The buck stops nowhere any more and I hear it's approaching the speed of light. The government is the ultimate legal power though and whenever bad stuff is legal we all know who made it legal.
If wages go up 20%, and prices go up 15%, everyone is better off and got a 5% raise, right?
Go poll people that experienced that and they won't tell you they're celebrating being 5% richer, they'll tell you they're outraged about the 15% inflation.
Psychologically they'll believe they earned that 20% raise through hard work. Putting in extra hours to get that promotion. But then the inflation robbed them of their 20% raise, and turned it into a measly 5% raise. They'll be outraged.
Politicians get this. No one will credit politicians for raising average wages, people will believe they earned their raise themselves. But there's lots of votes available for lowering prices.
i don't think this is really true. people don't complain about an abstract concept of inflation, they complain that they can no longer afford things they once could. if wages really did practically increase by 5%, they could afford more things and have more money left over at the end of the month, and that is what they would notice.
politicians can't really affect wages the same way they can temporarily and artificially lower prices. but they also understand they need inflation to get elected, since you generally win elections by what you promise, not what you don't promise.
What they would notice is their entire net worth decreased significantly and their marginal income increased slightly. This is not a good deal for anyone with any savings.
Inflation especially impacts people older in life, who tend to be people who are more likely to vote and contribute to campaigns.
Lowering prices is of course more noticeable because you receive a raise once every long period, but pay higher prices (or lower) constantly and it’s very visible.
inflation is great if you own assets, which skews older. and they're more likely to vote, yes. which is why we get policies that are determined to keep housing values sky high.
What I and many others to whom it matters a lot more than me are noticing is that the majority of things in the supermarket are twice the pre COVID price and pay has not gone up.
Don't forget about taxes. Things cost 15% more, wages go up 20%, but the government takes a chunk of that 20%. Do you net even 15%? Depends on your tax bracket.
If wages go up 20%, your post tax income should also go up by approximately 20%.
The exceptions are if you enter a new tax bracket, but that only affects your marginal dollars, sns even then, the increase in tax brackets is just a few percent.
In the U.S., you could also cross the SS/Medicare threshold and then suddenly your post tax earnings will go up more than your wage increase.
Post-tax wage changes shouldn’t differ too much from the pre-tax wage increase.
Having lived through hyper-inflation the only thing that got that under control was price controls. Wages going up can't stop inflation - they fuel inflation. Inflation psychology is that your money is going to become worthless so you don't save it, you spend it, which keep prices going up. It wrecks havoc on loans and debt as well. If you lent money with a fixed rate hyperinflation erases your returns. If you borrowed with a fix rate your debt is effectively erased.
Not to mention that governments in general don't control incomes. They can lower taxes (which is good IMO). They can pay government employees higher wages (which is hard to do when you lower taxes).
At the end of the day governments make things better by making smart investments (or policies that enable smart investments) and make things worse by making bad investments (or policies that lead to bad investments). Everything else is second order effect.
When wages go up 20%, they go up 50% for the top quintile and 5% average for everyone else (or whatever the math is, preserving the general proportion). When prices go up 15%, they go up 50% on mandatory expenses and 20% on discretionary spending, and the basket of goods used to index inflation for both is massaged until it looks like a 15% increase overall.
That said, your assessment of the psychology of inflation is correct. It's just inapplicable here. The issue isn't people not understanding how much richer they are, because they're not. It's the intelligentsia and "elite" refusing to acknowledge the reality, because they'd then have to actually make material changes, which would reverse the siphoning of wealth from the middle class that they've been engaging in for at least the last 30 years.
> Psychologically they'll believe they earned that 20% raise through hard work.
Well, it's not just that. They've been telling us for decades that wages are alternatively a direct reflection of the value of our labor to the company, or, a price set by the market, depending on which is cheaper for the corporations.
Kind of like when people say that UBI would simply instantly raise the price of all rent to match. Oh, really? The supply of rentable units will suddenly have decreased? The demand will suddenly have gone up? No? Odd that the "market set price" responded then.
Because people have more money, making more expensive things more affordable. Demand isn't a single number "I need one apartment." It's a curve: at $800/month I will live with a roommate, at $1200/month, I will rent a 1 br. At $1500/mo, I will rent a 2br. At $2000/month I will not rent anything because I do not have $2000/month. etc. And actually, it's a curve representing how many people are willing to pay for a thing at a given level, not how many apartments do you, one person, need. Now give everyone $2000/month, and their ability/willingness to pay will increase. Of course every sector of the economy knows this, not just landlords, so in reality prices of everything will rise rather than rent capturing it all.
