It's the inflation feedback loop that I think most people don't understand.
Most people I've talked to about it understand that there will be taxes that "pay for" the distribution. But they haven't thought through to the next step.
What happens when everyone has 12,000 more dollars per year?
Prices will go up by 12,000!
Personally, I'd be fine with a neutral shift from the current welfare programs to a universal distribution system. But the numbers there are more like 2000-3000 per individual instead of 12000 per adult.
Thanks for the feedback @neal.pal! You know, Milton Friedman advocated something called the negative income tax but I haven't read into it enough to know what potential problems may arise with that.
We do have a negative income tax for a large portion of the population though. If you are married with 3 kids under 17, you don't pay income tax below about 75k USD.
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Hello @bahh, and thank you for the feedback! Usually, places that try the UBI end up halting the program because it's not sustainable. In the case of Alaska, the permanent fund corporation is owned by the state and funded by oil revenues, therefore, they can afford to pay it out with no strings attached. As far as I know, they're not compensating for the loss with a statewide VAT either. So, that lets you know they have the money to do this in Alaska. However, when a nation doesn't have the money and has to impose a tax to make it so, then all those taxes are immediately passed down to the consumer at the cash register. I strongly question the feasibility of the program. Additionally, taxing people money to give them money doesn't make sense. Not only that, it opens the door for them to do the same with health care. They'll give people more money "free money" to pay for "free single-payer health care" and then they'll jack up the VAT even higher than before. As far as how people spend the money, I don't have any judgments about that, other than the fact it's stolen money just like all other social programs.
In this case, the VAT that they will use to either fund or partially fund the UBI is what creates instant inflation in the price of goods and services. Take the UK as an example. When you add a 20% VAT the good or service is immediately transformed at the cash register from £100 to £120. When you figure in every good or service this happens to; things get out of control very quickly.
If a salesman came to your door and offered you $100.00 free every month and all you had to do was sign up for a book club membership which costs $120.00 a month and as a bonus, you got one free book a month up to 10 dollars in value. Then regardless of the fact that you're getting $100.00 in "free money" and one "free book" every month; the truth of the matter is the money ain't free, the book ain't free, and you're out an additional $10.00 a month. With the $120.00 monthly fee, you're paying for it all, and this includes the net loss.
This doesn't even touch on traditional inflation; so for example, let's say the VAT doesn't cover the entire cost of the spending, perhaps the government will subsidize a percentage of the difference for the first 3 years to get everyone on board before they incrementally start jacking up the percent of the VAT to a realistic number that will cover the entire program.
This means the portion government funded which wasn't covered by the VAT will have been covered with new money. Every time government does a spending bill they're borrowing new money from the fed, and that inflates the supply of the currency which eventually trickles down to the prices of goods and services.
The inflation is why you can't get a coke for a nickel anymore like it was for coke's first 70 years of existence, the value of a dollar goes down, and therefore the prices of goods and services go up, the price differential is passed along to the consumer. I don't know how the URV or the real would relate to the value of the federal reserve note. It doesn't seem like a solid comparison, but I hear things aren't going so well in Brazil. The socialism they engaged in set them back quite a bit.
The UBI is like trying to tap into free energy, we all want to believe it's possible, but until we see a working model that doesn't require adding water to get free water, then we'd be foolish to do so at the peril of civilization as we know it.
It's the inflation feedback loop that I think most people don't understand.
Most people I've talked to about it understand that there will be taxes that "pay for" the distribution. But they haven't thought through to the next step.
What happens when everyone has 12,000 more dollars per year?
Prices will go up by 12,000!
Personally, I'd be fine with a neutral shift from the current welfare programs to a universal distribution system. But the numbers there are more like 2000-3000 per individual instead of 12000 per adult.
Thanks for the feedback @neal.pal! You know, Milton Friedman advocated something called the negative income tax but I haven't read into it enough to know what potential problems may arise with that.
Yeah I'm not well-versed on Friedman.
We do have a negative income tax for a large portion of the population though. If you are married with 3 kids under 17, you don't pay income tax below about 75k USD.
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Hello @bahh, and thank you for the feedback! Usually, places that try the UBI end up halting the program because it's not sustainable. In the case of Alaska, the permanent fund corporation is owned by the state and funded by oil revenues, therefore, they can afford to pay it out with no strings attached. As far as I know, they're not compensating for the loss with a statewide VAT either. So, that lets you know they have the money to do this in Alaska. However, when a nation doesn't have the money and has to impose a tax to make it so, then all those taxes are immediately passed down to the consumer at the cash register. I strongly question the feasibility of the program. Additionally, taxing people money to give them money doesn't make sense. Not only that, it opens the door for them to do the same with health care. They'll give people more money "free money" to pay for "free single-payer health care" and then they'll jack up the VAT even higher than before. As far as how people spend the money, I don't have any judgments about that, other than the fact it's stolen money just like all other social programs.
In this case, the VAT that they will use to either fund or partially fund the UBI is what creates instant inflation in the price of goods and services. Take the UK as an example. When you add a 20% VAT the good or service is immediately transformed at the cash register from £100 to £120. When you figure in every good or service this happens to; things get out of control very quickly.
If a salesman came to your door and offered you $100.00 free every month and all you had to do was sign up for a book club membership which costs $120.00 a month and as a bonus, you got one free book a month up to 10 dollars in value. Then regardless of the fact that you're getting $100.00 in "free money" and one "free book" every month; the truth of the matter is the money ain't free, the book ain't free, and you're out an additional $10.00 a month. With the $120.00 monthly fee, you're paying for it all, and this includes the net loss.
This doesn't even touch on traditional inflation; so for example, let's say the VAT doesn't cover the entire cost of the spending, perhaps the government will subsidize a percentage of the difference for the first 3 years to get everyone on board before they incrementally start jacking up the percent of the VAT to a realistic number that will cover the entire program.
This means the portion government funded which wasn't covered by the VAT will have been covered with new money. Every time government does a spending bill they're borrowing new money from the fed, and that inflates the supply of the currency which eventually trickles down to the prices of goods and services.
The inflation is why you can't get a coke for a nickel anymore like it was for coke's first 70 years of existence, the value of a dollar goes down, and therefore the prices of goods and services go up, the price differential is passed along to the consumer. I don't know how the URV or the real would relate to the value of the federal reserve note. It doesn't seem like a solid comparison, but I hear things aren't going so well in Brazil. The socialism they engaged in set them back quite a bit.
The UBI is like trying to tap into free energy, we all want to believe it's possible, but until we see a working model that doesn't require adding water to get free water, then we'd be foolish to do so at the peril of civilization as we know it.