I reject completely the idea that either printing money or borrowing money is a viable solution for most economies in the medium or long term. According to you, that must mean I support a Stalinist regime[1]. This is false, to say the least. Other (relative) proponents of a basic income, including such luminaries as Hayek and Milton Friedman, would likely also look at your claim with great skepticism.
A basic income is just the redistributionism practiced by current mixed market economies but implemented much more efficiently (in both the Pareto and administrative senses) than what exists now.
Price levels would be affected by a basic income, but you've got to specify what and how much. Considering supply effects, the likely first order result of a basic income is an increase in the cost of basic goods and also an overall increase in the consumption of them. Goods that are typically bought with, say, the marginal dollar at twice the basic income level will decrease in price but also be consumed less. The market would reallocate capital to more efficiently produce basic goods (defined as the goods that are typically bought with marginal dollars beneath the basic income level).
You might dislike this kind of very limited redistribution. Fair enough, and that is a great debate to have! But you've also got to be thoughtful about the full package. It's not whether you prefer no redistribution to a basic income. It's whether you prefer a basic income to a costly and heavily-administrated redistribution driven by special interest groups.
[1]Also, "Marxist communism"? I'd be curious to ask if you've got even a passing acquaintance with the structure of the Soviet economy. It's fine to criticize a basic income on inflationary grounds, but saying it's communism is so off that it qualifies as not even wrong.
Agreed, and I apologize for the rhetorical device. I'm not sitting here twirling my mustache trying to get people to say "BI == Stalin!!" - it seems to to me to lead in that direction, though, and I'm genuinely wanting to understand why it doesn't (or if it does, why that's okay).
> Considering supply effects, the likely first order result of a basic income is an increase in the cost of basic goods and also an overall increase in the consumption of them
The increase in cost seems obvious (as the necessary contraction of available capital would invariably cause), but I guess I'm hung up on the idea that there would be an overall increase in consumption (or at least, enough of an increase to offset the costs). People are already buying basic goods, be it on government welfare or not; would BI substantially increase purchases of those goods? As I understand BI, the general idea is to provide enough money for everyone to be able to purchase a minimum level of food, clothing, and shelter, so as to attain some particular quality of life. So, my first question would be "how many people do we currently have who are not able to attain this minimum quality of life?", which seems like would be the only market for whom consumption absolutely would increase under a BI plan. As I understand BI, for those currently on welfare, it's approximately analogous - there wouldn't necessarily be much of a change in income. I feel like this is a piece I'm missing - why would consumption of basic goods significantly increase? Basic goods by definition have a price elasticity of less than 1; you don't get linear returns in demand by increasing income.
Re: [1] Woefully unfamiliar, and making an effort to fix that by reading basically all the economic philosophy I can get my hands on. I'm aware that the USSR wasn't a great implementation of Marx's ideals, but I also believe that even the best system gets screwed up by people - if we could actually implement ideal communism, it'd probably be awesome. I guess I more meant "Marx's ideal of the elimination of social classes as we've seen it (mis)implemented".
But that suggests a key point: the basket of goods and time that people consume while below the poverty line is not necessarily what they would choose to consume if they simply received some amount of money equivalent to what one could reasonably expect to survive on. For instance, a huge chunk of the money we ostensibly give to people goes to Medicaid, which effectively redirects aid to an expensive program that doesn't even seem to improve health outcomes. What the money would flow into instead would cause inflation in those goods, but at the same time capital would flow to the production and provision of those same goods as more people were buying more of them. The net result is increased consumption of the replacement goods coupled with an increase in price somewhere between 0% and the percentage increase of the demand going for them. The exact value depends on elasticities and how many new ways capital can find to supply those goods.
There are welfare programs that do pass out real money, but they force a different kind of consumption: of time. Instead of consuming hours as an individual knows best, we ask them to send out dozens of ineffective applications. I don't know if they even have good choices: maybe these people are just screwed. But I do know that they probably know a lot better about how to get out of their situation--within the constraints of their particular levels of knowledge and self-control--than I do.
