Universal Basic Income (UBI) is coming

[ChooseFreedom]

The larger businesses with $25M revenue should have better margins. Would be better to ramp the tax rate up gradually, rather than 0% below 25M and 3% above. Hopefully they'll add something like a minimum residency period, so people won't go to Oregon just for this.

The size of a business is not a margin qualifier.
Every industry is different. Company size has very little to do with margins.
Plus, revenue doesn't mean profit. Far too many variables to base this strictly on amount of revenue.

 

[ChooseFreedom]

negative externality, in economics, the imposition of a cost on a party as an indirect effect of the actions of another party. Negative externalities arise when one party, such as a business, makes another party worse off, yet does not bear the costs from doing so.

See: CO2

Agreed. That's the epitome of all the Congress/Federal Reserve's decisions!
In a truly free market economy, predatory businesses do not survive for long, because there is always another option for people to take their business/money. And reputation matters.
But that's only part of it.

Unintended consequences very often come from the best of intentions. Every time the government/Fed gets involved in the economics, they inevitably make things worse in the long-term. Obviously, that isn't usually their intent at the beginning. But under/over corrections and the general politics of it, invariably leave the majority of us worse off than previous. Yet people continue to believe the gov/Fed know what they're doing. When in reality, if they just did nothing (regarding the money), the markets will always work themselves out. The weak/reckless companies fail. The strong/smart companies thrive. That's how it's supposed to be.
That's closer to how it used to be prior to fiat. No bail outs, no "too big to fail" BS.

If nothing else, previously having the USD on the gold standard at least forced way more fiscal responsibility. The gov couldn't just create more money out of thin air like now. Real thought and tough decisions had to be made when choosing what to spend on. Like most of us and how we run our households. We can't just print more money when we want to. They shouldn't be able to either!

To your point, the gov's money printing is a negative externality ON US through inflation.

 

[wdolson]

Years ago I came across someone who had actually read Adam Smith's book cover to cover. He said few have ever done it because it's not an easy read. The free market people are all in on what they think Adam Smith said, but what he actually describes in the book is that unregulated free markets are unstable. The financial crisis of 2008 was caused by an unregulated market that cropped up about 10 years before. The commoditization of home mortgages. Because demand skyrocketed for these, there was intense pressure on loan originators to be giving loans to anybody. A lot of fraud was committed by loan originators just to get more loans in the system.

During the 19th century there were many booms and busts in the US economy as money would flood into one market, then collapse and cause chaos throughout the entire economy. Starting in the early 20th century regulatory structures were put in place to curb the wild swings and while there have been recessions after the Great Depression, the dips have been shallower.

Removing all the regulation in this time of computer algorithms driving a lot of the markets would accelerate the chaos to levels unimagined by anyone in the 19th century. Regulation can be a pain, especially for those who are self disciplined enough to keep things reigned in. But in a situation where there is no regulation, all it takes is a few bad actors who let their greed get the best of them and the entire system becomes unstable.

This is where I break with the libertarians. I think social libertarianism (if what you're doing doesn't hurt others or put others at risk you should be left alone) is a good thing. What my neighbors are doing is none of my business unless they are putting me at risk. However economic libertarianismm has been shown to be a bad idea. Remove all the regulation and a few bad actors can put everyone's financial well being at risk. In a world where everyone was 100% self regulating to a point that the system was not at risk, then economy libertarianism is OK, but humans aren't that mature.

There is such a thing as too much regulation which is just as bad as too little. With everything the happy medium where there is just enough regulation to curb the bad actors without becoming a burden for everyone else needs to be found.

 

[wdolson]

Denver UBI pilot program
Denver gave people experiencing homelessness $1,000 a month. A year later, nearly half of participants had housing.

 

[ChooseFreedom]

Years ago I came across someone who had actually read Adam Smith's book cover to cover. He said few have ever done it because it's not an easy read. The free market people are all in on what they think Adam Smith said, but what he actually describes in the book is that unregulated free markets are unstable. The financial crisis of 2008 was caused by an unregulated market that cropped up about 10 years before. The commoditization of home mortgages. Because demand skyrocketed for these, there was intense pressure on loan originators to be giving loans to anybody. A lot of fraud was committed by loan originators just to get more loans in the system.