This still doesn't make sense to me because people will often stay in the same place that they may not like that much specifically because the landlord hasn't raised rent that much, even if they can afford to move. They can't justify it. Or California landowners that don't sell because of whatever that rule they have is that figures property tax against original price or whatever.
It doesn't seem liquid enough to justify an increase in cost of rent the instant minimum wage goes up or UBI is implemented. My point is that a lot of these "markets" are really just price controllers setting price as they please, and landlords particularly feeling like they're special and get to lay claim to some arbitrary percentage of people's income. Which, for structural reasons, they can do.
The point is they can't set the price as they please; they can't set it higher than demand supports. If right now landlords all just agreed at raise prices by $2000, many units would go unfilled as people don't have an extra $2000, so under no circumstances could they possibly pay that (they may find alternative arrangements like roommates or parents or living on the street).
If you give everyone $2000, then landlords can successfully raise prices because now people can pay that much, and as mad as they'd be about their UBI going straight into the hands of businesses, they're unlikely to go homeless or stop buying food to protest it, so they'll pay it. That ability and willingness to pay is called demand.
Your argument is oversimplified. Landlords may be able to extract more money from people who net benefit from UBI, yes, but they will be able to extract less money from those who take a net loss from the policy. (I’m skeptical that landlords will actually be able to extract more because I believe most low income people who can afford rent now are likely unable to afford the means of subsistence in total, but this aside doesn’t affect the argument I’m making here.)
So the inflationary effect will probably be limited to low-income housing, which is already heavily subsidized by taxpayer dollars in the US, arguably even more inefficiently than the situation under a hypothetical UBI. It will probably be coupled with a deflationary effect at middle-to-upper income housing, depending on the nature of the benefit and the structure of the taxes used to fund UBI. If the policy is structured competently, there’s no reason that it is necessarily inflationary as a whole.
Well, sure, if you put enough tax pressure on the middle/upper-middle class, then that might have a counterbalancing effect of some sort, but generally speaking, the upper class aren't spending their money on things that people are worried about when they talk about inflation, so to the extent that it's "inflation-neutral," it'd be exactly the phenomenon people claim happens with inflation reporting today: "No, no, inflation didn't happen! See, rent and food and healthcare and education became more expensive, but luxury vehicles and McMansions are cheaper! For the overall basket of goods there was actually deflation!"
The only reason it would go up by the same amount is greed of "the market" profits are unevenly distributed so it would make sense to even things out a bit (at least undo the gains made over COVID and the last few years by those profiting the most from inequality).
Debt is where inflation is awesome though, if you have 10% inflation and your wages raise 10%, your car loan and student loans become irrelevant quickly.
I borrowed the money on my flat for 1.25% fixed and I can feel the debt inflating away over the last couple of years. The Monthly payment is the same nominal amount where really nothing else still is. There are groceries twice the price of what they were 6 years ago. 6 more years like that and it will be less than paying the owners share of the building expenses.
How can you not feel that. Nobody is forcing me to take on new debt
I'm confused about your first point. Income tax brackets are adjusted annually for inflation, at least in the USA. Receiving a 20% raise in a year with 17% inflation comes with each tax bracket cutoff also going up about 17%, so the post-inflation and post-tax income should match receiving a 3% raise in a year with zero inflation.
> It's partly because a 20% raise isn't a 20% raise. Even at the most modest tax bracket (above poverty) that will be reduced down to 17%.
That's just not true.
To come up with an example of 17%, I have to plug in numbers that put you above the tax limit for social security, assume that tax brackets weren't modified by inflation (they are supposed to be), and put you right at the cusp before the next large jump tax bracket. So from 197,300 to that plus 20%. And even then, it's more than a 17% raise unless you are in California, where it's a 16% raise.
But that's again a very contrived example. In most cases, it's a full 20% raise.
> A 20% (ignoring taxes) raise when your take home pay is $3000 disappears very quickly into your $6000 credit card debt, or maybe your $700/month car loan, or your $400/month student loans
Except inflation makes loans cheaper. You get a raise. The principle stays the same. If inflation and your salary both go up by 20%, that's mathematically equivalent to a 16% reduction in your debt. So your credit card debt becomes the equivalent of $5,000, etc.