There are also psychological aspects that are pretty important. Living in a constant state of staving off being kicked onto the street forces a focus on short-term thinking, at the expense of medium- and long-term thinking. This is more behavioral than micro economics, but it's as real a factor as any other, and definitely changes what and how people choose to consume.
It's worth noting that I've left off all discussion of people above the basic income level (which, to be clear, I'm imagining as being around $10k), who constitute a significant majority of Americans. Two points I'd like to mention:
1) A lot of people fall into a benefits trap, where if they work they'll be punished. Literally they face a greater than 100% tax rate. For people on disability, this can actually be from 1,000% to 10,000%. This is horrific from an economic point of view, and horrific from the perspective of human dignity and autonomy. A basic income is one way of totally removing those obstacles to participating in the labor force.
2) People at $40k and above theoretically shouldn't be affected much by my suggested basic income, aside from a real but manageable tax hike. In practice, though, I suspect the behavioral aspect would be significant, if they know that they can quit their jobs without having to worry about bare minimum needs (though this is clearly just a strong suspicion on my part--I have difficulty imagining a good test for it). Instead of worrying about destroying their savings, they can go out and try new, risky ideas. I think we live in an era where there's a great need for individual entrepreneurship in both monetizable and non-monetizable goods, so that's something I embrace.
I hadn't considered the >100% tax rate on the impoverished, either. I wasn't even aware that this happens - it sounds absolutely horrific, and should be abolished posthaste if it's anything like you describe. Can you point me at some reading material on that sort of thing?
As for the $40k-and-above folks, I definitely think that it could encourage exploration by people with little to lose, but I don't think it would significantly affect people with mortgages and families - quitting your job to pursue a dream that fails still means losing your house and not being able to consistently feed your kids even on $10k BI. I definitely think it would help a certain set of people, and I would love to see entrepreneurship encouraged and facilitated; my concern is that it would do so by disproportionately penalizing existing entrepreneurs, by front-loading the majority of the cost for such a system onto them, and making them bear the brunt of the penalty for it if it fails.
It's a > 100% marginal tax rate. Emphasis on "marginal".
It happens every time the government decides to give something to the poor. A person that just crosses over the criteria used to determine who is poor has a >100% tax rate over that extra income. That means, if they work more they lose money - something called "poverty trap" because it effectively entraps people into poverty.
The solution to avoiding it is to simply give the money for everybody, and create a progressive tax that gets it back from the richer people. Or, in other words, basic income.
A person who receives $100 worth of benefit so long as they make make under $200 faces a harsh cut from $299 to only $200 should their income surpass it. Simply culling overage from the benefit, on the other hand, would mean they would reach a plateau in which they are adjusted to $300 from $200 to $300 worth of raised personal income, which while not be greatly encouraging, would have none of the damning nature of the strict cutoff approach.
Suppose you have a $5k/year benefit at $0 that phases out to $0k/year at $20k. The worst way to do that is obviously to have a cliff: at $20k, you suddenly get $5k/year less, effectively an infinite marginal rate. It's as extreme a trap as you can imagine.
But now consider the opposite, best case scenario that's the softest landing spread out over that entire income range: a benefit that phases out linearly. So at $10k/year, you get a total of $12.5k; at $15k/year, you get a total of $16.25k/year. That means you automatically get a walloping marginal tax rate.
If you wanted to limit benefit phase outs to contribute a maximum of 5% in marginal tax rates, you've got to spread it out over 20x the value of the benefit. A $5k benefit has to phase out over $100k.
Also note that that's by itself: you've also got regular taxes to pay. Worse, few of these welfare benefits have been designed so intelligently, and there are a lot of them, so you constantly hit discontinuities in marginal tax rates that make it really irrational to do any additional work or try to improve yourself.
A good accessible book to read, if you're interested in Soviet economic planning, is Red Plenty. Yes, it's fiction, but very much targeted at people who think linear programming and algorithmic complexity aren't out of place in a fiction book.