During the 19th century there were many booms and busts in the US economy as money would flood into one market, then collapse and cause chaos throughout the entire economy. Starting in the early 20th century regulatory structures were put in place to curb the wild swings and while there have been recessions after the Great Depression, the dips have been shallower.

Removing all the regulation in this time of computer algorithms driving a lot of the markets would accelerate the chaos to levels unimagined by anyone in the 19th century. Regulation can be a pain, especially for those who are self disciplined enough to keep things reigned in. But in a situation where there is no regulation, all it takes is a few bad actors who let their greed get the best of them and the entire system becomes unstable.

This is where I break with the libertarians. I think social libertarianism (if what you're doing doesn't hurt others or put others at risk you should be left alone) is a good thing. What my neighbors are doing is none of my business unless they are putting me at risk. However economic libertarianismm has been shown to be a bad idea. Remove all the regulation and a few bad actors can put everyone's financial well being at risk. In a world where everyone was 100% self regulating to a point that the system was not at risk, then economy libertarianism is OK, but humans aren't that mature.

There is such a thing as too much regulation which is just as bad as too little. With everything the happy medium where there is just enough regulation to curb the bad actors without becoming a burden for everyone else needs to be found.

The main problem with the 2008 financial crisis was less about how it happened and more about why.
Sure, there wasn't enough regulation in place, but the real reason it happened, especially with the big banks, is because they knew they had politicians in their pockets and would get bailed out.
If you take away the bail out option, and replace it with not just bank failure, but actual prosecution and jail time for those involved, then you would have had far less pressure to make bad loans.

I'm not a libertarian that thinks ALL regulations are bad and should be removed. No, it's more about govs trying to regulate every possible scenario. That's a losing, reactive, approach.
There will always be bad apples, and the few that can ruin it for everyone. It doesn't matter how many regulations are in place.
So why not try another approach?
You're right, the digital age has sped up the business cycle. But in my opinion, that's even more reason to remove regulations because govs can't keep up with the changes. And it also means the bad apples come and go even faster. A poorly run company can't survive as long because it's reputation will follow it.
And sure, some people will be taken advantage of, but that's happening now. The sooner society learns to be cautious and do their own homework on businesses, the sooner they can expose those bad apples and let them rot.
If a few bad apples can destabilize the entire economy, then it wasn't very stable to begin with.

We agree that too little and too much are both bad, I think we just have different views of where the happy medium resides.

 

[ChooseFreedom]

Denver UBI pilot program
Denver gave people experiencing homelessness $1,000 a month. A year later, nearly half of participants had housing.

That's not Universal Basic Income!
That's welfare.

 

[AnbaricBike]

That's not Universal Basic Income!
That's welfare.

I agree that "pilot" programs should not be called UBI.
Outcomes will not be the same as they would if the recipient(s) know that they will receive the payments in perpetuity. Instead of being able to plan to move it a LCOL area or start a business based on the continuous support, you basically just multiply the payment amount by the term of the program and arrive at some total sum that you'll get. You just can't make the same kind of changes to your life in the pilot scenario.

You also don't have the benefit of everyone else around you having extra money to spend at your bakery or whatever business you might decide to start. This is especially true in economically depressed areas like the Eastern North Carolina towns I drive through all the time.

The results of any of these studies are therefore not representative of what outcomes we might get with a UBI and frankly it's already pretty obvious that if you give someone who is struggling some free money they will be better off.

 

[mrmage]

I agree that "pilot" programs should not be called UBI.
Outcomes will not be the same as they would if the recipient(s) know that they will receive the payments in perpetuity. Instead of being able to plan to move it a LCOL area or start a business based on the continuous support, you basically just multiply the payment amount by the term of the program and arrive at some total sum that you'll get. You just can't make the same kind of changes to your life in the pilot scenario.

You also don't have the benefit of everyone else around you having extra money to spend at your bakery or whatever business you might decide to start. This is especially true in economically depressed areas like the Eastern North Carolina towns I drive through all the time.

The results of any of these studies are therefore not representative of what outcomes we might get with a UBI and frankly it's already pretty obvious that if you give someone who is struggling some free money they will be better off.