> It's partly because a 20% raise isn't a 20% raise. Even at the most modest tax bracket (above poverty) that will be reduced down to 17%. So outpacing groceries by 2% doesn't really feel good at all.
20% is 20%. Unless you're moving from one tax bracket to another on a particularly steep threshold, a 20% raise is going to actually translate to close to 20% extra take home, especially at the income levels for someone making $3k/mo take home.
This feels spot on to me, I roll my eyes at the cost of groceries over the past 6 years and remember the average price I was used to paying. It's much worse when I remember being a kid and 3 avacados for a dollar seemed expensive to my parents, now we're at 5 avacados for $10 (Canadian). A wise old timer I know was pointing out how we stopped using pennies and started rounding the price of things in cash and how that represents a big drop in the worth of money.
the affordability crisis is downstream of inflation. governments should stop inflating the money supply, but of course they won't ever do this because they would then need to generate revenue another way, which would be to raise taxes. inflation is really just a hidden tax and it's easier for them to "tax" without pissing off citizens.
and so really the solution is to reduce spending. which, to some extent, is so obvious it kind of hurts.
This is the most impactful economic discovery of the century. You can raise taxes as much as you want if you add a layer of seperation to it and print currency.
Well, a little bit of inflation is actually good for the economy long term, and we have to balance that with the opportunity of cost of not spending.
Yes, the amount of government spending currently is likely too much, but by not spending the opportunity cost is sometimes greater. As the article contends, the solution to the affordability problem is to raise wages. If you can use the levers of government to induce growth that naturally raises wages, more deficit spending might be worth it.
Deficit spending is not universally able to create wealth. It can when invested in durable infrastructure at reasonable prices that increases productivity of the economy. But when countries borrow to pay pensions and other transfers, it destroys wealth and makes society poorer.
Even if this were true, such a tax program would limit the outsized corrupting influence of this class. That's arguably an even greater benefit than just helping with the deficit.
The goal of taxing the rich isn't to save the enormous defecit. It's to make sure they can't buy elections and undermine democracy.
It also does help to reign in some spending. Because a lot of spending is indirectly performed through subsidies. Oftentimes in the modern day for the rich who can already afford such initiatives.
> What's wrong with taxing the rich to maintain current spending?
Perhaps you have something more sensible in mind, but much of this pressure is clearly coming from the perspective that we could have incredible government spending with no tradeoffs or inflation if only we summoned the political will to fight billionaires.
Laffer Curve. Depends on the country but France for example already takes 44% of their GDP as tax, runs heavy deficits, and attempts to make up the difference by increasing taxes on the wealthy causes them to leave.
It's well-established that Americans are much earlier on the curve than wealthy people would like to believe. Mamdani Doctrine: ignore the part of your brain screaming rich people double consciousness and just do what's right for and fair for most people. At this point in history, that's taxing wealthy people - including paid-off-6k-sq-ft-house-with-2-people-in-it pensioners and $200k-a-year-living-paycheck-to-paycheck-in-a-coastal-metro yuppies. Yes, there'll have to be some tough decisions; austerity, indeed.
I'm gonna expand on that last bit because people seem to have a kneejerk negative reaction, and I would like them to see the logic.
On Baby Boomers with paid-off houses: it's admirable that you were responsible, worked hard, bought your house in the 80s or 90s, and paid it off. However, you made that deal when there were 100 million fewer people in this country. That population growth is part of what kept those house payments affordable for you over that period. We are now in a housing crisis; there are not enough rooms to go around. Many houses are underutilized, including yours. From a strictly utilitarian standpoint, the solution would be to increase taxes to reflect the real societal cost of your residence existing as it does; it would be your decision whether to pay the tax, subdivide the house to increase utilization, or sell. This is a form of austerity.
For the yuppies: 99% of the world can make due on less than half your income, in the same city you live in. Your costs are high because your tastes are expensive. A high tax would not ruin you. It would force you to make decisions, some of which might be difficult. Public school instead of private. A cheaper car, and fewer cars. Better-controlled discretionary spending on things such as entertainment, clothing, food. Full-throated support for single-payer healthcare. Your kid will still get a good education, because you are an involved parent. You will still be able to get where you need to, because you will have a working vehicle. You will be more intentional about how you enrich your lift. You will reap the benefits of dismantling America's broken healthcare system and replacing it with something at least as good as what the rest of the developed world can boast. This is also a form of austerity.
You do not solve this problem simply my making poor people's lives harder.
