Guaranteed Income as Quantitative Easing

[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

Creating money = devaluation of currency = inflationary pressure.

Which is fine with me. Inflation hurts creditors more than it does debtors. And these days most creditors are predators. So fuck them.

[nailer]

Originally Posted by whell

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.

Thanks to Globalization, economic growth here will be slow for some time to come. I'm also thinking we have low inflation because there are not too many dollars chasing too few goods.

[Tom Joad]

Smart guy this dude. Way ahead of his time.

[whell]

Originally Posted by Tom Joad

Smart guy this dude. Way ahead of his time.

So, question about this:

While the people are going about their true business of being in school, who's going to build and maintian the classrooms, make the books, whiteboards, projectors, etc for the classrooms, make the clothes that folks wear to class, make and deliver the food the students eat, etc....?

[Tom Joad]

Originally Posted by whell

So, question about this:

While the people are going about their true business of being in school, who's going to build and maintian the classrooms, make the books, whiteboards, projectors, etc for the classrooms, make the clothes that folks wear to class, make and deliver the food the students eat, etc....?

We will need a few workers bees.

To make it fair, we'll set it up like the military. Everybody will have a worker bee obligation of two years. You'll have the option of enlisting into the worker bees. And you will be assigned to be trained and serve in some capacity that meets society's needs. You'll get extra pay of course so you'll have more money than the couch potatoes. And if you like it you can re-enlist and make a career out of it. Also, we will need a draft for those hard to fill positions. So you might get drafted and have to spend two years cleaning public rest rooms. That would suck, but it would only be for two years. Then you could go back to chillin on the couch.

[Dondilion]

Originally Posted by Tom Joad

Smart guy this dude. Way ahead of his time.

Really extraordinary fellow...Mr outstairs-instairs.