What's particularly funny about these constant trials is that we have millions of data points already about how a UBI works in part of a fixed currency area. It's just that the UBI in question is allocated by age rather than geographical location.
It's called the state pension. And yet there is constant demands for it scrapped, or for the number of people to get it to be reduced by increasing the age at which the division is made. Apparently it is unsupportable on the 'working part of the population' who pay the transfer tax.
Yet the easiest way to introduce a UBI would be a progressive reduction in the age at which the state pension is made available.
Perhaps it something to do with the unfortunate fact that those who receive a state pension tend to give up working...
Thanks for the rant - it aligns very much with what I've read when MMTers argue why UBI won't work. Their alternative solution is the job guarantee, which is supposed to lead to people always having the opportunity for a living wage if they add to the supply of goods and services. Thoughts on that?
The reason why MMTers support a JG is that it works as counter-cyclical policy. It directly interacts with the wage setting at the low end of the wage scale, and it is self-limiting. As tge economy expands, people leave the JG and expenditures fall. The lack of counter-cyclicality is why a UBI is dangerous - there is no way of knowing how much taxes need to be raised to deal with the inflation (outside of rich oil exporters, who can use imports and migrant labourers).
The UBI argument might change if we mash in a bit of Henry George. Recovering the social value inherent in the capital gains on land values would be a great way to balance the macro effects, and as a bonus would kill the stupid cycles of speculation that go with that. Taxes on income should be progressive but moderate, at least up to skilled professionals’ level of income (ramp up above that), as income taxes are taxes on value creation. Land tax, structured to catch all social value, with a deduction for improvements, would be a tax on value extraction, and an effective tax on wealth.
One major problem with the UBI is that it is a massive intervention in the economy that is not self-limiting like counter-cyclical welfare programmes. This means we have no idea how much taxes need to be raised to deal with the inflationary impact.
Adding another major structural shock - a tax on land, which is also not counter-cyclical, unlike a VAT or income taxes - makes the uncertainty about policy even worse.
Wealth does not cause inflation. Income flows do.
And it’s not as if we don’t already do not tax land. Land value is part of property value, and property value is taxed. Feel free to run on a programme of massively increasing property taxes and get back to me when you win an election.
I think I’m coming at this from a more radical position - a redesign, not a reform. You are right that there is no pragmatic approach to implementing a UBI, and this is why leftists (or worse, rightists) approaching the UBI from a neoclassical standpoint inevitably answer the wrong questions. Democracy and its institutions are designed to prevent any changes that threaten the capitalist power structure, and pragmatism is a political response to this. But, in the end, pragmatism is part of the reinforcement and reproduction of capitalism.
Capitalism has so far defeated every social movement that opposed it. Even now, China must constantly fight against the capitalist power that threatens its communist power structure - hence the uppity Chinese capitalists that “go quiet” for a while, what we might call “active management” of capitalist power. However, capitalism itself now confronts an enemy that it cannot defeat: the earth. As we hit more planetary boundaries, capitalism will have increasing crises, and eventually collapse. That makes a redesign approach essential - either to prevent collapse (the easy way), or to implement after collapse (the hard way). In that context, a UBI can work, in concert with a jobs guarantee.
(Also, as background, Australia’s land tax system is based on land value only, ex improvements. That makes it possible to fully recover social value, with deductions for spending on improvement so we don’t discourage development or production. But again, this is redesign, not reform.)
Truly a rant. Arguing from premises that start with “my guess is” suggests you’ve done no actual study of the matter using data. You’re shooting from the hip which suggests you’re likely using motivated reasoning: hypothesizing the set of premises necessary to help you reach the conclusion you already formed. Given that you never respond to the actual UBI research I can’t take much of what you say seriously. For instance, when you suggest UBI does nothing to increase output you ignore the findings that UBI increases employment. But, consistent with your motivated reasoning, you only consider conditions where it might not, essentially stacking the deck for your preferred conclusion.
This is the first of your pieces I’ve read - your newsletter appeared as a result of me subscribing to someone else. I think it’ll be my last.
I read old research, and the tax code effect was ugly. There is no need to repeat the exercise to update where the breakeven would be.
Allowing people to drop out of the labour force and pushing them into the informal economy as a mechanism to increase output would surprise pretty much everyone who follows macroeconomics.
