Comment by tdrgabi a day ago
I'm sorry if this has been answered many times in the past. I didn't find the answer anywhere else.
If everyone gets 1000$ extra, why wouldn't rent increase by close to 1000$. If you're not willing to pay it, someone will. I don't understand how giving all of us X amount of dollars would help. The number of goods are the same, they would become more expensive through inflation.
The current US federal tax system already is progressive in this way. Your first $X are taxed at 0%, the next $Y at 10%, etc. up to 37%. Your UBI in your formula is basically the standard deduction in the current system. But you still need to work or invest to make the first $X which are federal tax-free.
> money laundering
Just for the sake of precise communication: it’s tax evasion.
US income tax is already progressive and therefore increases monotinically with income. There's no reason to believe UBI and increased income tax brackets would result in a simpler tax system or removal of the various carve-outs - that's a totally separate issue and a poltical landmine.
So, when hundreds of millions of people got checks because covid, that wasn't inflationary? Sure feels like it was. UBI is the same thing.
You're not listening. During Covid, we did not do what the GP said. So no, UBI (implemented the way the GP said) is not the same thing.
You're also not listening. It won't work. There is no reality where it works. We all know this and pretend otherwise.
Everyone on this forum with hundreds of thousands to millions of dollars in the bank will just stop working. Who pays for the UBI?
It just will not work, there is no path forward where it can.
> why wouldn't rent increase by close to 1000$.
prices are dependent on demand/supply rather than how much money people have.
It might increase rental prices, but the people that are reliant on UBI tend to be on some sort of rent control mechanism.
The biggest hurdle though is that people getting jealous of "money for nothing" despite interest being literally that.
That doesn't seem like a full explanation. Sure, prices are tied to supply and demand. But demand is tied to how much money people have, so that just brings you right back to the original question.
Housing supply and demand isn't static. With UBI the need to live close to employment opportunities decreases, opening up more supply in areas that are currently less attractive and decreasing demand in other areas.
Furthermore we still don't know how people will react to UBI once they feel it is universal and permanent. If you're busting your ass to take home $1500 a month today, and then you get $1500 a month UBI, will you keep working just as much and take home $3000 a month, will you cut down on work and aim for $2200 a month, or will you keep living on $1500 a month and just chill all day. Depending on what choices people make, most people might not end up with that much more money.
> prices are dependent on demand/supply rather than how much money people have ... [UBI] might increase rental prices
Which is it? You can't have it both ways. The right answer is that if you print new money prices go up. If UBI is funded by taxes it's not a UBI (some people will end up giving back more in taxes than they "receive" in UBI, so it's net negative for them). If it's funded by borrowing it's not sustainable. If it's funded by money printing then prices will rise and the effect is eliminated.
> the people that are reliant on UBI tend to be on some sort of rent control mechanism
The argument for UBI is it lets you get rid of other means tested welfare systems. If you're going to introduce a category of people who really need UBI vs other people who don't really need it, and have special rules for the former, it's just a rebranded welfare system and those already exist.
I guess the theory, really, is that it's funded by corporate taxes. The triad of key taxes is income, sales/VAT and corporate. Income, as you say, is out, so is sales (since it's paid by end consumers) so you're left with corporate. And I guess that's kind of what would happen if one day AI takes over. There will be masses of unemployable people, farms and mines and factories ran by computers, and we will all be funded by this.
Until that utopia comes around, I don't see any way to fund UBI, as you say.
Taxes are all paid by people, ultimately, because it's people whose labor creates wealth. Corporate tax isn't some pool of money that would otherwise sit around not doing anything if not levied, as all profits eventually get paid out to individuals in one form or another. Corporate taxes are popular partly because people don't realize that (same reason governments love printing money), and partly because they're nice big static objects that find it harder to evade the tax man or move around.
AI doesn't change anything, no more than the internal combustion engine or computers did. There will still be plenty of jobs. AI has been around a few years now and hardly even impacted the job market! The effect will be like computers themselves, an uplift in the general welfare but give it 50 years and economists will be asking "where was the AI productivity boost?" just like they do with computers today.
What you find with UBI discussions is that the rationale for why it's going to be necessary constantly changes, and is always based on very dubious suppositions and extrapolations. UBI seems to be just a more respectable sounding version of /r/antiwork, when you boil it down.
> If UBI is funded by taxes it's not a UBI (some people will end up giving back more in taxes than they "receive" in UBI, so it's net negative for them)
This is plainly nonsense. UBI means only one thing: you get a check for a certain guaranteed amount no matter what. It doesn't mean that the amount on this check is necessarily smaller than other taxes due. And yes, it does mean that, in effect, some people will end up paying into the system while others will receive money from it. That is precisely the intent - to provide a baseline for the lower end of the income spectrum such that nobody is ever below it.
This applies less for basic human needs like a roof over the head, especially in a supply constrained market like we've been in for quite some time in many places around the world
Rental supply is fixed in the short to medium term. Rental prices are wholly decided by demand on that timescale. Giving everyone money would obviously increase demand
> prices are dependent on demand/supply rather than how much money people have.
That's not the full story of how the economics of demand work.
