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One thing I've never seen explained in a way that makes sense to me is how UBI wouldn't immediately result in inflation that eats through most of the grant for

by Zanfa 5y ago

One thing I've never seen explained in a way that makes sense to me is how UBI wouldn't immediately result in inflation that eats through most of the grant for lower income households. A lot of countries already have housing demand outstrip the supply by a significant margin so injecting money into the system on the demand side would result in rents (and house/apartment prices) going up even quicker, with UBI covering less and less of actual costs.

mlyle 5y ago
>One thing I've never seen explained in a way that makes sense to me is how UBI wouldn't immediately result in inflation that eats through most of the grant for lower income households Inflation would certainly eat through some. But a decent system would be close to budget-neutral: eliminating some social programs in favor of consolidated UBI, and requiring a bit more tax receipts on the top end. > already have housing demand outstrip the supply by a significant margin so injecting money into the system on the demand side would result in rents It might do the opposite to some extent on the low end: right now people requiring assistance get money for housing with a lot of strings attached on how it can be spent. If they just get more money, they might choose to rent only a room or stay with a relative: some benefit money that's now spent on housing probably wouldn't be.
- Zanfa 5y ago
  But the majority of people don’t get any financial assistance for their rent, so I don’t think simplifying social programs would affect their spending behavior.
  - mlyle 5y ago
    If your concern is what it will do for housing prices for the most poor-- those are the people receiving section 8 (about 8% of the population). If you're talking about the next slug up in income: they'd have some more money. Assuming 100% of this money is captured by necessities is pessimistic, IMO. And since we'd be getting rid of e.g. EITC, as you get to higher incomes UBI doesn't necessarily inject a ton more cash into the household. UBI is redistributive. It inherently moves money around; purchasing power for some (the poorest) will increase and for others (the richest) will decrease. Yes, shocks to pricing will erode a small part of this effect. One other thing to note: a UBI makes living in lower cost of living areas (with more housing supply) much more attractive, and makes relocation feasible for populations that never had the money to move. $1K/mo from the feds goes much further in Wyoming than San Francisco.
    - DarylZero 5y ago
      There are only ~2 million section 8 housing vouchers available for ~330 million people. So no way 8% of the population are receiving them. (8% of 330 million is 26 million, so for 2 million vouchers, the average household size for recipients would have to be ~13.)
      - deleted 5y ago
        [deleted]
      - mlyle 5y ago
        I screwed up-- there's about 10.2 million people receiving housing assistance, so about 3% of pop. But your number is off in the other direction: (counts are all households) 2.2 million housing choice vouchers, but another 900k public housing and another 1.2 million households of section 8 project-based housing (and about 400k in other programs), totaling 4.8M households.
DarylZero 5y ago
How could inflation ever eat through the grant power to the poor?? Doesn't make any sense, any inflation effect must be diluted through those it affects the most -- those with the most money. The only way it could possibly go with UBI is that the poor receive a larger proportion of the total economic consumption. Inflation cannot ever cancel out redistribution to the poor. No matter how much inflation, the inflation reduces the buying power of everyone else -- the poor still receive a higher proportion of buying power than before.
- Zanfa 5y ago
  Inflation disproportionately affects people who have most of their net worth in cash, aka people living paycheck to paycheck (or UBI payment to UBI payment), not the people with the most money. The problem I see is it doesn't make sense to save in cash, because you don't need to, due to UBI payments in perpetuity as well as inflation eating through any cash savings. So your options are either to invest in assets, thus driving up asset prices across the board, which primarily benefits the owners of such assets (aka the rich). Or you could go and spend the grant on accommodation or other expenses, thus driving the demand there and as we've seen this year especially, the supply isn't infinite and will result in higher prices. Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor.
  - mlyle 5y ago
    > Inflation disproportionately affects people who have most of their net worth in cash The 80th percentile of households by income each have more sitting in banks in cash than the 20th percentile make in a year. A slug of inflation takes away far more resources in absolute terms from the wealthy than the poor. > Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor. This is a bit of a funny argument. The only way that it could happen is if 100% of money flowing into households via UBI bids up the price of scarce resources with no elasticity, and money flowing out of households that are net contributors to UBI results in no decline in purchase of those resources. While some things may have little (but non-zero) elasticity (housing in urban markets), many other things have elasticity (food, fuel, consumer goods, utilities, housing in other markets). Otherwise, there's an inflationary impact to poor households, but it's less than the amount of the UBI payment, and there's a net redistribution of income to them.