There is no evidence that UBI invents people to drop out of the workforce. Who can live on $12k? In practice it gives people the cushion to be able to fix their car so they don’t lose their job. To weather the loss of one job and find another without being evicted in the meantime. To afford to take a day off work to care for a sick kid or pay for an emergency expense. To take a class to get a better job. Stockton was a grant example. St. Paul MN is another. Employments rates increased among those receiving UBI. To cherry pick situations where it doesn’t work is, again, motivated reasoning.
I used $12K since that was an easy number and it was the only concrete Canadian proposal I saw. Making it C$18,000 to make it closer to an actual “basic income” makes the tax situation worse. And if a couple pool two C$18,000 UBI incomes, they pretty much would be in a position to drop out of the labour force.
The reason there’s no “evidence” is that no serious jurisdiction has implemented a UBI, outside of the unusual case of Alaska (which is socially atypical) or places like Saudi Arabia (where I believe the locals are notorious for relying on migrant labour). Studies don’t work for the extremely obvious reason that nobody sensible is going to torpedo their work history for what they know is a temporary situation. Which is why all these “hand out money and see what happens” studies are worthless.
There’s no way of getting “data” since the programme is not politically viable outside of rich oil exporters.
All anyone can do is propose the tax structure that supports the programme. People have done that, and that’s why we know it’s non-viable. So the UBI fans go back to studying whether people are better off if they get money instead of addressing the elephant in the room.
Interesting post! So to summarise your point, are you saying that the UBI would need to be matched by tax increases to higher income earners in order to prevent inflation eating up all the benefits that the UBI would provide to lower income people?
You’d have to bank on that going into the policy. It would be a massive shock to the economy, without many precedents to work with.
It would also be hard to separate one-time inflationary effects due to changing economic patterns versus what is needed in steady state. People got pretty mad about the inflationary burst after the pandemic, making it clear that it’s a bad idea to brush off one-time inflationary spikes.
Since you are moving income flows from high-saving high income cohorts to low income cohorts, the policy might even be inflationary if revenue neutral.
What's particularly funny about these constant trials is that we have millions of data points already about how a UBI works in part of a fixed currency area. It's just that the UBI in question is allocated by age rather than geographical location.
It's called the state pension. And yet there is constant demands for it scrapped, or for the number of people to get it to be reduced by increasing the age at which the division is made. Apparently it is unsupportable on the 'working part of the population' who pay the transfer tax.
Yet the easiest way to introduce a UBI would be a progressive reduction in the age at which the state pension is made available.
Perhaps it something to do with the unfortunate fact that those who receive a state pension tend to give up working...
Thanks for the rant - it aligns very much with what I've read when MMTers argue why UBI won't work. Their alternative solution is the job guarantee, which is supposed to lead to people always having the opportunity for a living wage if they add to the supply of goods and services. Thoughts on that?
The reason why MMTers support a JG is that it works as counter-cyclical policy. It directly interacts with the wage setting at the low end of the wage scale, and it is self-limiting. As tge economy expands, people leave the JG and expenditures fall. The lack of counter-cyclicality is why a UBI is dangerous - there is no way of knowing how much taxes need to be raised to deal with the inflation (outside of rich oil exporters, who can use imports and migrant labourers).
The UBI argument might change if we mash in a bit of Henry George. Recovering the social value inherent in the capital gains on land values would be a great way to balance the macro effects, and as a bonus would kill the stupid cycles of speculation that go with that. Taxes on income should be progressive but moderate, at least up to skilled professionals’ level of income (ramp up above that), as income taxes are taxes on value creation. Land tax, structured to catch all social value, with a deduction for improvements, would be a tax on value extraction, and an effective tax on wealth.
One major problem with the UBI is that it is a massive intervention in the economy that is not self-limiting like counter-cyclical welfare programmes. This means we have no idea how much taxes need to be raised to deal with the inflationary impact.
Adding another major structural shock - a tax on land, which is also not counter-cyclical, unlike a VAT or income taxes - makes the uncertainty about policy even worse.
Wealth does not cause inflation. Income flows do.
And it’s not as if we don’t already do not tax land. Land value is part of property value, and property value is taxed. Feel free to run on a programme of massively increasing property taxes and get back to me when you win an election.