[1] That's a bit unfair, in a perverse way, as most of the mass famines we hear about with tens of millions of deaths weren't an accidental byproduct of bad planning but a conscious decision to destroy political enemies or demographics that statistically were less likely to support the regime. From an implementation point of view, the mass economic dislocations the USSR experienced in the revolutionary period were less than I might expect.
But my ideal taxation scheme includes an abolition of corporate, income, and sales taxes, and a replacement of them with aggressive taxation on goods that are highly inelastic and cheaply taxable. Think land taxes, except updated for contemporary times. Yeah, wish me luck with that.
Not all goods are perfectly elastic. Take a look at the research surrounding the minimum wage.
If we were to increase the minimum wage by $0.50 (~6.7%) we'd only have about a 1% increase in food prices (http://www.ers.usda.gov/media/306735/aib74703_1_.pdf). Also take a look at the study regarding fast food prices by Card and Krueger.
Increasing the minimum wage in general does not cause a net rise in unemployment (http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/200...).
The people who would receive the BI are the in the lowest income brackets. The bottom three income quintiles on average spend more in a year than they earn. This mean redistributing money to the lower income quintiles effectively results in more money being put back into the economy.
You can see this by studying the economic effect of various subsidies. Food stamps have the highest return on the dollar, with $1.73 in economic activity generated for every dollar spent on food stamps. And subsidies to the higher tax brackets like the Bush tax cuts have a negative return. http://frac.org/initiatives/american-recovery-and-reinvestme...
> The people who would receive the BI are the in the lowest income brackets.
As I understand BI, this is not true. BI is a payment made to every citizen and/or resident of a country, irrespective of any other consideration (including income, wealth, etc). What you seem to be describing is Guaranteed Minimum Income, which is an entirely different ball of wax. I'm now wondering how much of the discussion is people talking past each other because of conflation of these two terms.
See http://en.wikipedia.org/wiki/Basic_income and http://en.wikipedia.org/wiki/Minimum_income
PS: Of note BI is assumed to replace social security so someone making 50-80k may effectively pay significantly less in taxes prior to retirement but receive far fewer benefits in retirement.
This is why I think BI doesn't have a very good chance in the US. The AARP is a very powerful lobby and their members wouldn't go for a reduction in benefits after retirement.
Everyone would receive it. Otherwise it's not BI.
The people who successfully make money have a larger portion of it taken away by the government and given to people who don't make money. They recoup their losses by raising prices and re-extracting it from the people it has been given to
That doesn't happen in the real world -- raising taxes doesn't cause runaway inflation. (How could you possibly think that it does?)
BI has to be increased to keep pace with rising prices caused by funding BI [...] The endgame of the second option is Marxist communism
Even if raising taxes did cause runaway inflation, this would still be wrong. Say that each year you set aside 20% of the GDP for basic income. Then your basic income plan already automatically increases with inflation.
So the percentage of GDP used for basic income would be stable. We would never get communism.
The endgame isn't the Soviet Union, it's Denmark.
I agree that it doesn't cause runaway inflation (which we can see empirically), but it does cause economic contraction, which has many of the same effects as inflation. There's a good reason that one of a government's first relief measures in a recession is to ease taxes.
> Say that each year you set aside 20% of the GDP for basic income. Then your basic income plan already automatically increases with inflation.
It's important that we not conflate "inflation" with "consumer price index" here. The GDP is not fixed to the CPI - they have an inverse relationship. This means that if the GDP contracts significantly (reducing BI), the CPI could well expand outside of the bounds of what BI provides, necessitating the need for a greater BI contribution. Setting aside 20% of the GDP works until it doesn't.
[1]: http://www.nytimes.com/2013/04/21/world/europe/danes-rethink...
You're assuming that Denmark is a stable endgame. Is it? On what timescale?
Of course it would. But there is no reason to think that an equilibrium couldn't / wouldn't be reached.