It's welfare because the amount is paid to those who need it the most, as opposed to UBI where everyone is paid a fixed amount regardless of need. Personally, I'd prefer a graduated version of the former, but the latter has a better chance of passing.

 

[AnbaricBike]

The other dumb thing about pilot programs is that they don't answer the harder question(s) about UBI. We just get an answer to the question "do people who don't have money need money?" Of course the answer is yes, they do.

What nobody really knows, and what should be "studied" is:
-How do we structure the tax revenues to pay for it?
-How much "new" revenue do we actually need vs. how much will be covered or offset by savings from things like increasing economic activity*, health improvement and reduced incarceration.

It can't just be debt. It has to actually work.

I'm thinking new revenues will come from three things:
-VAT
-Carbon Tax
-Tax on some unit of automated productivity.

A good analog, I think, would be power generation. The VAT could be thought of as baseload like nuclear or coal. The carbon tax is the peaker plant. The automation tax is like solar, wind and batteries.
The VAT will always be there humming along,
but as an effect of the carbon tax, people will use fossil energy less and those revenues will decline. As more and more automation comes online those revenues will rise to take the place of the carbon tax.

I don't have the academic wherewithal to study these things myself but someone does and probably already has. Problem is, you're bound to have biases get involved and it's really complicated to model.

We're gonna have to do something though. Or we're f#&+@d

*Most wealth is locked away in equities and such, not churning around in local economys being taxed.

 

[ChooseFreedom]

The other dumb thing about pilot programs is that they don't answer the harder question(s) about UBI. We just get an answer to the question "do people who don't have money need money?" Of course the answer is yes, they do.

What nobody really knows, and what should be "studied" is:
-How do we structure the tax revenues to pay for it?
-How much "new" revenue do we actually need vs. how much will be covered or offset by savings from things like increasing economic activity*, health improvement and reduced incarceration.

It can't just be debt. It has to actually work.

I'm thinking new revenues will come from three things:
-VAT
-Carbon Tax
-Tax on some unit of automated productivity.

A good analog, I think, would be power generation. The VAT could be thought of as baseload like nuclear or coal. The carbon tax is the peaker plant. The automation tax is like solar, wind and batteries.
The VAT will always be there humming along,
but as an effect of the carbon tax, people will use fossil energy less and those revenues will decline. As more and more automation comes online those revenues will rise to take the place of the carbon tax.

I don't have the academic wherewithal to study these things myself but someone does and probably already has. Problem is, you're bound to have biases get involved and it's really complicated to model.

We're gonna have to do something though. Or we're f#&+@d

*Most wealth is locked away in equities and such, not churning around in local economys being taxed.

I love your willingness to think about the hard questions and not just stop at the surface like most do.

In regards to the power generation, new nuclear is:
a) 10-15+ yrs away in the US unfortunately, and,
b) doesn't really fall under a carbon tax, if you're trying to eventually phase out fossil fuels.
Nuclear doesn't use them in the traditional way, nor at the volume.
And as the very best possible form of energy production, I don't think we want to do any more to discourage the development of new nuclear power plants. China is already a decade ahead of us in developing new, safer, nuclear plants. We're already way behind.
Most of Europe has cut off their own feet by decommissioning much of their nuclear capacity, making them even more reliant on Russian/MidEast fossil fuels.

100% agree it cannot just be more fiat debt to pay for a UBI.
And IMO, that's the only way it would even be feasible. Because the shear amount of money needed to fund a UBI, at scale, is astronomical. And such a major increase in any/all taxes will:
1) Be very unpopular to all paying for it, which in turn means,
2) they'll be very unhappy with their politicians, who won't want to be in favor of anything that loses them elections.

So on a state-by-state level, you could see this massive unintended consequence, where many of the corporations in those states will leave to find more tax-friendly states to reside. And at the same time, you'll see a wave of low income/no income people moving to that state. So more people, mostly un/under-skilled, and less jobs. It's a disaster in the making.

