Guaranteed Income as Quantitative Easing
 

Fact one: Top Tenth of 1 Percenters Reaps All the Riches (Bloomberg)

Fact two: What they are doing with all that money gives us the economy we've got. Anemic growth and low-wage jobs are it, going forward. The money goes into bidding up assets (the stock market) and government bonds (buying guaranteed income). To a large degree, the money becomes static, tied up in non-productive assets, and economically ineffective.

Fact three: Government keeps incurring debt because it can't tax enough to cover current needs. It can't tax enough because the political power of the top .1% prevents it. They don't want the government taking their money, when instead they can loan it to the government and get interest on it forever.

Fact four: desperate to promote increased economic growth, the Federal Reserve has undertaken a program of 'quantitative easing,' in which large amounts of money are created and made available as reserves to commercial banks, enabling them to increase loans and investment. The stimulative results of this program have been disappointing.

Fact five: increased demand from the consumer sector would be the most certain factor to produce increased economic growth. However, downward pressure on employment and wages from globalization and automation precludes robust earnings growth in the consumer sector. This downward-pressure on the consumer sector will only increase in the future.

Fact six: massive government support for consumer demand, in the form of guaranteed annual income for consumers, has bee proposed as a method of stimulating the economy and restoring satisfactory rates of growth. However, the cost is deemed too great, as it will remain politically impossible to raise taxes on the high-income sector to fund a 'transfer' of income. Funding with debt would likewise lead to a burgeoning debt that will be too expensive to service.

Proposal: end quantitative easing program for creation of bank reserves, and instead fund guaranteed annual incomes by creating the necessary money. As long as this funds creation is kept within necessary bounds, it will not result in hyper-inflation, even as the current quantitative-easing program has not proved to be inflationary. Like current quantitative easing, it will simply counterbalance the deflationary effect of the withdrawal of huge sums into the relatively economically-inert cash hordes of super-weathly individuals and their corporations.

This proposal should enjoy support from all sectors; the super-wealthy will both like that it does not require taxation of their income, and be gratified as, over time, increased growth adds multiple zeros the the number-scores that denote their status. Because the program will allow them to continue to 'reap all the riches,' and indeed, counts on it to provide the sink that counterbalances the money-creation. And of course, it will also provide the benefit of a better life to those no longer necessary to the economy.

That's not what they say on Fox News. :p


Carl

I don't care what anybody says, due to dramatic increases in worker productivity we have a surplus of labor.

Robotics is going to make this surplus even more acute.

It's a wet dream for employers because they can dictate the terms of employment they want and the poor desperate for a job masses have to eat whatever shit sandwich they are offered.

The way I see it we have two options.

One is to create a shitload of non-jobs with the government.

The other is to pay people not to work, like we pay farmers not to grow shit in order to avoid surpluses.

I favor paying people not to work.

That's what I see the guaranteed income to be.

I wouldn't know.

Curious: what do you think will happen to the labor surplus and high productivity when we start paying people not to work?

Also, assuming this....um...interesting economic theory is put into place, and somehow supply meets demand in the labor market, how do you convince all those folks who are being paid not to work that they actually need to go back to work?

You would get enough for basic necessities by not working. You work for the luxuries and frills.

Type A's like you will be happy to work to get more material stuff.

Type B's like me will be happy to just chill on the couch.

Which is what I have been doing for the past 9 years. :)

Place a tax on all the jobs replaced by automation. To be used in retraining or maintaining those displaced.
Go to a thee day and a half day workweek and increase vacation time. In order to employ more people.



Barney

Not a bad idea.

When I was a freshman in 1965 our economics 101 instructor told us that due to increases in worker productivity we would only have to work 20 hours a week by the time we were his age.

Well productivity kept increasing, but workers share of the proceeds didn't. The mega rich kept it all for themselves.

I place part of the reason on the reduction of the top income tax bracket from 90% down to what it is today. When it was 90% the rich had an incentive to share the wealth because if they didn't the government was going to take 90% of it. Today that's not true, so they keep it all for themselves.