>The endgame of the first option is Zimbabwe.
We can get Zimbabwe or Weimar Germany without BI.
> The endgame of the second option is Marxist communism; the point at which the system reaches stability is the point at which there is nobody left to extract extra money from to distribute.
For that to be necessarily true, we'd need to already be in a sort of Malthusian crisis, and/or have a resource scarcity. Sure, it might happen, but it is not a certainty.
>why would it be different here?
People still strive for wealth, why would they stop just because of all-you-can-eat-beans-and-rice buffet and health care?
I agree equilibrium would be reached. I guess what I'm asking is "Why wouldn't the equilibrium be Marxist communism?" (and if it is, can we just admit that we're advocating for communism?)
> For that to be necessarily true, we'd need to already be in a sort of Malthusian crisis, and/or have a resource scarcity. Sure, it might happen, but it is not a certainty.
Can you elaborate on why this is necessary? This ties into my question of "Why wouldn't the equilibrium be Marxist communism?"
> People still strive for wealth, why would they stop just because of all-you-can-eat-beans-and-rice buffet and health care?
Wealth is a means to an end to achieve a certain quality of life. For most people, it is not the end itself. The caricature of the Scrooge McDuck character who collects money out of a psychopathic addiction to raw wealth so that he can swim around in it is not representative of almost anyone's actual financial goals or motivations.
People don't create wealth for the hell of it - they create it to improve their quality of life. If I am producing wealth, but it is not contributing to my quality of life, I have zero incentive or motivation to continue producing wealth.
Communism is all about state ownership of the means of production at every level. Wealth and entrepreneurship are heavily discouraged, if not outright banned. Those who advocate for a BI have nothing against wealth and entrepreneurship, and would probably withdraw their support for it if they believed that it would result in the outcome that you predict. BI isn't about everyone being equal, but rather about establishing a minimum income level.
> If I am producing wealth, but it is not contributing to my quality of life, I have zero incentive or motivation to continue producing wealth.
I think that the ideas that you have about incentives and wealth don't track with reality. Just look to yourself--I would be surprised if you live your entire life as a wealth-maximizing entity. Most people are very complex in their motiviations, and many, many wealthy people continue building wealth because it is a side-effect of something that they love to do, not because they want to make even more money.
Regarding equilibrium:
What makes you think that we aren't already near the price equilibrium that would be reached under a BI system? Ostensibly, at least at first, the only people who would see a gain in income net of taxes under BI would be people who are currently receiving some sort of social welfare payment such as social security, unemployment, or AFDC/TANF, which payments would be eliminated concurrently. If no net cash is injected into the economy, how would it have any effect on prices? In fact, BI could have a stabilizing effect on prices if it reduced the deflationary pressure on consumer goods that accompanies economic downturns.
I get this; I just wonder about the effect that funding it would have on wealth and entrepreneurship, given that decreasing the value of a unit of work through taxation tends to retard economic growth, and heavy taxation would be necessary to provide for these kinds of programs. If we can manage to pay for them without over-disincentivizing entrepreneurship, everything is dandy. Given the scope of the proposal, that seems sketchy - we have already seen a tangible effect from things like the ACA on employment (that is employers are willing to sacrifice raw economic output in order to avoid higher effective taxes) and that's a relatively small drop in the bucket compared to what would be needed to bootstrap a BI system. I may just be mentally overinflating the issue, but it seems like the capital necessary to fund a BI system would be so gargantuan that it would have a significantly detrimental effect on low-margin businesses, kicking us into a feedback look of reduced supply and higher prices.
> many wealthy people continue building wealth because it is a side-effect of something that they love to do, not because they want to make even more money.
Definitely, and isn't that the ideal here? To get us, as a society, to the place where we can devote all our time to things that we love to do, rather than the things that we have to do? I half-joke that I love what I do so much that I'd do it even if I wasn't making money at it, and I think that's true for a lot of people, but I can also say that I think the fact of the matter is that most people do what they do because they have to, not because they want to; squeezing out the wealth incentive leaves little there for most. If we can get everyone to a point where people do what they love and society still functions smoothly, I'll be the first to sign up for that. :)
> What makes you think that we aren't already near the price equilibrium that would be reached under a BI system?
