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Sure, if you simply gave everyone $1 for every dollar they already have, all you do is double prices and change nothing of substance. But I think the pro-UBI a

Sure, if you simply gave everyone $1 for every dollar they already have, all you do is double prices and change nothing of substance. But I think the pro-UBI argument would be that you don't need to increase the money supply to do it. About 60% of Federal spending is on Social Security, Medicare and Medicaid. Reducing the spending on these programs, and other inefficient transfers such as welfare and disability will pay for much of UBI, and the rest is paid for by raising taxes. The net outcome is that rich people will pay a bit more to the government than they do now, poor people get a bit more than they do now, but the major effects are 1) inefficient bureaucracy is eliminated, 2) bad incentives are eliminated (such as disability payments forbidding any gainful employment, and 3) the stigma of welfare payments is removed when everyone gets them. I don't think this will work in the US because 1) there's no political will to reduce existing entitlement programs and 2) there's a lot of resentment in the working class against recipients of entitlements, and 3) racism. However, the argument that UBI will fail because it requires printing money is probably wrong.

bigtunacan 9y ago
How is UBI any different from welfare if it is what you describe? From your description, it actually sounds worse. As I read it, it sounds sort of like this. 1) Reduce Social Security (so steal people's retirement money that they paid in...) 2) Reduce Medicare / Medicaid (The group of people that receive these are often the one's least likely to be able to afford medical care (the poor & the eldery) while simultaneously being the one's most likely to need such care (at least the elderly)).
mechagodzilla 9y ago
I disagree with your premise that doubling the number of dollars everyone has would simply double prices. If you take someone that has $1 million in the bank, and magically make that $2 million, they almost certainly won't double all of their expenditures (they probably wouldn't change what they spend at all on a wide variety of categories - food or clothing, for instance). Rising inequality means that lack of demand is actually a big issue, since we're transferring income from people that would readily increase consumption, given more income, to people that will largely sit on that money. Globally speaking, our factories could easily produce more goods without raising prices much, if any. I believe a UBI would effectively be a transfer of wealth from people that have lots of money (but don't spend it) to people that don't have lots of money (but would readily spend more if they had it), but it wouldn't be the zero-sum game that people often assume it would, just by virtue of our productive capacity not being nearly maxed out.
- jonreem 9y ago
  While the now $2 millionaire would not be likely to spend that extra million on food and clothing they would be extremely likely to invest that money in a variety of financial instruments, making that capital available in the market so it can be put to good use. Investing does help inject value into the economy and drive growth - "sitting on it" would require literally keeping it in cash in a bank, which no sane person would do due to inflation.
  - milcron 9y ago
    > they would be extremely likely to invest that money in a variety of financial instruments, making that capital available in the market so it can be put to good use This improves the supply-side of the economy, but doesn't do anything to stimulate demand for products. Today, lack of demand is a larger problem than increased output. The labor share of GDP has been decreasing since the 70s, and its starting to hit levels where people are having trouble affording as many goods. Although investing is a good use of funds, arguably redistribution (a type of demand-side stimulus) would be more helpful today.
  - Density 9y ago
    Juicero and their ilk prove that there's too much capital looking for somewhere to go. We don't need this much capital floating around, we need peoples' lives to improve so they stop killing themselves with heroin.
  - njarboe 9y ago
    "sitting on it" would require literally keeping it in cash in your safe. If put "in a bank", unless you mean a safety deposit box, is (to some approximation, in theory, in the not to distant past, maybe) reinvested by the bank. That is how the bank makes money.
- freshhawk 9y ago
  But that wasn't covered in the macro 101 class all this HN comment logic is based on!
JustSomeNobody 9y ago
The rich corporations and people are used to having wealth transfer "up" to them. That's why it has gotten so out of hand (the gap keeps increasing). By flipping the UBI switch, they aren't going to all the sudden say, "Well, it was a good ride while it lasted." Those tax increases will be funded by syphoning everyone's UBI back to the rich in the forms of price increases. So, then the poor will be left with decreased Social Security, Medicare, Medicaid, etc. But hey! At least they get 12K a year!
biggc 9y ago
Why would UBI reduce Medicare and Medicaid?
- yellowstuff 9y ago
  You would have to pay for UBI by: 1) Cutting spending elsewhere. 2) Raising taxes. (Or collecting more from a growing economy.) 3) Printing money. Probably it would be a combination of all 3, but since UBI can offset entitlement cuts it makes sense to me that that's where the government would find a lot of the money. Raising taxes is unpopular and can be counterproductive if done to the extreme, and printing money is inflationary and also counterproductive unless there are other deflationary forces at work. (Which there are currently, I agree with Ray Dalio that printing money makes sense during a deleveraging spiral https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0)
  - dredmorbius 9y ago
    Also by increased efficiency through reducing the administration costs of means-tested social programmes. I'm not an advocate of replacing all means-based programmes with UBI, but it should see a significant improvement over many such.
greedo 9y ago
The math doesn't work out. Just giving everyone $10k annually will dwarf what we're currently spending on benefits. And Social Security is the third rail of politics; it won't be reduced, ever.
- yellowstuff 9y ago
  You can raise taxes to pay for most of it because everyone has an extra $10k. You might need to do it in a sneaky way so people don't just see it as a wash for them personally. But still, I agree with you, UBI ain't happening in the US any time soon.