That question assumes that the current level of spending is optimal. Regardless of who pays the taxes, are we getting a good value for that spending? Or could it be drastically cut?
Taxes on the rich are already at European levels in the US. There simply aren’t enough of them to cover current spending.
It is a similar issue with taxing nominal wealth. 2/3 of nominal wealth in the US is completely non-liquid. Taxing the liquid fraction is essentially leveraged as a result, causing a catastrophic collapse in the value of similar investments by ordinary people as a side effect. Impoverishing a large portion of the middle class to own the rich isn’t a recipe for political success.
We’ve got to stop pretending loads of wealth is non-liquid and therefore off limits. The rich borrow using it as a collateral, if they can do that for their own purposes, they can do that to pay their fair share of taxes too.
A group of people unaffected by a problem will rarely correctly handle the problem. And the further they are away from it, the further from 'correctly handle' will be their handling.
Most of the people responsible for Government decisions are fairly well separated from most crises, hence the crises will continue and grow.
> Most of the people responsible for Government decisions are fairly well separated from most crises
A lot of the time it is actually even worse than this in that they are often in a position to benefit from the crises.
The real major economic problem of our day is the extent to which labor's share of productivity gains have plummeted and continue to plummet.
If your wealth comes from capital everything is going gangbusters and nothing needs to be fixed. Just listen to Trump talk about the economy and how blind he is to how normal people experience it.
Going way off topic here but, how can we expect AI 'alignment' when even country leadership doesn't align with the people any more?
On a relate-able scale, look at the 'alignment' difference between a worker and their manager; between an SWE and someone in mangement a couple of levels above. They're a different species, in terms of 'alignment', generally. They don't even speak the same language.
(I'm being hyperbolic, but hopefully the core of what I mean comes across).
We're completely misaligned. That's why it's going to supercharge the problem. Pour trillions not into heathcare nor other public goods, but towards private companies who want to ransack civilization and dismantle the idea of a labor economy. The workers hate data centers but cities and states keep signing on.
Just more examples of political greed being funded by a plutocracy.
The difference being that the Dutch Government isn't meant to be responsible for the civilised behaviour of other countries.
Governments, however, are responsible for responding to crises occurring in the areas they are elected and paid to govern. But increasingly they behave like lords over subjects rather than representatives of the group.
The Dutch government could protect its sovereign interests apart from the USA - for example by legalizing decompilation and antagonistic interrop with American software, or reverse engineering of American hardware, or suspension of copyright and trademark protections for American businesses. Dutch Mickey mouse cartoons for everyone!
There'd be short term economic repercussions when America throws a tantrum, but whose fault is it that this could significantly harm the Dutch economy? Better to rip off the band-aid.
They are isolated until the pitchforks come out. That's the big risk with letting a crisis fester, even if you yourself are not affected. thousands or millions of frustrated citizens, and it only takes one at the end of their rope.
oatmeal1 is right. The largest components of most people's budgets are housing and transportation. Restricting new construction constricts new supply which results in rent/mortgage payments being higher than they need to be. Zoning which makes driving easy and anything else very hard makes buying and maintaining an automobile a de facto necessity. It also exposes you to oil shocks.
Just got me thinking about how much an area would attract residents if it could advertise the savings they'd make from living there as compared to anywhere 'normal'.
No car = no on-going petrol / diesel costs.
Fewer cars = cleaner / healthier air. Quieter, more serene ... everything.
Cleaner / Healthier air = Fewer health issues.
Fewer cars = more bikes
More bikes = physically healthier people.
Good planning is worth its weight in gold. I fear I'm stumbling into utopia theory, which is fraught with forgetting a whole lot of other realities.
American cities are not nice places to live due to crime..the built environment is often better than equivalent cities elsewhere. People who care about cities need to care about law and order.
Not really. Third world countries have more orderly cities than America with people in much more destitution. I've lived in many and my parents grew up in one. The idea that it's just that is just silly imo.
The Economist, as a London-based magazine, has front-row seats to a great example of an affordability crisis in a city with good infrastructure and little car dependency. (In the UK they generally call it the "cost-of-living crisis", if you're looking for more information.)
Unfortunately, when the populace suffers economically, it tends to become dumber. In turn, populist and demagogues rise, and these tend only to worsen matters.
See, for example, what happened after Weimar Germany's inflation.
