Guaranteed Income as Quantitative Easing

[whell]

Originally Posted by Tom Joad

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.

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.

[donquixote99]

Originally Posted by whell

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.

[whell]

Originally Posted by donquixote99

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.

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.

Originally Posted by donquixote99

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.

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.

[donquixote99]

Originally Posted by whell

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.

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.

[whell]

Originally Posted by donquixote99

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.

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.

[donquixote99]

Originally Posted by whell

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.

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.

[Tom Joad]

Originally Posted by donquixote99

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.

[whell]

Originally Posted by donquixote99

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.

Oh, I've gotten my mind around it, alright. Creating money = devaluation of currency = inflationary pressure. That was my comment above about the QE program always intended to be temporary. If you make it long term, evenually you'll get inflation. The only reason I think we've not had inflation with QE this time is that the conditions are so lousy for economic growth.

If your long term objective is to put economic pressure on the "fixed class" folks to move out of the fixed class, then inflating the cost of all goods and services, including essentials, is one way to do it, I guess. But once you let that horse - inflation - out of the barn, its awfully hard to get it back in again.

[Tom Joad]

Originally Posted by whell

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.

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

And that's what terrifies you.

[Dondilion]

Originally Posted by Tom Joad

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.