...and watch those jobs go somewhere else where there is no tax on automation? It might get harder to tax somethibg when it disappears over time.

But since you're not producing anything of value that can be taxed, it won't take long for my Type A ability to purchase luxuries to be diminished so that the economy can continue to provide your Type B basic necessities. After a while we type A's will want you to be productive, because the economy can't afford you anymore. Couple that with some of my fellow type A's who might find the type B lifestyle gradually more appealing as time goes on, and you'll run out of enough type A's to keep things funded.

You are assuming some things here. One is that the guaranteed wage has to be paid for with taxes. But my proposal is to pay for it with created money, as is done with quantitative easing.

Second, you assume that if people don't mostly all work, we won't have enough stuff. That is exactly the economic earthquake now shaking under your very feet--the change away from an economy of scarcity, brought to you by robotics and AI. Mass consumption will not be funded by wages that no one intends to pay because the workers are NOT NEEDED for production. We either maintain the ability to consume by other means, or just let a bunch of people pick garbage at the dumps.

Sorry, not allowed. As whell points out, the .01% have no intention to pay taxes, or allow taxes on enterprise that cut into their 'earnings.' That is what makes my plan to finance consumption with created money necessary. Fortunately, the .01%'s determination to horde maximum profits means we won't have to contend with hyper-inflation when we do this.

Being a Type B, I'm not going to expend any of my own effort to reply to you.

Instead I'll go with "What Don said". :)

http://www.politicalchat.org/showpos...7&postcount=11

This plan is imminently doable because the rich will come around to loving it. Their taxes do not go up, all the profits still go to them, and there will be more and more profits because with demand restored the economy will take off like a rocket! They will get richer than they ever dreamed!

I've been skating like that for the past 9 years.

40 years if you count the 31 years I spent "working" for the government.

My contribution to society has been pumping my paychecks and then my pension and social security checks back into the economy. The worker bees seem to like it when I do that. :)

No guillotines? There has to be guillotines. ;)

The six hour workday works in Europe. What about America?

Labor force...sick less, work harder, lower stress.

https://www.bloomberg.com/news/artic...-about-america

Oh no, no guillotines. We don't lop off the heads of the rich. First of all it would be very hard, if they find out you've got that in mind, they will fight. They can hire henchmen who will disappear you, or take many other sorts of unpleasant measures. They can be a real tough bunch, with lots of resources.

And there's no need to get into that big hairy fight. It's not like we have to kill them and take their money. We just make more.

The beauty of my scheme is we don't have to turn society upside down with a bloody revolution. We just make one relatively easy change, and then things just roll along as they are, except lots of people are out of privation, and the economy perks up a lot.

Uncontrolled and irresponsible breeding are the cause of the labor surplus. The United states has doubled it's population in the past 65 years.

We need to strictly control breeding. Having babies is NOT a right guaranteed by the constitution.

I agree.

Tax that $hit too! If a company outsources make them pay for the workers they used then tossed away.



Barney

That's a whole other subject but I agree with you.

Both the planet and the US are already overpopulated.

We are well over 300 million right here in the US. I don't know what our max should be for a sustainable existence, but I would guess maybe half that?

I like the Game of Thrones style Stake burnings myself.

But the tree huggers would probably get all over my ass about the number of stakes I was using. :D

Well, we at least agree that QE was an exercise in printing money, but it was always meant to be short term. You guys are proposing turning it into an economic fixture and a lifestyle choice.

Yes if people don't work, we wont have enough stuff, even the basics like clothing food and water. Since the marketplace of folks who can afford non-essentials shrinks, all of the Type A folks would be likely be required to work in jobs that support the manufacturing and delivery of essentilals. The economy shrinks, the money supply shrinks as the economy shrinks, and you'd be forced to turn to taxation to support paying folks not to work.

Fine. Then the company moves its operations to a country where the tax structure is less onerous.

We could do with a little hyperinflation. It would help out all these people that are upside down on their mortgages. The banks would hate it. :)

I'm of a mind of a special business tax assessed on businesses who pay their employees so little that those employees need food stamps and other safety net services. Those costs along with an administration penalty should be assessed on those businesses. I'd wager they start paying a living wage pretty damned fast.

