning around and overtaken the less hardworking Jenny. The total wealth pool is now $333,374.28.
However if we had equalised their wealth on the death of their parents so that they had both started with $34,816.57. Jackie would then have ended up on $57,260.44 while Joe Junior would be on $399,255.53 for a combined wealth of $456,515.97 - significantly more than if wealth equalisation had not taken place
So that is one way it makes sense for the economy a a whole to redistribute wealth. Another is the fact that both Joe Junior and Jackie may have seen fixed costs (Medical bills?) on their life journeys. Jackies initial capital advantage measn she could weather those a lot more efficently then Joe Junior even if the return on her wealth she is generating is less.
And of course the same is true without having to wait for the next generation. Just because person A made good use of their resources for 10 years is no indication that they will always continue to do so and so are going to generate the best return on those resources - and the opposite is also true. That said while past performance is no indicator of future success it is a whole lot better then nothing.
TL;DR While completely flat wealth distribution is obviously a daft idea a simple argument shows some level of movement seems to be in the best interest of the economy as a whole.
>This argument breaks down in a couple of different ways but lets just look at one:
>Assuming there is no wealth redistribution then you had Joe and Jane have $19.128.28 and $69,330.20 respectively. Lets say they both die on the same day and leave all their wealth to Joe Junior ($19,128.28) and Jenny ($69,330.20).
I'd argue this is a categorically different case as it's taking wealth from a dead person. From economic perspective I agree there's less of an argument that this reduces growth.
>And of course the same is true without having to wait for the next generation. Just because person A made good use of their resources for 10 years is no indication that they will always continue to do so and so are going to generate the best return on those resources - and the opposite is also true. That said while past performance is no indicator of future success it is a whole lot better then nothing.
If past performance is some indicator of future success, then would it be fair to say that if a redistribution policy ignores this, and takes into account no other factors correlated with potential future returns in determining whom to redistribute to, then on average it will still result in transfer from better investors to worse investors? An opposed to e.g. redistribution in the form of scholarships to poor but well-performing students, which could increase overall growth.
Indeed. The counter argument, however, is the suggestion that Jane's higher returns are at least partially due to her ability to extract favours from the government. Perhaps her mis-managed bank was shored up in a crash, while Jo's better managed construction business went bankrupt.
Now, some heretics might suggest that it's better to stop the government doing people favours, instead of semi-blindly taxing Jane's gains for Jo's benefit and hoping most of it came from government favours (never mind that Jo is now extracting a kind of favour from the government herself), but such ideas don't get a lot purchase.
Good thing our society doesn't optimize for maximum absolute wealth growth in a vacuum, else we'd have 1 person with all of the country's wealth.
> If we equalise wealth, however, such that both have $4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have $13,186.44, for a total wealth pool of $48,003.01
Have you considered second order effects here? What if additional wealth allows "Jo" to increase their per annum return because they invest it in a business or education?
> In this sense there is hence a direct tradeoff between economic growth and wealth transfers from richer to poorer in the long term (all other things being equal).
I have a BA in Economics as well, and ceteris paribus models stop being useful past the 2nd year of study. I don't think they're ever useful except to illustrate the most basic concepts to freshmen and laymen. When you apply such models to the real world, you end up with a situation I described in the 1st paragraph.
In this case, the condition assumes that the rate of wealth creation is fixed and unalterable on a scale of 50 years. It also falsely assumes (just world fallacy) that wealth is already allocated in such a way as to belong to people with high (unalterable) wealth creation potential.
>Good thing our society doesn't optimize for maximum absolute wealth growth in a vacuum, else we'd have 1 person with all of the country's wealth.
The person must be trading with others somehow to be gaining those 4% returns; they could only end up with all the wealth if literally nobody else saved any money. And if nobody else saved any money, there'd be no economic growth at all if not for the person with all the wealth.
>Have you considered second order effects here? What if additional wealth allows "Jo" to increase their per annum return because they invest it in a business or education?