Back-of-the-napkin math suggests to me that it would require much more capital to implement BI than current entitlement programs require. If this is not the case, and it's just a matter of liquidating current entitlement programs, then there's absolutely no issue at all. My entire argument is predicated on the assumption that BI would require far more in the way of entitlement resources than we currently have available.
Communism has gotten such a bad rap that even when people advocate for something like it, they cannot admit that it's like communism.
See the quote from Keynes in the article, even. Obviously Keynes wasn't exactly a communism advocate, but "society will be so productive that it won't be organized around work but around leisure" is almost taken straight from Marx in many ways.
I guess what I'm saying is a variant of Graeber's "Are You An Anarchist? The Answer May Surprise You!" Remove the ideology behind some words and the positions that people advocate can be fascinating.
Well, you sound sincere, but your arguments are so ahistorical that it's really tough to believe you.
First of all, you keep saying "Marxist communism" and "what Marx called 'communism'", and so on. "Communism" is not the name of something Marx proposed. It's the name of something someone else proposed, while boosting its credibility by invoking Marx.
Second of all, nothing approaching Marxism has been tried on a large scale. Again, see "communism is not marxism".
But more importantly, the essential property of both Marxism and Communism is that the means of production are owned by the state, ("by the people collectively", ha ha ha). No BI plan is proposing that. So they're fundamentally absolutely not marxist, and not communist.
I simply don't understand what you think the BI plan has in common with Marxism, or with Socialism, aside from a concern for the welfare of poor members of society (a concern which I hope you will agree is not exclusive to Marxism and Socialism).
I'm aware that the USSR didn't implement pure Marxism, but implemented something called "communism" and invoked Marx as its deity. I think that a purely classless society as Marx envisioned is probably unachievable. I really am trying to avoid equating support BI with some ridiculous 1950s idea of Soviet communism, and I'm probably doing a pretty crappy job of it.
All that said, the whole concept seems to me to lead down a path that drives entrepreneurs out of the market by making the cost of doing business greater than the profit of it, which would necessarily lead to the nationalization of industries deemed essential. A society in which private entrepreneurs are taxed to a point of zero net revenue is effectively indistinguishable from the state's name being on the deed. I recognize that that the concept of that level of taxation is severe, but I'm also trying to figure out why it wouldn't eventually happen.
As simply as I can state it, BI seems flawed to me because the cost of living is pegged to the cost of goods, and the cost of goods in a competitive market doesn't have a lot of downwards elasticity. The funding for BI would have to come from producers, which would drive up the cost of those goods, which would drive people out of the market, which would reduce competition and increase the cost of goods, all of which increases the minimum BI necessary to achieve a consistent quality of life. That seems to be to be a feedback loop of which the end effect is the effective nationalization of business in order to control prices.
Many people obviously disagree that that's the end result. Experience would tell me that I've made an assumption that they haven't, and I'd like to figure out what that assumption is, and how viable that assumption is.
Uh. Union of Soviet Socialist Republics, not communist republics.
My knowledge of Soviet history is incomplete, but surely you're not suggesting that the USSR didn't claim to implement communism.
Oh, and hey: many people do claim that the USSR wasn't actually _socialist_. You'll find two groups who do this: anarchists, and new Marxists who still have some liberal left in them. The USSR certainly claimed to be socialist, and was according to socialist principles.
The two groups will make this incorrect, revisionist claim because of two reasons. Anarchists want to bolster socialism while trashing statism, so they want to play up 'state socialism's failures. New Marxists will want to play down any perceived 'failures' of Marxism by distancing themselves from said 'failures.'
