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I’m so confused why this inflation argument keeps popping up. If you’re paying for the Ubi with taxes then there’s no inflation. Net money supply hasn’t change

I’m so confused why this inflation argument keeps popping up. If you’re paying for the Ubi with taxes then there’s no inflation. Net money supply hasn’t changed (0). If you pay for ubi by printing money then yes, inflation would be a problem. But no one has suggested that. (0) I’m willing to entertain an argument about the velocity of money increasing from ubi but I really doubt it would be too significant.

justchilly 7y ago
Rich people aren't spending all their money on stuff, they're investing it. If wealthy people were to take all that wealth and start buying stuff (themselves or via redistribution through taxes to UBI), there isn't magically more stuff, so the price of stuff goes way up => inflation.
- mrfusion 7y ago
  What do you think investment is? That money doesn’t disappear. It still enters the economy.
- mr_toad 7y ago
  Investing is just lending money to people who need to buy something, such as capital. That money is still spent. In fact it needs to be spent on production, in order to produce returns. You can’t just store wealth in a vault and have it grow.
- TimJRobinson 7y ago
  > there isn't magically more stuff Most companies can easily ramp up production to meet increased demand. It's not magic, it's the modern world. Most general goods companies are demand constrained, that's why they need to do marketing campaigns to make more sales. It's only if they had too many orders and couldn't grow production that we'd have inflation. So there may be some inflation immediately but not long term.
- digitaltrees 7y ago
  But there would be more stuff, the increase in demand would be met with an increase in supply. Thats the magic of the market.
tomp 7y ago
> Net money supply hasn’t changed But where it lands has. House prices and Ferraris might be cheaper. Milk and rents will be more expensive.
- mrfusion 7y ago
  I don’t buy that it’s a necessary consequence. Even In your example if demand for houses goes down and demand for milk goes up, what prevents more land being used for dairy farming, more builders becoming farmers?
- lern_too_spel 7y ago
  Poor people already have to live somewhere. It just paid for with rental subsidies and low income housing now, both of which also drive up rents for others. Similarly, the US government already buys up milk to create a price floor, giving the milk away to the poor and to school lunch providers.
- tonyedgecombe 7y ago
  Housing would be a problem where supply is constrained, I can't see it being a big issue in the US.
sunnydayddr 7y ago
I'm not sure how one would manage to produce $1,000 per month per citizen over 18 without printing money. That's $2,500,000,000,000 per year. You'd have to raise taxes by more than 50% to cover the costs.
- bavell 7y ago
  The US govt has recently dumped trillions into the banking system in a matter of days. Last I checked they were talking about additionally cutting payroll taxes for the year. Somehow they were able to do this without raising taxes by 50%... Turns out we have the money after all.
  - godelski 7y ago
    This isn't a fair comparison. That injection is a loan. I support UBI, but we can't be making bad comparisons like this. It doesn't help.
- arebop 7y ago
  The average American pays $10489 in taxes each year. Double the taxes and give average Americans $12000 and they'll come out ahead. Median Americans will do even better. Even if you assume no efficiency improvements, no benefits from velocity of money changes, and no cuts to existing social welfare programs such that the average tax increase equals the $12000 expenditure, you can fund it purely on taxes and most people will still end up with more money in their pockets.
- UnpossibleJim 7y ago
  He doesn't do it all with taxes. He cuts a lot of welfare programs, as those would now be covered by UBI. He cuts spending in Social Security, as 12000 dollars a year of that is covered by UBI. There were some more overlapping areas he laid out that I heard him mention in an interview. It wouldn't be, "Oh, you get this program AND this program" unchanged, but more of, "You already get $12000 in UBI, now what more of a subsidy do you need? Not as much." At least, that's the way he was laying it out. He was far more conservative with spending than a lot of people were getting by just looking at the headlines, but that's one of the failures of our media structure.
v64 7y ago
My understanding is that if it's known that every American adult collects $1000 in addition to their regular income, prices will rise in an attempt to capture some of that known financial excess, so that the net result isn't that everyone gets an extra $1000 in discretionary income, but that everyone ends up paying that extra $1000 back in inflated prices. Similar logic to how raising tariffs doesn't hurt companies as much as they hurt customers because the cost is passed on (speaking from an American perspective, not considering tax systems like VAT).
- mrfusion 7y ago
  Surely McDonald’s already knows everyone has an extra two dollars but they don’t raise their prices because of it. The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. Even opec can’t raise their prices in unison without someone cheating.
  - v64 7y ago
    > The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. But we know economically this isn't necessarily true. Some industries are more monopolized than others. Some people aren't in areas where they have good alternative shopping choices. Goods like toilet paper have many different price points and it hasn't been a race to the bottom among the brands to become the cheapest toilet paper. "You get what you pay for" is still a common rule of thumb. Veblen goods would also rise in price. It's my opinion that UBI would give businesses an opportunity to raise prices in certain sectors, but I concede it wouldn't be universal inflation across the board.
    - aeternum 7y ago
      If there are sectors where UBI gives businesses an opportunity to raise prices, then it follows that there is room for competitors to enter. Competition will eventually drive prices down and lead to more consumer choice.
  - listenallyall 7y ago
ajr0 7y ago
out of curiosity, why not just tax people less rather than offer UBI? either lower the tax or start offering monthly tax refunds? would that work as an alternative or equivalent to UBI or am I thinking of something very different?
- bnjms 7y ago
  That’s just a UBI with a different mechanism. The problem here is most proposals for negative income tax pay out annually rather than monthly (you specifically do not), and fail to account for people who do not work but otherwise provide useful input into the economy like stay at home parents and adults taking care of elderly family.
- sybarita 7y ago
  Because the people who need/would benefit aren't paying anything remotely near 1k/month in taxes, that's the whole point. Your solution only works in a society where people already have a reasonable amount of income.