Jo started with the same amount of wealth as Jane; he had no less opportunity to invest it in a business/education, invest it in something to increase in something that increased his investment returns, than she did.
>In this case, the condition assumes that the rate of wealth creation is fixed and unalterable on a scale of 50 years. It also falsely assumes (just world fallacy) that wealth is already allocated in such a way as to belong to people with high (unalterable) wealth creation potential.
It doesn't assume the latter, it assumes Jane and Jo started with the same amount of wealth, and shows that given this condition it will result in more wealth being allocated to the people with more wealth creation potential. Starting from the same point, Jane and Jo have equal chance to increase their ability to create wealth.
If the cost of ensuring that every person in the US has food, health care and housing is SpaceX, that's OK by me.
The advancements from SpaceX are certainly cool, and have likely dropped the price of many services I consume; but that extra bit of convenience is hardly worth leaving so many in society behind.
Not to mention, if everyone was not tied to selling their time/body/skills just to survive, what other advancements could arise?
Another missing element in the model: People who need it most are renting. You hand everyone $1000 per month and I guarantee there will be a large uptick in rents. This will short circuit economic activity and just push the money straight to those who own rental property, thereby increasing the wealth gap while raising the cost of living. I won't all go into this effect, but certainly a lot of it will.
Everyone getting it buys a lot of the same goods, including housing. You'd expect increased demand to bring prices up a bit across the board, but I don't think it's as huge as you're making it out to be.
Inflation isn't really tied directly to cash in the market and I doubt you'd see inflation soak up $1000 / month. The dollar would have to become basically worthless for that to happen.
this is the perspective of someone who lives in a housing market in dire shortage. basic income might enable people, for the first time, to try living outside these places, where they are tied to their current job. in the rest of america, there is competition between landlords to attract tenants.
I know someone who live in subsidized housing. I understand this is not a common situation so it's not representative of a lot. Her rent is literally defined as a percentage of her income. She doesn't work, so income is in part child support payments and who knows what else. I believe the percentage is over 30, so if you handed her UBI over $300 would go straight to her rent.
Prices are like that - hand people (actually loan them beyond their means) money to go to college and tuition skyrockets. Give them heath insurance and those costs go up. Hand them a blank check every month and it will most likely all go to some form of inflation.
The law that enacts basic income could easily exclude BI from the calculation of income for rent subsidies. Or it could change the formula for those subsidies, maybe by capping the rent (if it isn't already).
So you'd move to one of those places with cheap housing and no jobs? Does that mean you'd not be working?
Of course the influx of people to low cost areas with no jobs would create some jobs in those places and raise prices on everything from housing to pizza.
We need to await the results of the Finnish study[1]. As an aside, I wish all politics would take an experimental scientific approach as the Finnish are doing. They are randomly selecting 2000 unemployed in a specific area and trialling the basic income for two years. I hope they have also selected a control population. At the end of two years they will assess how the scheme affects cost and employment status of that group.
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[ 3.1 ms ] story [ 72.3 ms ] threadWell, this idea is dead in the water then.
By the way, the lower class is striking back, but it looks more like a fake tan and a combover than the image of St. Petersburg in 1917 you seem to lust for.
Are you implying the lower class is "striking back" by electing a NYC real estate billionaire as president? Who are you thinking they are striking against, themselves?
> Who are you thinking they are striking against, themselves?
Being right is not a prerequisite. The workers that rose up in communist revolutions 100 years ago got throughly screwed over.
Tell that to the US DSA which is seeing record membership increases. And tell that to Kamala Harris who's an astute politician that co-signed Sander's single-payer bill. If the winds of change aren't blowing leftward then explain the current trend.
