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Ok, let's spell it out with a basic example You said we are going to give $12 billion to the poor There is $747 billion of credit card debt in the United Stat
by jganetsk 10y ago
Ok, let's spell it out with a basic example
You said we are going to give $12 billion to the poor
There is $747 billion of credit card debt in the United States. Much of that comes from lending in the past to the poor to finance their basic needs.
$747 billion > $12 billion
It is possible that all of 1 year's basic income entirely goes toward paying off credit card debt. In this scenario:
1) The poor receive a much needed benefit from basic income: they get to pay off their credit card bills.
2) There is no change in demand on basic goods whatsoever.
3) This significant paying down of debt leads to consumer interest rates going down, which further helps the poor.
So here is one scenario that is a counterexample to your claim that this can "any other change hurts the poor". This is an example which helps the poor.
You are forgetting that people have the freedom to do what they want with their money. When prices go up for one thing, they spend their money in other ways.
Healthy ways for prices to change:
1) The price change is stable, rather than runaway. It happens once, and that's it, but we continue to pay basic income year after year. This is expected, if we keep the money supply fixed.
2) The price change eventually leads to an increase in wages for the poor, which have been stagnant for decades.
- sokoloff 10y agoWhat is the likelihood that all $12BB given to people carrying credit card debt gets spent entirely and solely on reducing that credit card debt? I think it's about 1 / googol.
- jganetsk 10y agoYes but that's irrelevant. What will really happen is, as I said earlier, a combination of saving/investing, spending, and paying off debt. (Obviously, what else can you do with money?) Spending on basic needs is not the only option. They are not forced to do so. And don't underestimate just how much debt the American poor have, and how much they can benefit from relieving their debt.
- sokoloff 10y agoSorry. I must have mis-understood your argument about why prices would change. I thought you were positing that the recipients might spend all the UBI on retiring credit card debt, causing prices to not change. I thought that to be exceptionally unlikely. Upon re-reading, I still read your words that way.
- jganetsk 10y agoI was just giving one scenario, though unlikely, in which consumer spending does not increase whatsoever. It is likely that a large fraction, maybe even a majority, of basic income would go to paying off debt rather than consumer spending. Given that there is such a huge amount of personal debt out there, the poor have the freedom to allocate their basic income between spending and paying off debt for many years. And when prices go up for certain things, they might reallocate their income to other things.
- DougN7 10y agoPaying off debt is good. Once it's paid off, that money will probably go to goods and services (if you say the poor will save it instead, they weren't that poor to begin with). So your scenario of paying off debt for one year just pushes the inevitable out one year. And that one time price change will cancel out the benefit of the UBI. It has to, otherwise companies are not getting the most profit they can (they won't do that), or we magically have unending goods and services. Supply and demand can't be overcome in a market economy of scare resources. Raising the minimum wage eventually has a similar effect. Ask yourself why a loaf of bread isn't $0.05 any more (it surely was sometime in the past 200 years). The obvious answer is inflation. But why? Why did prices increase over time? What economic pressure caused that?
- jganetsk 10y agoFew things wrong in your post: > So your scenario of paying off debt for one year just pushes the inevitable out one year. There is enough debt out there that the poor can spend many years paying it off. > Raising the minimum wage eventually has a similar effect. Ask yourself why a loaf of bread isn't $0.05 any more (it surely was sometime in the past 200 years). The obvious answer is inflation. But why? Why did prices increase over time? What economic pressure caused that? Milton Friedman and Anna Schwartz wrote A Monetary History of the United States, 1867-1960, where they made the claim "inflation is always and everywhere a monetary phenomenon" [1] Thus, the reason why a loaf of bread isn't $0.05 anymore is because of the expansion of money supply, not because of raising minimum wage. The article suggests financing basic income through tax revenues -- and even doing so without raising the deficit. It is not suggesting expanding money supply. Milton Friedman himself even supported the kind of basic income described in the article, which he called a "negative income tax" [2] [1] https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Monetarism [2] https://en.wikipedia.org/wiki/Milton_Friedman#Social_security.2C_welfare_programs.2C_and_negative_income_tax https://en.wikipedia.org/wiki/Milton_Friedman#Social_securit...