justchilly 7y ago

Rich people aren't spending all their money on stuff, they're investing it. If wealthy people were to take all that wealth and start buying stuff (themselves or via redistribution through taxes to UBI), there isn't magically more stuff, so the price of stuff goes way up => inflation.

mrfusion 7y ago
What do you think investment is? That money doesn’t disappear. It still enters the economy.
mr_toad 7y ago
Investing is just lending money to people who need to buy something, such as capital. That money is still spent. In fact it needs to be spent on production, in order to produce returns. You can’t just store wealth in a vault and have it grow.
TimJRobinson 7y ago
> there isn't magically more stuff Most companies can easily ramp up production to meet increased demand. It's not magic, it's the modern world. Most general goods companies are demand constrained, that's why they need to do marketing campaigns to make more sales. It's only if they had too many orders and couldn't grow production that we'd have inflation. So there may be some inflation immediately but not long term.
digitaltrees 7y ago
But there would be more stuff, the increase in demand would be met with an increase in supply. Thats the magic of the market.

tomp 7y ago

> Net money supply hasn’t changed But where it lands has. House prices and Ferraris might be cheaper. Milk and rents will be more expensive.

mrfusion 7y ago
I don’t buy that it’s a necessary consequence. Even In your example if demand for houses goes down and demand for milk goes up, what prevents more land being used for dairy farming, more builders becoming farmers?
lern_too_spel 7y ago
Poor people already have to live somewhere. It just paid for with rental subsidies and low income housing now, both of which also drive up rents for others. Similarly, the US government already buys up milk to create a price floor, giving the milk away to the poor and to school lunch providers.
tonyedgecombe 7y ago
Housing would be a problem where supply is constrained, I can't see it being a big issue in the US.

sunnydayddr 7y ago

I'm not sure how one would manage to produce $1,000 per month per citizen over 18 without printing money. That's $2,500,000,000,000 per year. You'd have to raise taxes by more than 50% to cover the costs.

bavell 7y ago
The US govt has recently dumped trillions into the banking system in a matter of days. Last I checked they were talking about additionally cutting payroll taxes for the year. Somehow they were able to do this without raising taxes by 50%... Turns out we have the money after all.
- godelski 7y ago
  This isn't a fair comparison. That injection is a loan. I support UBI, but we can't be making bad comparisons like this. It doesn't help.
arebop 7y ago
The average American pays $10489 in taxes each year. Double the taxes and give average Americans $12000 and they'll come out ahead. Median Americans will do even better. Even if you assume no efficiency improvements, no benefits from velocity of money changes, and no cuts to existing social welfare programs such that the average tax increase equals the $12000 expenditure, you can fund it purely on taxes and most people will still end up with more money in their pockets.
UnpossibleJim 7y ago
He doesn't do it all with taxes. He cuts a lot of welfare programs, as those would now be covered by UBI. He cuts spending in Social Security, as 12000 dollars a year of that is covered by UBI. There were some more overlapping areas he laid out that I heard him mention in an interview. It wouldn't be, "Oh, you get this program AND this program" unchanged, but more of, "You already get $12000 in UBI, now what more of a subsidy do you need? Not as much." At least, that's the way he was laying it out. He was far more conservative with spending than a lot of people were getting by just looking at the headlines, but that's one of the failures of our media structure.

v64 7y ago

My understanding is that if it's known that every American adult collects $1000 in addition to their regular income, prices will rise in an attempt to capture some of that known financial excess, so that the net result isn't that everyone gets an extra $1000 in discretionary income, but that everyone ends up paying that extra $1000 back in inflated prices. Similar logic to how raising tariffs doesn't hurt companies as much as they hurt customers because the cost is passed on (speaking from an American perspective, not considering tax systems like VAT).

mrfusion 7y ago
Surely McDonald’s already knows everyone has an extra two dollars but they don’t raise their prices because of it. The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. Even opec can’t raise their prices in unison without someone cheating.
- v64 7y ago
  > The thing is people would still shop around for the lowest price. The vendor with the lowest price gets the business. But we know economically this isn't necessarily true. Some industries are more monopolized than others. Some people aren't in areas where they have good alternative shopping choices. Goods like toilet paper have many different price points and it hasn't been a race to the bottom among the brands to become the cheapest toilet paper. "You get what you pay for" is still a common rule of thumb. Veblen goods would also rise in price. It's my opinion that UBI would give businesses an opportunity to raise prices in certain sectors, but I concede it wouldn't be universal inflation across the board.
  - aeternum 7y ago
    If there are sectors where UBI gives businesses an opportunity to raise prices, then it follows that there is room for competitors to enter. Competition will eventually drive prices down and lead to more consumer choice.
- listenallyall 7y ago

ajr0 7y ago

out of curiosity, why not just tax people less rather than offer UBI? either lower the tax or start offering monthly tax refunds? would that work as an alternative or equivalent to UBI or am I thinking of something very different?

bnjms 7y ago
That’s just a UBI with a different mechanism. The problem here is most proposals for negative income tax pay out annually rather than monthly (you specifically do not), and fail to account for people who do not work but otherwise provide useful input into the economy like stay at home parents and adults taking care of elderly family.
sybarita 7y ago
Because the people who need/would benefit aren't paying anything remotely near 1k/month in taxes, that's the whole point. Your solution only works in a society where people already have a reasonable amount of income.