Also, Trump's ascendancy is the result of the capitalists not the working class. Robert Mercer (one of Trump's key supporters) has as much in common with you and me than does a mouse with a moose. Essentially, Trump is the carefully created result of decades of right wing propaganda and concerted destruction of the welfare state. Want to see less of Trump? Then tax the living heck out of the super rich and/or ban their right to fund any kind of think tank or PAC forever (down to a constitution amendment if necessary).
Some bad news: Bernie Sanders' support is substantially middle class. His policies are only very generously described as socialism at all, crucially he does not even begin to propose a fundamental break with private property or capitalism.
The rise of Bernie Sanders may be a nice development, and his hypothetical election might well bring benefits. But it's not going to be a workers revolution in any meaningful 20th century sense of the word.
Trump may be all that, but he was elected by appealing to the working class. Bernie Sanders has as much in common with you and I as a mouse has with a slightly smaller moose. Few of the revolutionary icons of the 20th century were themselves working class (Marx himself was remarkably posh). The important metric for a working class uprising is what the working class does (specifically, that it rises up), not the class background of the person they rise behind.
Am I misreading this? (It does seem a little too good to be true).
- There is zero effect on propensity to work
- The national debt has no secondary effects on the economy
- Changes in taxation do not affect consumption or investment behavior, at any tax level.
Those first two right there are incredibly massive assumptions, and they amount to two of the biggest criticisms of these proposals in the first place. And the third is flat out wrong, with enormous amounts of data available to debunk it.
Moreover, the third assumption ("Increasing government revenue by increasing taxes levied on households does not change household behavior") is actually at odds with their end conclusion! If there were truly no change in household behavior (whether at the margin or in the aggregate), then there could be no primary mechanism for this policy to have an impact in the first place. (And because this study explicitly ignores secondary impacts, without a primary impact, what are they actually claiming to measure?)
So I'm not sure what the value is in a study that basically says, "If we ignore the biggest and most commonly criticized negative effects, the effect of this policy will be positive".
I think it likely that this would cause low end job wages to rise, not necessarily increase employment.
People who are broke care. Some money is always better than no money.
In addition. The total money supply isn't growing, it is being redistributed to people more likely to consume. The velocity of money will increase but the total amount won't. This will keep prices relatively stable.
This isn't just common sense; the data on working age economically inactive people, working age economically inactive people receiving benefits and admin costs is free and open for most countries.
The only reason not to back an idea like this is how much the top earners will be able to evade paying their part, overburdening those who can't dodge taxes as efficiently.
Which is quite surprising because every, and I mean every, UBI proposal talks up how much money we'd _save_ because welfare would be eliminated. I just don't see how that's possible, because inevitably there are going to be a lot of people with real or self-imposed crises crying about how they don't have enough money to pay rent or buy food, and what is the government going to do, tell them "tough shit, you should've managed your UBI better"? Uh, I doubt it. We'll end up stuck with welfare programs as a UBI safety net and then people will inevitably game the system by crying broke every single month.
This whole thing is such a ridiculous leftist fantasy, the biggest giveaway is that it completely ignores basic human behavior.
And you're dodging the bigger question: I'm on UBI and my money runs out, can't afford to feed the kids. Multiply that by at least several thousand people every month. Now what?
In the UK, many welfare payments go directly to the person, so this wouldn't be a new issue.
Many of them are designed really just to ensure a floor people don't drop below, but combined with exceptionally high marginal tax rates and odd conditions. The marginal tax rate in many cases is 100%, and can be above this.
Not sure what you mean by this. The issue is that currently welfare payments are earmarked: this money can only be used for rent, this money can only be used for food, etc. By eliminating our existing welfare programs, as is the case with every UBI proposal, we would instead be giving a single check and saying "manage this money wisely and pay your expenses." The problem is that when the money isn't earmarked for a specific purpose you can't be sure that the basic necessities are actually paid for before the money runs out. Just ignoring the fraud angle (spend all the money and claim an emergency makes you unable to pay for rent), how do you deal with someone having a _real_ emergency, having to spend all their UBI, and then being unable to pay for rent? Tell them tough shit? That's not what's going to happen.