They should outlaw financial engineering of human agency and build decision models development and deployed within full public view that bubble up for vote national, regional, or local initiatives
But since government is a euphemism for the more verbose "humans whose biology drives them to select self" they will continue to mishandle the "affordability crisis" by propping up its roots, doing nothing to stave off future gilded ages
It's really annoying that minimum wage and the like aren't pegged to a general 'cost of living'-number that scales with inflation and whatnot. Peg the wages of the politicians to the same number. If they then want to increase their own wages, they have to also increase the minimum wage, or go out of their way to only increase their own wage, which will hopefully cause some people to call them out on their shenanigans.
I do love the idea of tying the wages of public servants roughly to their constituents. But we already know the loophole of "use insider trading and bribes" to get around such restrictions on salary. Above all else, we need proper accountability before we dream of any real change like this.
Are there really a lot of countries where politicians are constantly increasing their wages while minimum wage stays the same? In the UK, both numbers are set by independent commissions which primarily adjust for cost of living; MP wages also have a modest benchmarking adjustment to ensure they stay in line with what civil servants responsible for similarly complex work would make. The US has "solved" the problem by increasing neither politician salaries nor minimum wage since 2009.
Reaffirming my view that The Economist is a neoliberal dishrag, the word "housing" appears zero times. Because housing is the number one problem and it'll never get fixed because ever-increasing house prices have become an explicit policy goal and, more importantly, homeowners will never vote for decreasing house prices.
High house prices are simply stealing from the next generation and increasing house prices raise the prices of everything because housing is an input to the cost of everything.
In many Western countries, housing is the best performing asset class so it's reached the point of stealing investment dollars that might otherwise go to productive output. Housing is the black hole at the heart of the economy.
The only country that has attempted to correct this thus far has been China. Xi Jinping quietly popped the real estate bubble a decade ago and the real estate sector has been in recession ever since as prices correct. As Xi says, houses are for living in, not for speculation [1].
The only countries that have even partly avoided this are because they implemented systems long ago that have prevented land hoarding, such as Red Vienna [2]. Interestingly, the post-WW2 UK almost ended landlords but then along came Thatcher [3].
> In many Western countries, housing is the best performing asset class so it's reached the point of stealing investment dollars that might otherwise go to productive output. Housing is the black hole at the heart of the economy.
This is true, and it is a huge problem in Europe for example, where buying a property to rent is often the best investment for regular people. So instead of opening a business or taking any other risk that may or may not pay off, investment money is going to an asset class that is not productive.
This misses the primary cause. There's an affordability crisis because most of the capital continues to concentrate in the hands of a small set of people who maximally extract rents. As one small example, private equity buys up businesses of all kinds and extracts a rent; both the consumer and the worker suffer.
If you said during the feudal era "there is an affordability crisis: the peasants don't have money to buy castles," perhaps you were right. But the solution was to revolt against the king.
And high inflation would stop/reduce that by lowering debt.
Fundamentally, you should think of rich people's wealth as a percentage of outstanding debt (except of course things like Royal families' wealth). If public + private debt drops as a percentage of GDP, rich people will own more in nominal terms, less in terms of GDP (ie. less compared to labour). So the net effect of high inflation will do is make their ownings worth less in terms of assets.
And, to distract everyone from the destruction of the lower and middle-classes, here’s an <insert ethnic or somewhat alien> group you’re supposed to hate.
Perhaps capitalism was less to blame… A critical fifth estate and honest political ruling would’ve kept us on the path of the post-war “contract with the people” bit, that was working fairly well.
> But the solution was to revolt against the king.
most revolts were triggered by someone else (a rich lord) wanting to be king. The peasants participating in the revolt are simply either lied to, or were promised they would reap the benefits and rise above their station.
The real solution was the black plague, which created labour shortages, and gave the remaining peasants bargaining power.
Many of the issues that are currency related. The same labor being priced in different currency having different value is the most major issue. When a currency dives, then labor gets discounted due to inflation.
I don't see how simply raising the income would change anything long term.
The main issue is that the affordability crisis is also a result of the market. And without changing the preconditions or mechanics we'd get the same outcome just with different numbers.
So:
- Build housing
- Make housing more affordable by allowing homeowners (= not renting out) to write off and/or write off-faster
- Give newly built housing better write-off conditions
- Prevent cartels that operate via "pricing as a service"
Build housing is the biggest contributor (the remaining are simply levers to generate more build housing).
The lack of building comes from the bad zoning laws preventing builds. The rules at the local level are mostly favourable to existing owners, who by a large margin, want their existing property and environment to remain as static as possible to what they purchased (ala, the character of their neighbourhood).