That's where the guillotines, or my stake burning comes in. :)

You've got the whole economics thing backwards. The economy doesn't shrink, it expands because more consumers are spending more money. You're assuming everyone who's now making 40 or 60K a year is going to quit for maybe 20K? Keep in mind this guarantee doesn't do anything to change the economy and people's costs structure. If they have a mortgage, they still have a mortgage. I expect the 20K* guarantee will mostly go to top up people whose unemployment has run out and can't get that much at the part time gigs they are stuck with, or who are stuck on minimun social security, or such like.

*20 K just a notional guess at how much. Maybe less, maybe more.

Oh no! The anti children noise.

Our capitalist system is nothing more than a giant pyramid scheme, one that is playing out to the end as we sit here. More children will only bring more hunger and suffering.

We can't take care of what we have now. So we breed more?

Someone explain please how consumer economy prosperity works without an ultimately unsustainable expanding population.

How are folks spending more money? That makes no sense.

In your scenario you've created a "fixed class" who have money to buy only essentials. A number of folks in that newly created class used to buy more than essentials, even if they did it on shakey credit. Now that their income is fixed and they have no opportunity to earn more, they won't even be able to get shakey credit. Step one to a shrinking economy.

Since you've removed buyers from the marketplace of anything more than "essentials", businesses that manufacture, sell, make parts for, make accessories for, provide services for, etc., non-essential goods and services find themselves chasing after fewer buyers. Supply and demand: price for non-essentials starts to fall, businesses that can't compete lay off workers or shut down. Step two to a shrinking economy.

Finding fewer job opportunities in the businesses that manufacture, sell, make parts for, make accessories for, provide services for, etc., non-essential goods and services, you've created additional supply of workers. Supply and demand: an abundance of labor drives down the cost of labor since more people are competing for few jobs. Step three to a shrinking economy.

Some of those workers will find jobs in businesses that manufacture essentials, albeit at lower wages, or the same wage with few opportunities to see their incomes rise. Step 4 to a shrinking economy.

And yes, some of those workers will make the decision that its easier to get by than beat their heads against the wall in the job market, and opt for the "fixed class". Step 5 to a shrinking economy.

Finally, fewer productive workers supporting those in the fixed class, and a eventually the shrinking money supply and shrinking tax base will force the gov't to raise taxes - whether on individuals or business - to support the fixed class. At this point, not only do we have Step 6 to a shrinking economy, but since we're pulling additional capital out of the productive economy for tax, return to Step One. This is called an economic death spiral.

Immigration, legal or otherwise.

You describe some pitfalls that the program would have to be designed to avoid, but to a large extent you just haven't gotten you mind around the one really radical aspect, and it's implications. I refer to the funding source, which is created money, not tax money.

This means any reduction in tax receipts (which will be not so large, since the program targets people who don't pay income taxes anyway) will be counterbalanced by a reduction in current tax-funded assistance for the poor. It also means people like you don't have to go around fuming that your tax dollars are supporting 'deadbeats.'

You think there's no room for increase in consumption at the low end, with people scraping by now on incomes of 12K a year?

I'm fine with there being provisions that encourage supplementing the support with wages. The goal is a large net increase in consumer buying power, stimulating economic growth, despite any marginal abandonment of work. My guess is most work-abandoners will be persons with no opportunity to make a living wage in the first place, so there will be no reduction in consumer spending for 'non-essentials.' Those people weren't buying new cars or central air conditioners anyway.

I'm also very fine with starting slow on this. Experiment, see if your assumptions or mine are more borne out in practice. Change things as necessary as you learn.

I like this idea Don.

Actually the idea that Don has presented is a damned good one and just might work.

And that's what terrifies you.

But you still should address his argument re shrinking economy.

It can't and the consequences are dire.

Like I said, I'm a type B slacker.

So I'll let donquixote do all the work while I kick back and take snarky little potshots at Whell. :)