Now, at the federal level, if they wanted to try and do a UBI nationwide, you'd see similar unintended consequences. Large employer corporations would simply move overseas, and we'd have a flood of immigrants (even more than now).
So then, the gov would be forced to either, put strict qualifiers on the UBI, which kinda defeats the purpose, doesn't it?
Or print so much new fiat, that they trigger hyper-inflation, devaluing the USD, which would collapse the entire global market because the USD is still currently the global standard for fiat debt.

Listen, I'm not trying to be an all gloom and doom conspiracy theorist. These scenarios are not conspiracies.
They are legitimate theories that every gov economist has studied. They've run the numbers.
That's why we don't already have a UBI, and we never will.
They already know the outcomes. They've run the scenarios time and time again (thank you War Games).

All of the short-term benefits to a UBI are completely wiped out by the long-term effects.
It doesn't matter if a homeless person can afford housing, start a business, and better themselves quickly, if all of that is then destroyed by either taxes, or hyper-inflation making their fiat worthless. It's all leading to Socialist/Communist solutions.
(Side note: Can we please stop using homeless as an example for UBI?! They're not homeless from lack of money. The vast majority of them, not all, but most, have mental health issues and/or addiction issues. They can't keep money, so giving them more doesn't fix their problems. If you want to throw money at a problem, why not target improving the mental healthcare options in this country? That would go so much farther toward lessening homelessness.)

There is no silver bullet for the mess we're in.
Not until we fix the money itself AT THE SOURCE!

 

[AnbaricBike]

Can't move over seas to avoid a VAT unless you just decide to stop marketing your products in a country that has one and many countries already do. In fact, corporation won't pay the VAT. Consumers will, it just gets passed right along. The more they spend, the more they pay. The higher income/wealth population will be net payers in a VAT UBI arrangement. It fulfills the aspirations of all the negative income tax proponents but it works even better because it isn't based on how much income you earn, but how much you spend. So billionaires who build rockets or buy yachts will pay into the VAT where they may easily avoid having taxable income. It's ok to be a billionaire btw. Freedom!

The nuclear thing was part of an analogy regarding various revenue streams, not about whether there would be any carbon tax revenue from such category of generation. That some categories of generation would be subject to a carbon tax is incidental to the analogy. Though if it had enough teeth, a carbon tax would certainly further erode the economics of coal fired generation in favor of nuclear. It's an example of properly pricing a negative externality to allow the market to weigh the cost accurately. I alluded to this in an earlier post.

 

[ChooseFreedom]

Can't move over seas to avoid a VAT unless you just decide to stop marketing your products in a country that has one and many countries already do. In fact, corporation won't pay the VAT. Consumers will, it just gets passed right along. The more they spend, the more they pay. The higher income/wealth population will be net payers in a VAT UBI arrangement. It fulfills the aspirations of all the negative income tax proponents but it works even better because it isn't based on how much income you earn, but how much you spend. So billionaires who build rockets or buy yachts will pay into the VAT where they may easily avoid having taxable income. It's ok to be a billionaire btw. Freedom!

"In fact, corporation(s) won't pay the VAT. Consumers will, it just gets passed right along."
So right off the bat, you're increasing inflation for everyone. Not a great start.
And then, in an economy built on debt and the absolute necessity of adding more debt, you're going to discourage spending?
(Which is most people's reasoning for why deflation is bad. (not true, BTW))

A UBI funded by taxing spenders/Corps, who then pass it on to the consumers that the very UBI is trying to help.
Am I getting that right? How exactly is that a good idea? I mean, it's good if you're a Communist dictator.

 

[AnbaricBike]

Giving the bottom ~80% of the population free money* is not going to discourage spending.
Plus, there would be many things excluded from the VAT the same way groceries and other necessities are excluded from sales tax. It's still going to be a marketplace where corporations compete with each other on price. I suppose they could all collude to uniformly raise the price of everything but that would be sort of difficult to pull off.

Inflation results from scarcity. I'm trying to say that it doesn't have to be that way. Look ahead to the world of super-abundant sustainable energy and automated everything. The only limit to the size of an economy will be the raw resources that the goods are actually made from (and the landfill space to hide everything when it gets thrown away). Then look at how the rewards of such abundance will be distributed under the current system. We have to do something.

*This % may roughly be the point where the shift from net payer to net recipient occurs.