If you only want one book, that book is Capital I. I suggest David Harvey's lectures along with it, they'll help out quite a bit. If you have read Smith and Ricardo, that'll make it much easier, too. For bonus points, read the short "Wages, price, and profit" by Marx, it's a bit easier of an intro than the book's.
If you can fit in a second, I'd suggest "the State and Revolution" by Lenin.
Marx identifies a problem and a crude solution, and Lenin provides a good solution. Those two will give you the most of it. Wikipedia, especially on the historical/dialectical materialism stuff, is helpful.
A more full list is here: http://www.reddit.com/r/communism/comments/wisiw/basic_marxi...
Also, /r/communism101 is very good and there to answer questions, if you Reddit.
Also, minor procedural note, Marx wrote mostly about capitalism and analyzing it, and a tiny bit about socialism, but next to nothing on communism... Anyway.
Why would it? I think that it might neatly solve the problem of the current system whereby low skilled people are actually dissuaded from working. I know for a fact there are people on welfare who would rather have gainful employment. It might even wind up being cheaper than the current system (from a tax perspective). Another thing that I am certain of is that technology will displace low-skill labor, and that we will have to have a society-wide solution for how we treat the displaced laborers.
>...can we just admit that we're advocating for communism?
It may well be the result. But I'd consider myself to be very far from a communist. My predictions about the future may be wrong, just as you may be in yours; but, no, I am not advocating for communism..
>Can you elaborate on why this is necessary?
If I understand your argument correctly, "...the point at which the system reaches stability is the point at which there is nobody left to extract extra money from to distribute." aren't you implying that there isn't enough productivity/resources to support the entire population currently?
>Wealth is a means to an end to...
I sacrificed precision for brevity when I used the word wealth. Maybe I should have said: I reject the hypothesis that providing BI for a person will squelch or kill his/her ambition. On the contrary, I expect some people to perform 'better' in that respect once the stress of survival is removed.
As for your assertion that the already productive will lose the incentive to produce, I don't believe that either.
Consider how much the rest of your paragraph sounds like "from each according to his ability, to each according to his need."
To answer you WRT "Marx's ideals of classless economics" or what my idea of that is[1], In my opinion BI falls pretty far short of "Marx's ideals of classless economics"
[1] As steveklabnik has astutely pointed out, and I will readily admit that my notions of Marx and communism are colored by my Reagan era childhood's definition of communism. I wouldn't trust my own or anyone else's definition until I've done a bit more reading.
>> Can someone please explain to me why a BI wouldn't simply result in higher prices, resulting in the need for a higher BI, resulting in higher prices, resulting in the need for a higher BI, etc?
> A basic income guarantee is the same as having a basic (food/healthcare/public services/whatever) guarantee (basically, state welfare already implemented in many countries) - the difference is the government is paying in money instead of trying to provide the services themselves.
State welfare programs have a long list of conditions for who is and is not eligible for welfare assistance. If you're just talking about liquidating all state welfare and distributing raw cash instead with no net change, then sure, okay, no big loss there except for the elimination of thousands of government jobs. That's not what BI is, though - BI is Oprah. "You get $1000! You get $1000! Everyone gets $1000!" Unless I grossly misunderstand the concept, liquidating existing state welfare services wouldn't even begin to approach the financial needs of BI.
It shouldn't replace everyone's desire to work. It should have some built in compelling agent to keep people working m even if it isn't that much work.
2. Living in rural areas isn't always as cheap as you think. Gas, Food, Internet, Phone, TV, etc.
Gas especially for my first question.
We'd save a lot of tax dollars if we denied them money for gasoline to drive a car to the hospital, money for natural gas/wood to run a heater in the winter, and money for funeral services when they finally die from neglect!
It's simply not possible to argue at this point that urban living is a 'luxury'. Non-urban living is not a realistic option for a large portion of the US population. If you dislike this reality, that is fine - I'd certainly be in favor of efforts to change it - but you can't just willfully disregard it and pretend that people who live in urban areas are greedy or spoiled or something. Living in rural areas in the modern United States comes with dozens of hidden costs, some in the form of actual money spent and others in the form of lost opportunities, impaired health, etc.