Demand increases as the money supply increases, but supply remains constant. This is inflation. More dollars chasing the same basket of goods.
Another way to look at it is as the money supply increases, the cost of money and the cost to borrow decreases. This leads to an increased desire to spend. It's an aggregate demand increase across businesses and consumers.
We recently saw the impact of this when the money supply was increased during Covid. It led to one of the largest jumps in inflation in our lifetimes.
> Another way to look at it is as the money supply increases, the cost of money and the cost to borrow decreases.
I'm going to say something radical here, so do hear me out. any bank that loans money, is increasing the money supply. the more banks lend, the more money is printed. There is no fixed supply of virtual money. We don't really know how much actual dollars there are out there. (ignoring eurodollars)
Banks profits are literally because they are printing money. The very act of loaning out means that the 1 dollar bill you deposited with become 1.8, as its loaned out again to someone else, who then repays it, with interest.
<<end radicalism>>
Sure we had QE, we had covid cash, but the problem with using covid as an example of "giving money to everyone causes inflation" is that its difficult to distinguish from supply chain, tariffs, stimulus and $other.
the other problem is that stimulus was given to companies as well.
but the argument about not increasing the money supply is difficult to argue unless you are a bank, because that's their job, not the government's.
so, the point is, the economics of demand is an approximate model, rather than a formula. Its based on the collective perceived value of a good or service, rather than a strict supply/demand. sure its a close approximation, but not an accurate one.
Housing follows supply/demand curves more than most other goods do. Most other goods have elastic supply -- when demand for widgets goes up factories start producing more widgets so the price follows the commodity rule "price = marginal cost" rather than classical supply and demand.
I think you're referring to the Winston Churchill's "on Land Monopoly".
I don't remember exact details and may miss something, but the work is very short so please check it. In short, he described, I believe, a real situation when a major of people in a town got extra extra money because a toll on the bridge to the fabric was eliminated. But in a short time the town's rental cost grew up by exactly this amount.
Because presumably the money doesn’t come from increasing the money supply but rather by the redirection of tax revenue.
FWIW we have had a form of UBI in the USA for decades: the earned income tax credit, which for many people amounts to a significant subsidy over and above their tax burden. Nobody stopped working, and prices didn’t go up.
>FWIW we have had a form of UBI in the USA for decades: the earned income tax credit, which for many people amounts to a significant subsidy over and above their tax burden
How is a tax credit that you only get if you're working, and scales up depending on how much you earn (to an extent) an "universal" basic income?
>Nobody stopped working, and prices didn’t go up.
Nobody stopped working because you had to work to get the tax credit.
I’ve always seen UBI as part of a post-scarcity sci-fi future. Once the robots run the farms and deliver the food and build the buildings and so on, and there just isn’t enough work to go around for humans, of course the fruits of this productivity should be shared with the wider population (both morally and to prevent uprisings). Sure, in this sci-fi future you can live in your basic pod and eat basic food for free or you can work a little or a lot to try to upgrade your situation.
But I don’t think we’re there yet. We do have a lot of industries that rely on shit jobs that people would rather not do. If we, IMHO prematurely, try to institute a UBI now we’d be in for a world of pain along the way as the prices of basic services skyrocket without robots being ready to step in.
“Of course”
But, that’s not where we are headed.
Instead, automation will make money irrelevant in the “we don’t need to make money because money ultimately only can be used to pay wages, and nothing else” way.
Since automation means you don’t pay wages anymore, you only need natural resources and energy.
When corporations no longer see (external) money as useful, but only as a way to apportion resources internally to stakeholders, that makes everyone outside of that system into ants.
It’s grey goo, just on a macroscopic scale.
If you make the "basic pod" a tent, wealthy countries could probably afford this sci-fi future today. But "enough money to live like a homeless person without having to beg or steal" doesn't sound so great as an aspirational goal, does it?
If the "basic pod" is supposed to be something more durable, probably the first step would have to be building enough homeless shelters for all the UBI recipients without another source of income.
Yes, I'm saying that wealthy countries can definitely afford the "basic food" part of the "live in your basic pod and eat basic food" future, but the "basic pods" are more uncertain. If there's not enough money to build enough homeless shelters to house everyone, how could there be enough money to pay for UBI high enough that everyone can afford a roof over their head?
Wealthy countries could afford this even with proper housing, food etc (not fancy, but not tent/slop either). Even not so wealthy ones could afford something. You have to go back all the way to hunter/gatherer societies to have a situation where each person's productive labor only generates enough wealth to feed themselves. In any modern industrial society, the productivity is long past the point where each person produces enough to satisfy multiple people's needs, in aggregate. The only problem is that most of this generated wealth is then directed to satisfy the whims of the very few people at the top who get to collect economic rent from the rest of us.
> of course the fruits of this productivity should be shared with the wider population
we're quickly getting closer to that stage with the promises of AI-increased productivity; and yet, there is not the faintest signal from those building and profiting from AI that the fruits of the increased productivity will be shared; quite to the contrary it will be captured almost entirely by shareholders -- why are investors pouring hundreds of $B into AI otherwise?