by Zanfa 5y ago

mlyle 5y ago

>One thing I've never seen explained in a way that makes sense to me is how UBI wouldn't immediately result in inflation that eats through most of the grant for lower income households Inflation would certainly eat through some. But a decent system would be close to budget-neutral: eliminating some social programs in favor of consolidated UBI, and requiring a bit more tax receipts on the top end. > already have housing demand outstrip the supply by a significant margin so injecting money into the system on the demand side would result in rents It might do the opposite to some extent on the low end: right now people requiring assistance get money for housing with a lot of strings attached on how it can be spent. If they just get more money, they might choose to rent only a room or stay with a relative: some benefit money that's now spent on housing probably wouldn't be.

Zanfa 5y ago
But the majority of people don’t get any financial assistance for their rent, so I don’t think simplifying social programs would affect their spending behavior.
- mlyle 5y ago
  If your concern is what it will do for housing prices for the most poor-- those are the people receiving section 8 (about 8% of the population). If you're talking about the next slug up in income: they'd have some more money. Assuming 100% of this money is captured by necessities is pessimistic, IMO. And since we'd be getting rid of e.g. EITC, as you get to higher incomes UBI doesn't necessarily inject a ton more cash into the household. UBI is redistributive. It inherently moves money around; purchasing power for some (the poorest) will increase and for others (the richest) will decrease. Yes, shocks to pricing will erode a small part of this effect. One other thing to note: a UBI makes living in lower cost of living areas (with more housing supply) much more attractive, and makes relocation feasible for populations that never had the money to move. $1K/mo from the feds goes much further in Wyoming than San Francisco.
  - DarylZero 5y ago
    There are only ~2 million section 8 housing vouchers available for ~330 million people. So no way 8% of the population are receiving them. (8% of 330 million is 26 million, so for 2 million vouchers, the average household size for recipients would have to be ~13.)
    - deleted 5y ago
      [deleted]
    - mlyle 5y ago
      I screwed up-- there's about 10.2 million people receiving housing assistance, so about 3% of pop. But your number is off in the other direction: (counts are all households) 2.2 million housing choice vouchers, but another 900k public housing and another 1.2 million households of section 8 project-based housing (and about 400k in other programs), totaling 4.8M households.

DarylZero 5y ago

How could inflation ever eat through the grant power to the poor?? Doesn't make any sense, any inflation effect must be diluted through those it affects the most -- those with the most money. The only way it could possibly go with UBI is that the poor receive a larger proportion of the total economic consumption. Inflation cannot ever cancel out redistribution to the poor. No matter how much inflation, the inflation reduces the buying power of everyone else -- the poor still receive a higher proportion of buying power than before.

Zanfa 5y ago
Inflation disproportionately affects people who have most of their net worth in cash, aka people living paycheck to paycheck (or UBI payment to UBI payment), not the people with the most money. The problem I see is it doesn't make sense to save in cash, because you don't need to, due to UBI payments in perpetuity as well as inflation eating through any cash savings. So your options are either to invest in assets, thus driving up asset prices across the board, which primarily benefits the owners of such assets (aka the rich). Or you could go and spend the grant on accommodation or other expenses, thus driving the demand there and as we've seen this year especially, the supply isn't infinite and will result in higher prices. Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor.
- mlyle 5y ago
  > Inflation disproportionately affects people who have most of their net worth in cash The 80th percentile of households by income each have more sitting in banks in cash than the 20th percentile make in a year. A slug of inflation takes away far more resources in absolute terms from the wealthy than the poor. > Now UBI payments must also be indexed to inflation, otherwise it won't be of much use for very long, so you'll create this infinite loop of increasing UBI, resulting in higher asset prices, cost of living and thus inflation, requiring a further increase in UBI, triggering another round of asset prices and inflation and so on. In the end, the rich are as rich as ever and the poor will still be poor. This is a bit of a funny argument. The only way that it could happen is if 100% of money flowing into households via UBI bids up the price of scarce resources with no elasticity, and money flowing out of households that are net contributors to UBI results in no decline in purchase of those resources. While some things may have little (but non-zero) elasticity (housing in urban markets), many other things have elasticity (food, fuel, consumer goods, utilities, housing in other markets). Otherwise, there's an inflationary impact to poor households, but it's less than the amount of the UBI payment, and there's a net redistribution of income to them.