Then we've done #3 via re-introducing QE via the fed. Both back in September, and again last week, and why yet again just 30 mins ago. While we call them short term loans, they still haven't been paid back since the start of the GFC. And not only have we continued printing more via the Fed, when the fed finally tried to get some companies to pay them back a year ago the repo market siezed up last fall. The fact that there was a flood of Treasury Securities on the market to pay for item #1 (it increased supply by 50%) likely had a lot to do with it.
If you want the economy to function, then get money in the people who will spend it. What's the factor? For lower incomes every extra dollar they have, introduces 1.5x or 2x or something into the economy. And for every dollar given to middle-high and high incomes only 0.4x or less actually goes into the economy.
Propping up assets isn't a functioning economy.
$4T a year, required to pay for monthly basic income of $1k to all Americans is much wilder than $1T of tax not collected over 10 years, yes. The former number is 40 times larger than the latter.
> Then we've done #3 via re-introducing QE via the fed.
No, we've done only small part of 3) via QE. QE over its history had bought around $4T of assets, which is a far cry from what's required to pay every American $12k/year. QE also doesn't directly "print money", and so Fed buying $4T of assets has much smaller inflationary impact than actually printing $4T and giving it to the government or people.
What I want is for people to be honest about how much basic income actually costs, and where will that money actually come from. Quite simply, you cannot double federal government spending overnight by some clever accounting trick or increasing taxes on "the wealthy": there aren't nearly enough wealthy people to cover that.
"one-time payment of $1,000 to every adult who is a U.S. citizen or a taxpaying U.S. resident, and $500 to every child who meets the same criteria."
You're arguing against something nobody proposed. Please compare the numbers with whats actually being proposed.
> This is how we should manage the money supply, and it should be monthly.
Tax revenue has not decreased. The deficit is a spending problem not a revenue problem.
I'm not certain what you're getting at. The deficit is defined as the delta between spending and revenue. It's as much one problem as it is the other. Could you clarify what you mean?
There is another way to do it without issuing debt, but while still controlling monetary policy.
1. Provision "dividend.federalreserve.gov" CRUD app (or just dividend.gov for convenience). Create "Fed" accounts, very similar to what you get with a Social Security Administration account at https://ssa.gov. Accept routing and account numbers from citizens. Issue debit cards with no fees to the unbanked. Provide local service at Social Security offices.
2. The Fed slowly buys up income producing assets (equities, fixed income, etc), and distributes the gains monthly to everyone. Many central banks go on buying binges to support asset prices already (the Bank of Japan already owns a significant amount of the Nikkei [1]).
You will eventually arrive at a UBI supported by the economic productivity of your country. Alaska does something smaller with oil revenue already [2]. This also keeps with Fed mandates to maximize employment and keep inflation around their 2% target (inflation will never increase because of structural demographics, the shift to a service economy, the transition to EVs and renewables, etc).
[1] https://asia.nikkei.com/Business/Markets/Bank-of-Japan-to-be...
Saying that this will lead to inflation is moot - this proposal will only take effect when inflation is explicitly desired.
https://www.investopedia.com/articles/08/fight-recession.asp
> Number 3) will cause significant inflation, so it will effectively be paid for by tax on cash savings.
Yeah, the same was said before QE was rolled about and it did not happen--as predicted Krugman and those that follow IS-LM models:
* https://krugman.blogs.nytimes.com/2015/02/12/qe-truthers/
* https://en.wikipedia.org/wiki/Zero_lower_bound
Stimulus now could be very useful, and 'helicopter money' is probably just as good as any other method:
* https://www.nytimes.com/2020/03/07/opinion/the-case-for-perm...
The only difference would be that instead of the Fed injecting the printed money through financial instrument purchases which benefit the top 5%, they would provide it to all citizens as a UBI.
While I'd like for it to be possible to pull $12k/year for every American out of thin air, there's simply no way.
12k / year for every american is likely too high. I think the Fed should still determine the amount of QE based on inflation and economic metrics, however that QE should be distributed via a UBI rather than used to purchase financial instruments.
But why go the roundabout way of going through QE to pay for UBI? Why not just increase taxes directly?
The answer is, clearly, because once you talk about increasing taxes to pay for something, you start thinking hard about numbers, and having them add up. When you talk about some vague ideas like the above, calculating the impact exactly becomes difficult, so instead one can just throw up their hands in the air and ignore the problem altogether. The impact however stays very real, as real as when you pay for it through taxation.
QE is different though, the Fed already has mechanisms in place to decide "how much" and is already printing money not paid for by taxes. Part of the goal of QE is actually to devalue the nation's currency in order to increase exports. The question is just how to best inject this printed money into the nation's economy.
In one way, QE is an extremely efficient (and very difficult to evade) wealth tax applied proportionally and instantly to any entity that holds USD. It would be very hard to pull that off with traditional taxes.
The government could also just print itself lots of new dollars, it's even more efficient. We don't do that, because the central banks are independent from government, so QE is a roundabout way of allowing government to print more money in a way that doesn't create high inflation expectations in future.
The biggest reason we don't do such taxes though is because they would be extremely distortionary. It's super easy to evade USD cash tax: just don't hold cash, buy stocks or real estate or some other real property. The USD tax will artificially inflate those assets, while at the same time, will require new cash-denominated bonds to be have payouts indexed by inflation.
The central bank could keep that independence but simply distribute the QE money to individuals as a one-time or traunched payment (I realize calling it a UBI is misleading as it implies it is ongoing). There should be no expectation that it is permanent or continues.
Right. This is a sensible (though unclear if the best) policy in context of exogenous shock. However, using this as a backdoor to introduce perpetual basic income of significant value, with some very vague hand-wavy plan how to pay for it on an ongoing basis, is rather silly, and that's what I was pointing out in parent posters.
Debt spends the same as money. We have already had the inflation, paid for with debt. Now the debt system is becoming unstable and will lead to deflation unless we put non-debt spending power in the average persons hands.
Read Keen's site, he explains the situation:
http://www.debtdeflation.com/blogs/manifesto/
Most economists view debt as a wash. "We owe it to ourselves." But, at Keen demonstrates, that isn't the case. We need a debt jubilee if we want the economy to function properly again, and he, alone and mocked by any mainstream economist who actually paid attention to him, came up with a modern, fair way to do it.
There are three ways to make it possible: 1) issue government debt to pay for it 2) increase taxes to cover it 3) print money to cover it.
Number 3) will cause significant inflation, so it will effectively be paid for by tax on cash savings. High inflation is really bad, it’s a terrible idea.
1) has the problem of only working temporarily: you cannot indebt yourself indefinitely, at some point the service payments will become simply untenable.
2) is the only one practical, but the only way to make it work in practice is to increase taxes all across the population. In result, this will be $1000 monthly only for the very poor. For people around the median, this will balance out to zero or negative.
So, the only way this destroys debt bubble is by 1), inflation destroying cash debt. This is terrible: businesses will not have access to debt to finance operations, mortgages will not be accessible for people without significant savings to buy houses, etc. All around, a terrible idea.