I think I’m coming at this from a more radical position - a redesign, not a reform. You are right that there is no pragmatic approach to implementing a UBI, and this is why leftists (or worse, rightists) approaching the UBI from a neoclassical standpoint inevitably answer the wrong questions. Democracy and its institutions are designed to prevent any changes that threaten the capitalist power structure, and pragmatism is a political response to this. But, in the end, pragmatism is part of the reinforcement and reproduction of capitalism.
Capitalism has so far defeated every social movement that opposed it. Even now, China must constantly fight against the capitalist power that threatens its communist power structure - hence the uppity Chinese capitalists that “go quiet” for a while, what we might call “active management” of capitalist power. However, capitalism itself now confronts an enemy that it cannot defeat: the earth. As we hit more planetary boundaries, capitalism will have increasing crises, and eventually collapse. That makes a redesign approach essential - either to prevent collapse (the easy way), or to implement after collapse (the hard way). In that context, a UBI can work, in concert with a jobs guarantee.
(Also, as background, Australia’s land tax system is based on land value only, ex improvements. That makes it possible to fully recover social value, with deductions for spending on improvement so we don’t discourage development or production. But again, this is redesign, not reform.)
"And it’s not as if we don’t already do not tax land." -- A triple negative! Can you disambiguate?
I apparently was in an extremely negative mood when I wrote that. I will leave it unexplained due to craftsmanship that went into it…
Truly a rant. Arguing from premises that start with “my guess is” suggests you’ve done no actual study of the matter using data. You’re shooting from the hip which suggests you’re likely using motivated reasoning: hypothesizing the set of premises necessary to help you reach the conclusion you already formed. Given that you never respond to the actual UBI research I can’t take much of what you say seriously. For instance, when you suggest UBI does nothing to increase output you ignore the findings that UBI increases employment. But, consistent with your motivated reasoning, you only consider conditions where it might not, essentially stacking the deck for your preferred conclusion.
This is the first of your pieces I’ve read - your newsletter appeared as a result of me subscribing to someone else. I think it’ll be my last.
I read old research, and the tax code effect was ugly. There is no need to repeat the exercise to update where the breakeven would be.
Allowing people to drop out of the labour force and pushing them into the informal economy as a mechanism to increase output would surprise pretty much everyone who follows macroeconomics.
There is no evidence that UBI invents people to drop out of the workforce. Who can live on $12k? In practice it gives people the cushion to be able to fix their car so they don’t lose their job. To weather the loss of one job and find another without being evicted in the meantime. To afford to take a day off work to care for a sick kid or pay for an emergency expense. To take a class to get a better job. Stockton was a grant example. St. Paul MN is another. Employments rates increased among those receiving UBI. To cherry pick situations where it doesn’t work is, again, motivated reasoning.
*incents
I used $12K since that was an easy number and it was the only concrete Canadian proposal I saw. Making it C$18,000 to make it closer to an actual “basic income” makes the tax situation worse. And if a couple pool two C$18,000 UBI incomes, they pretty much would be in a position to drop out of the labour force.
The reason there’s no “evidence” is that no serious jurisdiction has implemented a UBI, outside of the unusual case of Alaska (which is socially atypical) or places like Saudi Arabia (where I believe the locals are notorious for relying on migrant labour). Studies don’t work for the extremely obvious reason that nobody sensible is going to torpedo their work history for what they know is a temporary situation. Which is why all these “hand out money and see what happens” studies are worthless.
Fine. You want to argue theory without actual data be my guest. I’m out.
There’s no way of getting “data” since the programme is not politically viable outside of rich oil exporters.
All anyone can do is propose the tax structure that supports the programme. People have done that, and that’s why we know it’s non-viable. So the UBI fans go back to studying whether people are better off if they get money instead of addressing the elephant in the room.
Interesting post! So to summarise your point, are you saying that the UBI would need to be matched by tax increases to higher income earners in order to prevent inflation eating up all the benefits that the UBI would provide to lower income people?
You’d have to bank on that going into the policy. It would be a massive shock to the economy, without many precedents to work with.
It would also be hard to separate one-time inflationary effects due to changing economic patterns versus what is needed in steady state. People got pretty mad about the inflationary burst after the pandemic, making it clear that it’s a bad idea to brush off one-time inflationary spikes.
Since you are moving income flows from high-saving high income cohorts to low income cohorts, the policy might even be inflationary if revenue neutral.