I mean this is often not the case in the UK. We don't have food stamps and housing benefit is afaik generally paid directly to the person, not the landlord.
That's what happens now, whether the person gets money from a job or from any kind of benefits. Why should it change? It's called 'Basic Income', not 'Basic Relax All Your Needs Will Be Met'.
With additional pressure when both parents work and can't survive with one of them unemployed - they lack the freedom to seek better positions elsewhere because they are limited to both having jobs all the time.
Unless this program were to completely eliminate welfare spending, then you'd likely end up with people choosing not to work because they don't need to. This of course assumes that purchasing power doesn't change with the massive influx of cash into the economy.
(or you could look at what happens when people are actually presented with realistic options for escaping the cycle of minimum-wage poverty, but that's a few steps of consciousness-raising away from where you currently are)
The number of children who are able to live off of their parents / grandparents money and don't work at all is so finite that it isn't really worth mentioning. Alongside that, they are a net gain for the economy.
Think about it - you have vast sums of wealth being dumped back into the economy through luxury purchases, and no impact to the labor force by them working. I may not agree with their decision to not work, but I really couldn't care less whether they do what I agree or not.
Also, a 100% estate tax would do one of two things: 1) create a disincentive for wealth accumulation as their is nothing to do with it afterwards thereby reducing their overall output 2) force those people into different investment vehicles where they can pass their wealth to their children as a "gift" prior to their passing.
That is really only import for those who are amassing large sums of wealth though. For the regular person - or even top 10% - all the 100% estate tax would mean is that dad's classic car that you restored together gets sold at auction instead being passed down, or the funds that could have gone to their grandchildren's college is now funneled into the government, or other similar act of smallish amount of funds being siphoned off by the federal government.
You are aware of the historical/empirical problems with it, yes?
If that's perceived as a problem, we already have that happening right now and aren't doing anything about it -- a complete confiscatory estate tax would solve it, though!
Which feed people in remote countries minimum wage at best and keeps what looks like slavery at worst while it generates handsome profits for others who brought in very little value.
> create a disincentive for wealth accumulation
Which is actually a great thing: all that money will hit the economy much sooner.
> force those people into different investment vehicles
Like giving their offspring an education that'll allow them to pursue well paid positions. Gifts are also taxed and an exponential tax on their market value would be a smart thing. Also, they can be sure their children, no matter how deplorable, won't starve.
> That is really only import for those who are amassing large sums of wealth though
So these people who make insane amounts of money while pressuring down compensation for the rest of society will bear most of the burden. Seems only fair.
Also, keep in mind these people are far too powerful now to freely give up their advantages. These ideas have the potential of getting very, very ugly.
Regular people won't be affected, only a fraction of the richest 1%:
> a maximum amount, varying year by year, can be given by an individual, before and/or upon their death, without incurring federal gift or estate taxes:[2] $5,340,000 for estates of persons dying in 2014[3] and 2015,[4] $5,450,000 (effectively $10.90 million per married couple) for estates of persons dying in 2016.[5] Because of these exemptions, only the largest 0.2% of estates in the U.S. will pay the tax.[6]
You need to consider the humanitarian aspect of forcing someone to work multiple jobs and very long hours to avoiding starvation and sleeping on the streets.
If paying more taxes is the price to know no kid will sleep hungry and no family will have to live on the streets, I'll gladly do it. I don't care if they will or will not show up to work (I bet most will, because 12000+7000 is more than 12000).
OTOH, imagine parents that today can't be present to raise their kids may have the option of dropping one of their jobs to be with their family.
The other benefit for those not employed by or involved in the restaurant's supply chain is cheap and convenient food.
