3 ms·

Maybe a dumb question, but I have always wondered this. Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing th

by oarla 9y ago

Maybe a dumb question, but I have always wondered this. Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. In a hyper-simplistic hypothetical scenario, if it's assumed that a person is poor if he has $0, with UBI, he'll have $X/month, making him above the poverty line. But now the entire country, rich and poor, have at least $X/month, which might translate to an increase in cost of all goods/services by $X, rendering the poor as poor and rich as rich.

Chinjut 9y ago
It's unlikely for $0 pre-basic income and $X post-basic income to have the same value. The former is, well, nothing, and the latter is, well, something.
AnthonyMouse 9y ago
> Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. As far as I can tell this keeps coming up because the answer is "no" but the explanation is complicated. The are two types of inflation. One is industry-specific and happens when the government subsidizes something. For example, if the government provides education subsidies then the cost of education increases compared to other things like food or transportation. The other is currency-specific. When the government prints a lot of new currency, the value of a dollar goes down. Prices go up not because there is more demand for products but because there is less demand for dollars. A UBI doesn't do either of those things. It doesn't subsidize any specific thing and it doesn't create any new money. The closest you can get is that there is a theory that higher income people spend less of their income than lower income people, so anything that transfers money from higher income people to lower income people is equivalent to creating new money, because the money in the hands of higher income people was effectively out of circulation. That general form has nothing to do with a UBI. It applies equally to any government program that produces per-capita public benefits from sales or income tax revenues. The rich pay a tax and the poor get public schools and housing subsidies, which means the poor have the money they didn't spend on schools or housing and can spend it on something else. Moreover, the effect is small (most people aren't rich enough to never spend their money), and it's simple to compensate for it -- the government is constantly creating new currency because more currency is required as the economy grows. So if you want less inflation, print less money. And that's assuming that moderate inflation would be a problem, but in fact it's a benefit. The country is in a debt crisis. People have too much mortgage debt, too much student debt, too much credit card debt. The government itself has too much public debt. The prices of housing and education and medicine are too high, but lowering nominal prices is very difficult because everyone has mortgages and contracts that assume the existing prices. The US balance of trade has been out of whack for decades. Lowering the value of the dollar helps with all of those things because it lets the nominal price of those things stay the same while reducing their actual cost back to sane levels.
- mac01021 9y ago
  Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? And who does that help but the landlords? This is the (less abstract) way I've seen the question asked before. I'm not necessarily saying that this is what would happen (it could though, especially if the landlords are on the zoning board). I'm just saying you haven't necessarily answered the concern here.
  - AnthonyMouse 9y ago
    > Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? Where is the extra $200/month supposed to come from? A UBI doesn't create new money. If the average person had $1000/month before then they will still have $1000/month. For the government to pay $1 in UBI it has to collect $1 in taxes. There is no extra money for the landlords to capture.
    - dragonwriter 9y ago
      > For the government to pay $1 in UBI it has to collect $1 in taxes. Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) > There is no extra money for the landlords to capture. Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.)
      - AnthonyMouse 9y ago
        > Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) Which is equally true of any government program financed in those ways. > Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.) That's hardly "UBI leads to fully-canceling prices increases".
lastyearman 9y ago
If productivity stays the same, then all we can ever do is to shift wealth around. That is all there is to it. So the important questions are: does UBI increase or decrease productivity and how is wealth divided after UBI.

by oarla 9y ago

Chinjut 9y ago

It's unlikely for $0 pre-basic income and $X post-basic income to have the same value. The former is, well, nothing, and the latter is, well, something.

AnthonyMouse 9y ago

> Won't UBI just shift the poverty line to a value above whatever it is now(0 maybe), without changing the income inequality/wealth difference. As far as I can tell this keeps coming up because the answer is "no" but the explanation is complicated. The are two types of inflation. One is industry-specific and happens when the government subsidizes something. For example, if the government provides education subsidies then the cost of education increases compared to other things like food or transportation. The other is currency-specific. When the government prints a lot of new currency, the value of a dollar goes down. Prices go up not because there is more demand for products but because there is less demand for dollars. A UBI doesn't do either of those things. It doesn't subsidize any specific thing and it doesn't create any new money. The closest you can get is that there is a theory that higher income people spend less of their income than lower income people, so anything that transfers money from higher income people to lower income people is equivalent to creating new money, because the money in the hands of higher income people was effectively out of circulation. That general form has nothing to do with a UBI. It applies equally to any government program that produces per-capita public benefits from sales or income tax revenues. The rich pay a tax and the poor get public schools and housing subsidies, which means the poor have the money they didn't spend on schools or housing and can spend it on something else. Moreover, the effect is small (most people aren't rich enough to never spend their money), and it's simple to compensate for it -- the government is constantly creating new currency because more currency is required as the economy grows. So if you want less inflation, print less money. And that's assuming that moderate inflation would be a problem, but in fact it's a benefit. The country is in a debt crisis. People have too much mortgage debt, too much student debt, too much credit card debt. The government itself has too much public debt. The prices of housing and education and medicine are too high, but lowering nominal prices is very difficult because everyone has mortgages and contracts that assume the existing prices. The US balance of trade has been out of whack for decades. Lowering the value of the dollar helps with all of those things because it lets the nominal price of those things stay the same while reducing their actual cost back to sane levels.

mac01021 9y ago
Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? And who does that help but the landlords? This is the (less abstract) way I've seen the question asked before. I'm not necessarily saying that this is what would happen (it could though, especially if the landlords are on the zoning board). I'm just saying you haven't necessarily answered the concern here.
- AnthonyMouse 9y ago
  > Imagine, though, a city where most poor people earn about $1000 per month spend about $750 rent (housing). If the landlords catch wind that everyone is now taking in $1200 after the institution of UBI, won't they collectively up their rates to $950 (because where else are the tenants going to go)? Where is the extra $200/month supposed to come from? A UBI doesn't create new money. If the average person had $1000/month before then they will still have $1000/month. For the government to pay $1 in UBI it has to collect $1 in taxes. There is no extra money for the landlords to capture.
  - dragonwriter 9y ago
    > For the government to pay $1 in UBI it has to collect $1 in taxes. Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) > There is no extra money for the landlords to capture. Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.)
    - AnthonyMouse 9y ago
      > Excluding debt financing (with which it need not increase present taxes) or monetization (with which it need never increase taxes.) Which is equally true of any government program financed in those ways. > Even in the balanced-budget, non-monetized case, landlords renting to a particular social class may have more money to capture if the taxes are levied on a different class (landlords or other vendors selling to a different class may lose money for the same reason.) That's hardly "UBI leads to fully-canceling prices increases".

lastyearman 9y ago

If productivity stays the same, then all we can ever do is to shift wealth around. That is all there is to it. So the important questions are: does UBI increase or decrease productivity and how is wealth divided after UBI.