And not to mention that even if they, in principle, agree with denser housing, they would face problems with crowded infrastructure that has to be paid for (and mostly hasnt been upgraded or improved, like public transport, road conditions, grid connections etc).
Therefore, the best current option is to push the affordable (read: high density) housing away from where you are, even if you, in principle, don't disagree with the ideals of it.
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[ 4.3 ms ] story [ 54.9 ms ] threadLet them eat cake.
I think this misses the psychology of inflation.
If wages go up 20%, and prices go up 15%, everyone is better off and got a 5% raise, right?
Go poll people that experienced that and they won't tell you they're celebrating being 5% richer, they'll tell you they're outraged about the 15% inflation.
Psychologically they'll believe they earned that 20% raise through hard work. Putting in extra hours to get that promotion. But then the inflation robbed them of their 20% raise, and turned it into a measly 5% raise. They'll be outraged.
Politicians get this. No one will credit politicians for raising average wages, people will believe they earned their raise themselves. But there's lots of votes available for lowering prices.
politicians can't really affect wages the same way they can temporarily and artificially lower prices. but they also understand they need inflation to get elected, since you generally win elections by what you promise, not what you don't promise.
Inflation especially impacts people older in life, who tend to be people who are more likely to vote and contribute to campaigns.
Lowering prices is of course more noticeable because you receive a raise once every long period, but pay higher prices (or lower) constantly and it’s very visible.
The exceptions are if you enter a new tax bracket, but that only affects your marginal dollars, sns even then, the increase in tax brackets is just a few percent.
In the U.S., you could also cross the SS/Medicare threshold and then suddenly your post tax earnings will go up more than your wage increase.
Post-tax wage changes shouldn’t differ too much from the pre-tax wage increase.
Having lived through hyper-inflation the only thing that got that under control was price controls. Wages going up can't stop inflation - they fuel inflation. Inflation psychology is that your money is going to become worthless so you don't save it, you spend it, which keep prices going up. It wrecks havoc on loans and debt as well. If you lent money with a fixed rate hyperinflation erases your returns. If you borrowed with a fix rate your debt is effectively erased.
Not to mention that governments in general don't control incomes. They can lower taxes (which is good IMO). They can pay government employees higher wages (which is hard to do when you lower taxes).
At the end of the day governments make things better by making smart investments (or policies that enable smart investments) and make things worse by making bad investments (or policies that lead to bad investments). Everything else is second order effect.
That said, your assessment of the psychology of inflation is correct. It's just inapplicable here. The issue isn't people not understanding how much richer they are, because they're not. It's the intelligentsia and "elite" refusing to acknowledge the reality, because they'd then have to actually make material changes, which would reverse the siphoning of wealth from the middle class that they've been engaging in for at least the last 30 years.
Well, it's not just that. They've been telling us for decades that wages are alternatively a direct reflection of the value of our labor to the company, or, a price set by the market, depending on which is cheaper for the corporations.
Kind of like when people say that UBI would simply instantly raise the price of all rent to match. Oh, really? The supply of rentable units will suddenly have decreased? The demand will suddenly have gone up? No? Odd that the "market set price" responded then.
It doesn't seem liquid enough to justify an increase in cost of rent the instant minimum wage goes up or UBI is implemented. My point is that a lot of these "markets" are really just price controllers setting price as they please, and landlords particularly feeling like they're special and get to lay claim to some arbitrary percentage of people's income. Which, for structural reasons, they can do.
If you give everyone $2000, then landlords can successfully raise prices because now people can pay that much, and as mad as they'd be about their UBI going straight into the hands of businesses, they're unlikely to go homeless or stop buying food to protest it, so they'll pay it. That ability and willingness to pay is called demand.
So the inflationary effect will probably be limited to low-income housing, which is already heavily subsidized by taxpayer dollars in the US, arguably even more inefficiently than the situation under a hypothetical UBI. It will probably be coupled with a deflationary effect at middle-to-upper income housing, depending on the nature of the benefit and the structure of the taxes used to fund UBI. If the policy is structured competently, there’s no reason that it is necessarily inflationary as a whole.
In practice, most people will never escape the shackles of perpetual debt.
How can you not feel that. Nobody is forcing me to take on new debt
That's just not true.
To come up with an example of 17%, I have to plug in numbers that put you above the tax limit for social security, assume that tax brackets weren't modified by inflation (they are supposed to be), and put you right at the cusp before the next large jump tax bracket. So from 197,300 to that plus 20%. And even then, it's more than a 17% raise unless you are in California, where it's a 16% raise.