> They also model the impact of the plan if it's paid for with taxes. That amounts to large-scale income redistribution, which, the authors argue, would stimulate the economy, because lower-income people are likelier to spend their money in the near-term than rich people are. Thus, they find that a full $12,000 a year per adult basic income, paid for with progressive income taxes, would grow the economy by about 2.62 percent ($515 billion) and expand the labor force by about 1.1 million people.
So, borrowing and spending 300 million adults * $12,000/adult/year = $3.6 trillion/year would grow the economy by $2.5 trillion? And raising it in taxes would grow the economy by just half a trillion?
Or what am I missing?
Also this:
> because lower-income people are likelier to spend their money in the near-term than rich people are
But what about the long term? We can debate the finer points about when and how much etc, but it remains uncontroversial that rich people invest nontrivial amounts in long term stuff. With near-70% top average (not marginal!) tax rates, this will go down by a lot. How will this redistribution from long-term investments to near-term spending affect the economy over the long term? Yes, fewer yachts and private jets (there are also people employed supporting those, and the net employment benefit suggested is already quite modest), but would an Elon Musk or Jeff Bezos subject to a 70% tax rate invest in the next SpaceX/Blue Origin (not to mention thousands of other startups backed by angels and personal/friends&family savings)?
To illustrate, imagine they both start with $1000 each. The total wealth pool is hence $2000, and they both have 50% each, perfect equality. Now, let's look 50 years in the future, assuming the previously mentioned interest rates per annum compounding annually. According tohttp://www.moneychimp.com/calculator/compound_interest_calcu..., Jo will have $2,691.59 and Jane will have $7,106.68. The total wealth pool is $9,798.27. Jo hence now has 27.47%, and Jane has 72.53%. They're both less equal, but they're also both wealthier, and the overall wealth pool has increased.
Now, let's look ahead another 50 years. If no wealth transfer occurs, Jane will have $50,504.92 and Jo will have $7,244.65, with the total wealth pool being $57,749.57. If we equalise wealth, however, such that both have $4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have $13,186.44, for a total wealth pool of $48,003.01. This is 83.12% of the total wealth pool that there would be if no wealth transfer took place. This effect is applies similarly if wealth redistribution happens every year through redistribution of income.
In this sense there is hence a direct tradeoff between economic growth and wealth transfers from richer to poorer in the long term (all other things being equal).
Assuming there is no wealth redistribution then you had Joe and Jane have $19.128.28 and $69,330.20 respectively. Lets say they both die on the same day and leave all their wealth to Joe Junior ($19,128.28) and Jenny ($69,330.20).
Now it turns out that Joe Junior works hard and is really smart. He can get a 5% per annum return. Meanwhile Jenny is a bit of a flake but can still get 1% per annum from her investment.
After 50 years Joe Junior has $219,351.63 and Jenny has $114,022.65. So the hardworking Joe has turned his more modest beginning around and overtaken the less hardworking Jenny. The total wealth pool is now $333,374.28.
However if we had equalised their wealth on the death of their parents so that they had both started with $34,816.57. Jackie would then have ended up on $57,260.44 while Joe Junior would be on $399,255.53 for a combined wealth of $456,515.97 - significantly more than if wealth equalisation had not taken place
So that is one way it makes sense for the economy a a whole to redistribute wealth. Another is the fact that both Joe Junior and Jackie may have seen fixed costs (Medical bills?) on their life journeys. Jackies initial capital advantage measn she could weather those a lot more efficently then Joe Junior even if the return on her wealth she is generating is less.
And of course the same is true without having to wait for the next generation. Just because person A made good use of their resources for 10 years is no indication that they will always continue to do so and so are going to generate the best return on those resources - and the opposite is also true. That said while past performance is no indicator of future success it is a whole lot better then nothing.
TL;DR While completely flat wealth distribution is obviously a daft idea a simple argument shows some level of movement seems to be in the best interest of the economy as a whole.
>Assuming there is no wealth redistribution then you had Joe and Jane have $19.128.28 and $69,330.20 respectively. Lets say they both die on the same day and leave all their wealth to Joe Junior ($19,128.28) and Jenny ($69,330.20).