bigtunacan 9y ago

How is UBI any different from welfare if it is what you describe? From your description, it actually sounds worse. As I read it, it sounds sort of like this. 1) Reduce Social Security (so steal people's retirement money that they paid in...) 2) Reduce Medicare / Medicaid (The group of people that receive these are often the one's least likely to be able to afford medical care (the poor & the eldery) while simultaneously being the one's most likely to need such care (at least the elderly)).

mechagodzilla 9y ago

I disagree with your premise that doubling the number of dollars everyone has would simply double prices. If you take someone that has $1 million in the bank, and magically make that $2 million, they almost certainly won't double all of their expenditures (they probably wouldn't change what they spend at all on a wide variety of categories - food or clothing, for instance). Rising inequality means that lack of demand is actually a big issue, since we're transferring income from people that would readily increase consumption, given more income, to people that will largely sit on that money. Globally speaking, our factories could easily produce more goods without raising prices much, if any. I believe a UBI would effectively be a transfer of wealth from people that have lots of money (but don't spend it) to people that don't have lots of money (but would readily spend more if they had it), but it wouldn't be the zero-sum game that people often assume it would, just by virtue of our productive capacity not being nearly maxed out.

jonreem 9y ago
While the now $2 millionaire would not be likely to spend that extra million on food and clothing they would be extremely likely to invest that money in a variety of financial instruments, making that capital available in the market so it can be put to good use. Investing does help inject value into the economy and drive growth - "sitting on it" would require literally keeping it in cash in a bank, which no sane person would do due to inflation.
- milcron 9y ago
  > they would be extremely likely to invest that money in a variety of financial instruments, making that capital available in the market so it can be put to good use This improves the supply-side of the economy, but doesn't do anything to stimulate demand for products. Today, lack of demand is a larger problem than increased output. The labor share of GDP has been decreasing since the 70s, and its starting to hit levels where people are having trouble affording as many goods. Although investing is a good use of funds, arguably redistribution (a type of demand-side stimulus) would be more helpful today.
- Density 9y ago
  Juicero and their ilk prove that there's too much capital looking for somewhere to go. We don't need this much capital floating around, we need peoples' lives to improve so they stop killing themselves with heroin.
- njarboe 9y ago
  "sitting on it" would require literally keeping it in cash in your safe. If put "in a bank", unless you mean a safety deposit box, is (to some approximation, in theory, in the not to distant past, maybe) reinvested by the bank. That is how the bank makes money.
freshhawk 9y ago
But that wasn't covered in the macro 101 class all this HN comment logic is based on!

JustSomeNobody 9y ago

The rich corporations and people are used to having wealth transfer "up" to them. That's why it has gotten so out of hand (the gap keeps increasing). By flipping the UBI switch, they aren't going to all the sudden say, "Well, it was a good ride while it lasted." Those tax increases will be funded by syphoning everyone's UBI back to the rich in the forms of price increases. So, then the poor will be left with decreased Social Security, Medicare, Medicaid, etc. But hey! At least they get 12K a year!

biggc 9y ago

Why would UBI reduce Medicare and Medicaid?

yellowstuff 9y ago
You would have to pay for UBI by: 1) Cutting spending elsewhere. 2) Raising taxes. (Or collecting more from a growing economy.) 3) Printing money. Probably it would be a combination of all 3, but since UBI can offset entitlement cuts it makes sense to me that that's where the government would find a lot of the money. Raising taxes is unpopular and can be counterproductive if done to the extreme, and printing money is inflationary and also counterproductive unless there are other deflationary forces at work. (Which there are currently, I agree with Ray Dalio that printing money makes sense during a deleveraging spiral https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0)
- dredmorbius 9y ago
  Also by increased efficiency through reducing the administration costs of means-tested social programmes. I'm not an advocate of replacing all means-based programmes with UBI, but it should see a significant improvement over many such.

greedo 9y ago

The math doesn't work out. Just giving everyone $10k annually will dwarf what we're currently spending on benefits. And Social Security is the third rail of politics; it won't be reduced, ever.

yellowstuff 9y ago
You can raise taxes to pay for most of it because everyone has an extra $10k. You might need to do it in a sneaky way so people don't just see it as a wash for them personally. But still, I agree with you, UBI ain't happening in the US any time soon.