But that's again a very contrived example. In most cases, it's a full 20% raise.
> A 20% (ignoring taxes) raise when your take home pay is $3000 disappears very quickly into your $6000 credit card debt, or maybe your $700/month car loan, or your $400/month student loans
Except inflation makes loans cheaper. You get a raise. The principle stays the same. If inflation and your salary both go up by 20%, that's mathematically equivalent to a 16% reduction in your debt. So your credit card debt becomes the equivalent of $5,000, etc.
20% is 20%. Unless you're moving from one tax bracket to another on a particularly steep threshold, a 20% raise is going to actually translate to close to 20% extra take home, especially at the income levels for someone making $3k/mo take home.
Which means we need to ship homeless people next to the poor people and make them happier.
and so really the solution is to reduce spending. which, to some extent, is so obvious it kind of hurts.
Yes, the amount of government spending currently is likely too much, but by not spending the opportunity cost is sometimes greater. As the article contends, the solution to the affordability problem is to raise wages. If you can use the levers of government to induce growth that naturally raises wages, more deficit spending might be worth it.
Inflation is useful, actually. So is deficit spending in a growing economy.
After that, the money is gone.
The underlying problem of high, persistent government spending remains. This isn’t primarily a “tax the rich” problem.
It also does help to reign in some spending. Because a lot of spending is indirectly performed through subsidies. Oftentimes in the modern day for the rich who can already afford such initiatives.
> What's wrong with taxing the rich to maintain current spending?
Perhaps you have something more sensible in mind, but much of this pressure is clearly coming from the perspective that we could have incredible government spending with no tradeoffs or inflation if only we summoned the political will to fight billionaires.
At some point they'll need to do austerity.
On Baby Boomers with paid-off houses: it's admirable that you were responsible, worked hard, bought your house in the 80s or 90s, and paid it off. However, you made that deal when there were 100 million fewer people in this country. That population growth is part of what kept those house payments affordable for you over that period. We are now in a housing crisis; there are not enough rooms to go around. Many houses are underutilized, including yours. From a strictly utilitarian standpoint, the solution would be to increase taxes to reflect the real societal cost of your residence existing as it does; it would be your decision whether to pay the tax, subdivide the house to increase utilization, or sell. This is a form of austerity.
For the yuppies: 99% of the world can make due on less than half your income, in the same city you live in. Your costs are high because your tastes are expensive. A high tax would not ruin you. It would force you to make decisions, some of which might be difficult. Public school instead of private. A cheaper car, and fewer cars. Better-controlled discretionary spending on things such as entertainment, clothing, food. Full-throated support for single-payer healthcare. Your kid will still get a good education, because you are an involved parent. You will still be able to get where you need to, because you will have a working vehicle. You will be more intentional about how you enrich your lift. You will reap the benefits of dismantling America's broken healthcare system and replacing it with something at least as good as what the rest of the developed world can boast. This is also a form of austerity.
You do not solve this problem simply my making poor people's lives harder.
It is a similar issue with taxing nominal wealth. 2/3 of nominal wealth in the US is completely non-liquid. Taxing the liquid fraction is essentially leveraged as a result, causing a catastrophic collapse in the value of similar investments by ordinary people as a side effect. Impoverishing a large portion of the middle class to own the rich isn’t a recipe for political success.
Most of the people responsible for Government decisions are fairly well separated from most crises, hence the crises will continue and grow.
A lot of the time it is actually even worse than this in that they are often in a position to benefit from the crises.
The real major economic problem of our day is the extent to which labor's share of productivity gains have plummeted and continue to plummet.
If your wealth comes from capital everything is going gangbusters and nothing needs to be fixed. Just listen to Trump talk about the economy and how blind he is to how normal people experience it.
And AI is just going to supercharge this problem.
On a relate-able scale, look at the 'alignment' difference between a worker and their manager; between an SWE and someone in mangement a couple of levels above. They're a different species, in terms of 'alignment', generally. They don't even speak the same language.
(I'm being hyperbolic, but hopefully the core of what I mean comes across).
Just more examples of political greed being funded by a plutocracy.
As it is we have to live with it. Enduring the barbarians.
Governments, however, are responsible for responding to crises occurring in the areas they are elected and paid to govern. But increasingly they behave like lords over subjects rather than representatives of the group.