By gas, I meant fuel for transportation. One simply cannot survive in a rural area without an automobile and the ability to use it.
Food, ironically is more expensive, and lower quality. I still haven't figured out why (other than market opportunism).
Internet, same as food, more expensive, and lower quality.
TV, I agree is not a necessity, but another example of a common expense that tends to be lower quality in rural areas when compared to urban areas.
OTOH, housing is generally cheaper.
Frankly, we don't need as many people working as much as they do. (speaking about productive work)
I can't tell if you're agreeing with me or not...
Currently this is generally done in a highly inefficient manner though dozens or hundreds of different subsidies and benefits, and it costs a lot to process everything through a thick wall of bureaucracy, and it still ends up being unfair and unmotivational to many. The canonical class of problems is that it doesn't make sense to work because your benefits received would drop in direct proportion to what you get paid. Or it's simply forbidden work even a little in order to be eligible to receive benefits.
The point of BI is to redistribute the already redistributed money in a fair and simple way: everyone gets something that may or just may not be enough to live on its own, but there are no questions asked and if you work on top of that, you scoop most of the extra money to yourself after taxes.
If you're really, really a scrooge you might just make it with the BI only if you're willing to drop your standard of living a couple of decades back. But most people want more money and they'll work for it, if it's five hours a week or 20 hours a week, and they don't lose BI if they do. For any middle-class adult, BI would simply translate into a slightly lower tax rate. They would still get $500 of BI per month or so, but because they would make $5000 per month in salary on top of that the significance of BI would be marginal.
>>> * The people who successfully make money have a larger portion of it taken away by the government and given to people who don't make money. They recoup their losses by raising prices and re-extracting it from the people it has been given to, except now the government gets a cut of it twice. BI has to be increased to keep pace with rising prices caused by funding BI. >>>
is rather muddled.
1) FWIW Basic income would be distributed to everyone.
2) What you are describing is the current system, people who make more money are taxed more, and that money is distributed to various things, including giving money to poor people.
3) The phrase "they recoup their losses" has nothing to do with how the market functions right now. Companies set their prices based on a variety of factors, and generally try to be as profitable as they can. The taxation rate of individuals does not directly modulate that. For example, if the CEO of Walmart or Mattel had a marginal tax rate of 99% this would not directly change the price of a Barbie doll.
I also don't think that a basic income would have as strong an inflationary effect as you think it would on the items necessary to survive on a basic income. Since the basic income would replace minimum wage, producers would be free to pay cheap labor much closer to fair market value, so the cost of the products of unskilled labor could drop significantly (offset by an increase in the price of luxuries due to higher income taxes).
I'm really trying to avoid arguments about whether BI would encourage or retard laziness, because I can't make an intelligent argument one way or the other. My concern is with the cost of funding, and the negative effects that would have on currently-productive parts of the market.
> if the basic income only provides a net income boost to a minority of voters, then there will be electoral pressure to keep it low, rather than to keep increasing it.
Can you elaborate on this point? It seems like this same argument could be used to argue that there would be electoral pressure to not implement BI in the first place, if I understand you correctly. What makes BI electorally viable at level X but not at level Y?
> Since the basic income would replace minimum wage, producers would be free to pay cheap labor much closer to fair market value, so the cost of the products of unskilled labor could drop significantly (offset by an increase in the price of luxuries due to higher income taxes).
I hadn't considered that at all. Interesting variable. This actually changes my view of the whole thing substantially, since the reduced cost of labor could be the variable that employers could tweak to keep prices approximately stable (I get less of each dollar earned, but it costs less to earn that dollar, so it's a wash). I was assuming that labor costs would remain fixed, but if BI permitted for them to be reduced, that might in fact address one of the biggest concerns.
I think the evidence strongly indicates that this is the case. Basic Income has not been implemented, and won't pass any referendum without the help of sympathy for the poor. (I don't think enough people will be swayed by the possible long-term benefits.)
