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UBI would only cause inflation if 1) it is not covered by taxes, 2) production does not increase in proportion, and 3) debt does not decrease in proportion. It

by smaddox 11y ago

UBI would only cause inflation if 1) it is not covered by taxes, 2) production does not increase in proportion, and 3) debt does not decrease in proportion. It is extremely likely that a combination of 1, 2, and 3 will keep inflation in check. Ideally, 3 would dominate, because that would greatly dampen the business cycle (i.e. the boom and bust cycle). The potential for number 3 is the reason I think UBI is a macroeconomic necessity. Currently, our monetary system is based almost entirely on debt; only if that debt (private+public) grows is there an incentive to invest and further grow the economy. When the country and its citizens reduce their debt load, the currency deflates, which distinctivises investment and growth---a depression. With UBI, we could potentially replace this system with a much more stable and robust one, while simultaneously eliminating poverty and poor working conditions.

bane 10y ago
It's currently believed by most economic models that debt would wildly increase in proportion as there's few tax schemes that would tax the wealthy enough (and in the right ways) to make it work. For example, even a WW2 level progressive income tax scheme would not provide enough money because the wealthy have learned how to acquire wealth without it being their personal income. Capital gains taxes only occur if money is made from investments, and there's lots of wonderful ways to show losses or get around that kind of tax system by reinvesting or working the books over to show losses. You don't want to tax asset ownership too much, because then you'll be taxing people's stock and bond ownership and their retirement accounts and it produces a disincentive to invest in businesses that would need that money to produce the kind of automation revolution that would make UBI work (your #2). A great many assets also only have value and not intrinsic worth. For example, Donald Trump is on record saying that he believes his personal fortune can vary by billions of dollars on any given day given how he "feels" about his brand image. We all know about VC valuations. Do we tax paper billionaires who are pulling down $100k in real income? How can they possibly pay that? Consumption taxes have been demonstrated to have an outsized impact on the poor. and so on. A notion that "well we'll just close all the tax loopholes to make UBI work" is quite frankly a fantasy. I agree that UBI would stabilize boom bust cycles, but it's not clear that that's a desired end-state. Boom cycles are often when major innovation happens.

by smaddox 11y ago

bane 10y ago

It's currently believed by most economic models that debt would wildly increase in proportion as there's few tax schemes that would tax the wealthy enough (and in the right ways) to make it work. For example, even a WW2 level progressive income tax scheme would not provide enough money because the wealthy have learned how to acquire wealth without it being their personal income. Capital gains taxes only occur if money is made from investments, and there's lots of wonderful ways to show losses or get around that kind of tax system by reinvesting or working the books over to show losses. You don't want to tax asset ownership too much, because then you'll be taxing people's stock and bond ownership and their retirement accounts and it produces a disincentive to invest in businesses that would need that money to produce the kind of automation revolution that would make UBI work (your #2). A great many assets also only have value and not intrinsic worth. For example, Donald Trump is on record saying that he believes his personal fortune can vary by billions of dollars on any given day given how he "feels" about his brand image. We all know about VC valuations. Do we tax paper billionaires who are pulling down $100k in real income? How can they possibly pay that? Consumption taxes have been demonstrated to have an outsized impact on the poor. and so on. A notion that "well we'll just close all the tax loopholes to make UBI work" is quite frankly a fantasy. I agree that UBI would stabilize boom bust cycles, but it's not clear that that's a desired end-state. Boom cycles are often when major innovation happens.