There'd be short term economic repercussions when America throws a tantrum, but whose fault is it that this could significantly harm the Dutch economy? Better to rip off the band-aid.
New York City is one of the most expensive places in the world. Housing is more expensive than SF.
No cars needed in NYC, yet expensive as hell.
No car = no on-going petrol / diesel costs.
Fewer cars = cleaner / healthier air. Quieter, more serene ... everything.
Cleaner / Healthier air = Fewer health issues.
Fewer cars = more bikes
More bikes = physically healthier people.
Good planning is worth its weight in gold. I fear I'm stumbling into utopia theory, which is fraught with forgetting a whole lot of other realities.
Man, you really sold it.
Before COVID America was seeing a resurgence of city life.
Redistribution is a left-wing policy. A lot of elected governments went right-wing recently. It's as simple as that.
It's not "governments", it's the actual voting public.
See, for example, what happened after Weimar Germany's inflation.
But since government is a euphemism for the more verbose "humans whose biology drives them to select self" they will continue to mishandle the "affordability crisis" by propping up its roots, doing nothing to stave off future gilded ages
One possibility is "adjust the minimum wage for inflation," but they seem to be against this: https://www.google.com/search?client=firefox-b-1-d&q=the+eco...
High house prices are simply stealing from the next generation and increasing house prices raise the prices of everything because housing is an input to the cost of everything.
In many Western countries, housing is the best performing asset class so it's reached the point of stealing investment dollars that might otherwise go to productive output. Housing is the black hole at the heart of the economy.
The only country that has attempted to correct this thus far has been China. Xi Jinping quietly popped the real estate bubble a decade ago and the real estate sector has been in recession ever since as prices correct. As Xi says, houses are for living in, not for speculation [1].
The only countries that have even partly avoided this are because they implemented systems long ago that have prevented land hoarding, such as Red Vienna [2]. Interestingly, the post-WW2 UK almost ended landlords but then along came Thatcher [3].
[1]: https://en.wikipedia.org/wiki/Houses_are_for_living,_not_for...
[2]: https://www.youtube.com/watch?v=jO52FWzJoyQ
[3]: https://www.theguardian.com/lifeandstyle/2024/mar/19/end-of-...
This is true, and it is a huge problem in Europe for example, where buying a property to rent is often the best investment for regular people. So instead of opening a business or taking any other risk that may or may not pay off, investment money is going to an asset class that is not productive.
If you said during the feudal era "there is an affordability crisis: the peasants don't have money to buy castles," perhaps you were right. But the solution was to revolt against the king.
Fundamentally, you should think of rich people's wealth as a percentage of outstanding debt (except of course things like Royal families' wealth). If public + private debt drops as a percentage of GDP, rich people will own more in nominal terms, less in terms of GDP (ie. less compared to labour). So the net effect of high inflation will do is make their ownings worth less in terms of assets.
Which is why rich people oppose it so harshly.
And, to distract everyone from the destruction of the lower and middle-classes, here’s an <insert ethnic or somewhat alien> group you’re supposed to hate.
Perhaps capitalism was less to blame… A critical fifth estate and honest political ruling would’ve kept us on the path of the post-war “contract with the people” bit, that was working fairly well.
most revolts were triggered by someone else (a rich lord) wanting to be king. The peasants participating in the revolt are simply either lied to, or were promised they would reap the benefits and rise above their station.
The real solution was the black plague, which created labour shortages, and gave the remaining peasants bargaining power.
Is this true of French Revolution? (not sure?) Is it true of the American Revolution? (Probably not?) Is it true of the Civil War? (Don't think so?)
The main issue is that the affordability crisis is also a result of the market. And without changing the preconditions or mechanics we'd get the same outcome just with different numbers.
So:
- Build housing
- Make housing more affordable by allowing homeowners (= not renting out) to write off and/or write off-faster
- Give newly built housing better write-off conditions
- Prevent cartels that operate via "pricing as a service"
The lack of building comes from the bad zoning laws preventing builds. The rules at the local level are mostly favourable to existing owners, who by a large margin, want their existing property and environment to remain as static as possible to what they purchased (ala, the character of their neighbourhood).
And not to mention that even if they, in principle, agree with denser housing, they would face problems with crowded infrastructure that has to be paid for (and mostly hasnt been upgraded or improved, like public transport, road conditions, grid connections etc).
Therefore, the best current option is to push the affordable (read: high density) housing away from where you are, even if you, in principle, don't disagree with the ideals of it.