Presumably because one of the two things are true:
- there's competition, and so if it's possible to rent for less than 1000-eps and still profit, someone will
- there's no competition, which is a cartel, the kind of thing that civilized societies ought to frown upon
Because you can buy anything with that $1000. Some people will buy clothes, others a new computer, others will travel etc. The demand for any one specific thing (apples, rent, netflix, etc.) will only increase a tiny fraction.
Rent is expensive because all the jobs are in expensive metros, so people are forced to move there. With UBI the idea is that some fraction of people won't have to work (or can do part time remote work), and therefore can move to a random town in North Dakota with cheap rent.
Other cool things cities have is police stations and hospitals, but I guess since there's no jobs you just get treated by a robot in the woods?
But then if people are creating art or working on their theater play or whatever, they'll want other people to show it too. I don't see cities existing only because of jobs.
UBI will lower rent.
The most common criticism of UBI is that landlords will raise their prices to capture all of the gains. I disagree, I believe that a properly implemented UBI will lower rent prices.
Rent rises quickly because both supply and demand are inelastic and renters are relatively price-insensitive. Any market with relatively fixed supply and demand experiences large and quick price changes. The most prominent example is oil -- a small change in supply causes a large change in price because demand is inelastic; people don't stop buying gas just because the price went up. But oil experiences quick price changes in both directions. Rent only seems to increase.
Housing is a necessity. If there are more families needing housing than there are houses, families will pay as much as they are able to ensure they're not the ones without housing. So when supply exceeds demand, price rises rapidly. The converse is not true. Most landlords are not as desparate to rent their dwellings. When supply exceeds demand they have the ability to say no, they can and do choose to leave the dwelling empty rather than accept a lower price.
But prices do eventually come down when supply exceeds demand. For example, the rent for 1 bedroom apartments in Toronto is down 10% in the last 12 months.
If implemented poorly UBI could definitely be inflationary. If UBI is paid for by money printing rather than through taxes it will be inflationary. But if it doesn't increase the money supply and is constant across the country UBI will lower rents rather than raising them.
Why? Becuase it makes demand elastic. Right now people are moving to the expensive cities because that's where the jobs are. They don't really have a choice. UBI gives them a choice. You can move to San Francisco and work 2 jobs to be able to afford rent, or you can move to West Virginia and pay your rent out of UBI and not need a job. Some people are going to do that. Not many, but likely enough.
There's a saying. "100 supply, 101 demand; price goes up. 100 supply, 99 demand, price goes down". Small changes on the margin can have a large impact on prices.
Keep in mind that any UBI that is fully tax supported is going to necessarily be very miserly. US average income if $40K. So if you set tax rates at 100% and spent every penny on UBI then UBI could be $40K. Obviously neither assumption is going to be true. Tax rates will have to be significantly less than 100%, and we'll spend money on our military, etc. A UBI of more than $1000/month seems highly unlikely without money printing. And there are basically only three ways you can live on $1000/month: Move to a low cost of living region like West Virgina, live on the street or live in highly shared accomodation. All three of these scenarios reduce housing demand in expensive cities rather than lower it.
And how would UBI change that? The kind of people who are willing to break the law to avoid paying taxes are already breaking the law to avoid paying taxes.
You're reiterating my "UBI will be miserly" point. Yes, if taxes were set at 100% to support a $40k/year UBI, I would quit my six figure job to make $10/hour cutting grass under the table. OTOH, if my taxes went up 25% to support a $10K/year UBI, I wouldn't.
I don’t think _everyone_ gets an extra $1,000, just those at the bottom. I’m pretty sure there are different ways of implementing UBI, and some of them only provide a certain amount to the lower income folks. So if you are making plenty of money, whatever plenty means in your location and context, you would not receive any additional income.
The point of it being universal is that you still have a good incentive to work, since every dollar earned is a dollar more in your pocket (initially, before you reach the income level where you need to pay taxes).
Compare that to non-universal social help, where every dollar earned gets subtracted from your social pay, so the first $1000 you earn are effectively taxed 100%, creating an incentive to not start working.
That's not UBI (the universal part), that's state subsidies, which already exist today all over the world.
- If more money is available for rents (increase demand), more people will build apartments to get that money (increase supply). This will introduce competition and keep rents reasonable. This won't work where housing supply is artificially limited.
- I might live with a relative instead of paying $1000 extra, and can now afford the car to get to and from my job instead of living with them without a job or deepending on them for a ride.
- I might put that into a mortgage payment instead of rent. UBI if done correctly is always there so it's something a bank could count on as a reliable asset.
- "The number of goods are the same, they would become more expensive through inflation" - If there is more money to buy goods, people will find a way to produce more goods, if allowed. If people aren't producing more goods then your problem is there - transportation to markets could be an issue.
With UBI and a flat tax, you end up paying:
tax_rate * income - ubi
to the government. Tax rate has to go up for UBI to be revenue neutral. So, it is not inflationary. It just provides safety net for low income people.
Note that this formula would greatly simplify the tax code (especially if income included capital gains and maybe excluded donations), and is also actually progressive (your effective tax rate increases monotonically with income), unlike the current US system.