Competition keeps prices balanced; it doesn't drive them arbitrarily low. Nobody will sell at a price that doesn't allow them to sustain their business.
1. Using public pensions. While unlikely to be supported by the people making the laws (it is their pension), if they have basic income, they don't need a pension.
2. Move all funds currently in other welfare programs into the basic income program. This both moves existing funding m and gets rid of those departments, removing people working for those departments from the payroll. While my statement may be crass, it's a valid solution.
3. Take some of our military funding. Also give some of it to NASA.
None of those solutions decrease net income, except for people losing their jobs (they can find another one?) or their public pension (they're getting the basic income, and the original idea was that once someone served their term, they'd return to their previous profession, and become contributing members of society).
I thought BI inflation would happen due to people having more money to spend, not because losses had to be recouped for. Am I wrong?
If people magically had more money to spend without anyone having to lose money to fund it, that would cause direct inflation (since the total amount of currency in circulation would be higher). The only way that happens is if the government starts printing a few hundred billion each month and handing it out to people.
> I don't think that very much of it at all is genuinely out of circulation which could otherwise be brought into circulation through BI taxes
I dug into some numbers to try to figure out what kind of tax rate you'd need to make that work. It's... challenging to say the least.
What I did find however was that in terms of income distribution, only 23M households were making <$20K/yr (mean household size was 2). An incredibly rough number, but you could run a Guaranteed Minimum Income program for $20K/yr for about 10x less (1.7% GDP) - you'd get that for free if you switched to single-payer nationalized health care (Canada, Germany, France, UK, Japan costs are 9-11% GDP while the US currently spends just under 18% GDP)[1]
This of course will never happen in the US because it'd make too much sense.
If you want to play w/ some numbers/sources: https://docs.google.com/spreadsheet/pub?key=0AgAh7-k-pFfVdG1...
If the BI is constant across a geographical area that has varying housing costs then people without any other income would choose to live in cheaper areas, those living in currently expensive areas would have to pay more for basic services to allow people providing them to live nearby. I think this would help to deflate the current housing bubbles.
http://articles.sun-sentinel.com/1993-08-16/news/9301300112_...
The UK has a sales tax called 'VAT' that applies to almost everything, with a defined list of exceptions.
Most types of food are untaxed, as are books, children's clothes, college education, safety boots, gold investment coins, sport activities, tap water, most healthcare services, burials and cremations, museum entry fees, houseboat moorings, charter of military aeroplanes, and so on [1].
OK so the list of things that are exempt or 0% taxed is fairly long. But the vast majority of things are subject to VAT.
[1] http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services....
You have two mechanisms by which you can fund such a proposal:
* The government prints money and hands it out. Basically, just direct inflation; the BI becomes an arms race to keep up with inflation caused by BI.
* The people who successfully make money have a larger portion of it taken away by the government and given to people who don't make money. They recoup their losses by raising prices and re-extracting it from the people it has been given to, except now the government gets a cut of it twice. BI has to be increased to keep pace with rising prices caused by funding BI.
(There is a third proposal: Borrow it without any plan to actually repay it, which is not self-sustaining for obvious reasons)
In either case, I can't understand how a BI would lead to a more stable economy. The endgame of the first option is Zimbabwe. The endgame of the second option is Marxist communism; the point at which the system reaches stability is the point at which there is nobody left to extract extra money from to distribute.
I feel like I'm missing something critical that makes it a viable strategy. I don't think anyone at all is in favor of uncontrolled hyperinflation, so I'm left to conclude that the favored option is the second choice. We know from history that communism just doesn't work once you reach a large enough population that people are not personally accountable to each other; why would it be different here?
(I want to make it clear that if I could snap my fingers and make the world such that nobody had to live in poverty and had food, clothing, shelter, and an internet connection, I'd do it. I don't have anything against the moral goals of BI. I just don't see how it's sustainable, since the money for it has to some from somewhere.)