I'd argue this is a categorically different case as it's taking wealth from a dead person. From economic perspective I agree there's less of an argument that this reduces growth.
>And of course the same is true without having to wait for the next generation. Just because person A made good use of their resources for 10 years is no indication that they will always continue to do so and so are going to generate the best return on those resources - and the opposite is also true. That said while past performance is no indicator of future success it is a whole lot better then nothing.
If past performance is some indicator of future success, then would it be fair to say that if a redistribution policy ignores this, and takes into account no other factors correlated with potential future returns in determining whom to redistribute to, then on average it will still result in transfer from better investors to worse investors? An opposed to e.g. redistribution in the form of scholarships to poor but well-performing students, which could increase overall growth.
Now, some heretics might suggest that it's better to stop the government doing people favours, instead of semi-blindly taxing Jane's gains for Jo's benefit and hoping most of it came from government favours (never mind that Jo is now extracting a kind of favour from the government herself), but such ideas don't get a lot purchase.
> If we equalise wealth, however, such that both have $4,899.13, then in 50 years Jane will have $34,816.57 and Jo will have $13,186.44, for a total wealth pool of $48,003.01
Have you considered second order effects here? What if additional wealth allows "Jo" to increase their per annum return because they invest it in a business or education?
> In this sense there is hence a direct tradeoff between economic growth and wealth transfers from richer to poorer in the long term (all other things being equal).
I have a BA in Economics as well, and ceteris paribus models stop being useful past the 2nd year of study. I don't think they're ever useful except to illustrate the most basic concepts to freshmen and laymen. When you apply such models to the real world, you end up with a situation I described in the 1st paragraph.
In this case, the condition assumes that the rate of wealth creation is fixed and unalterable on a scale of 50 years. It also falsely assumes (just world fallacy) that wealth is already allocated in such a way as to belong to people with high (unalterable) wealth creation potential.
The person must be trading with others somehow to be gaining those 4% returns; they could only end up with all the wealth if literally nobody else saved any money. And if nobody else saved any money, there'd be no economic growth at all if not for the person with all the wealth.
>Have you considered second order effects here? What if additional wealth allows "Jo" to increase their per annum return because they invest it in a business or education?
Jo started with the same amount of wealth as Jane; he had no less opportunity to invest it in a business/education, invest it in something to increase in something that increased his investment returns, than she did.
>In this case, the condition assumes that the rate of wealth creation is fixed and unalterable on a scale of 50 years. It also falsely assumes (just world fallacy) that wealth is already allocated in such a way as to belong to people with high (unalterable) wealth creation potential.
It doesn't assume the latter, it assumes Jane and Jo started with the same amount of wealth, and shows that given this condition it will result in more wealth being allocated to the people with more wealth creation potential. Starting from the same point, Jane and Jo have equal chance to increase their ability to create wealth.
The advancements from SpaceX are certainly cool, and have likely dropped the price of many services I consume; but that extra bit of convenience is hardly worth leaving so many in society behind.
Not to mention, if everyone was not tied to selling their time/body/skills just to survive, what other advancements could arise?
Prices are like that - hand people (actually loan them beyond their means) money to go to college and tuition skyrockets. Give them heath insurance and those costs go up. Hand them a blank check every month and it will most likely all go to some form of inflation.
The USA has more housing than people. Alas, that excess supply isn't near the jobs.
Of course the influx of people to low cost areas with no jobs would create some jobs in those places and raise prices on everything from housing to pizza.
Of course wealth redistribution via progressive taxation, in this case via UBI (or negative income tax) increases the economy.
Conflating wealth growth (aggregation, transferring, hording) with economic activity is how we got into our current mess (accelerating inequity).
[1]http://basicincome.org/news/2017/05/finland-first-results-ba...
The given commodity becomes an oft-wasted resource. (i.e. inflation is a result.)