I think you’re probably correct, CK – I wasn’t aware that UBI already had a strict definition but it appears that it does. I suppose I’m thinking more about guaranteed minimum income or a graduated income scheme that would benefit the poorest most heavily and gradually phase out so that it would be a small boost for those who are already earning a strong middle class salary.
He makes some good arguments indeed, and I don’t necessarily believe we would have hyperinflation or anything like that. But by putting an extra, say, $12000 a year in everyone’s pocket - all throughout the economy - the initial economic impact of its rollout will be stimulus. But that stimulus could lead to a surge in consumer activity, which could then be followed (at some point) by prices to match the demand.
Even if that doesn’t necessarily play out that way, my broader concern is that the poorest in society, the ones who are barely getting by, are the ones who need the highest concentration of free resources, not everyone universally. You want more of that money going to people who are forced to choose between food or electric bills, college or healthcare, and so on. It also helps the rest of the economy by increasing the purchasing power relative to people who already have purchase power – there’s better economic parity.
None of that disregards other issues that I’m guessing Yang has already touched on, like the importance of education and other systems of support that can break welfare dependency.
His lengthy argument is a red herring. It is not per se “inflationary” because it is not adding any money into the system. It’s not in net putting more money in people’s pockets. It takes it out first. This isn’t printing more money or borrowing from the future with even more deficit.
It takes money out, lots of it, by way of VAT (a 10% increase of the costs of goods and services, inclusive of impacts on food like fresh vegetables trucked in, and clothing), and then puts it back in, more over current baseline to the wealthier half, less over the current baseline to the lower half, least of all to the lowest 20%.
Clearly not. It stacks the playing field further to the wealthier group’s advantage.
Yang is very straightforward about this actually. Those who do not get any benefits currently, mostly the upper half of income households, will see an increase of $12K a year per individual over 18 in the household, and pay a share of it back in increased goods and services costs. If OTOH you currently get benefits, which most households in the lower half do, you won’t end up seeing an increase of $12K a year per individual over 18 in household (much worse impact for household headed by single parents with kids than ones who have been two adult homes) over now, some maybe none at all, but you will also still pay the same burden of VAT raising the prices of goods and services.
The vast majority of the 4th decile and below gets some safety net benefits currently and would see less than a $12K/yr/adult over 18. Even the 5th decile has more than half. And this is just for those who are non-elderly with children without disability!
Add in those whose current safety net, that this is proposed to replace, is from Federal disability payments, another 14 million Americans on disability, and it is even worse. These 14 million disabled Americans also pay their share of the 10% VAT (by way of increased cost for goods and services), but would not get the same net return.
Actually they would be paying for the VAT and getting no benefit UBI at all as they’d be idiots to trade disability payments for it:
It’s not great but it’s less poor than trying to live off $12K/yr would be.
Yang’s proposal would increase wealth inequality. It’s a horrible idea.
I’m well acquainted with VAT, as I’ve lived with it for more than a dozen years. It’s applied at various rates to various commodities and I’m comfortable with the benefit it provides in terms of funding for the social safety net. A 10% VAT is half what I’m used to, but thanks for your explanation of what it means and how it works because most Americans reading this thread won’t have experience with it. Bottom line, you get used to paying a bit more for stuff, life goes on, and in exchange people have access to healthcare. It’s a good trade-off. In the US the trade would be for UBI but it’s the same principle.
With respect to UBI, I think it’s a bit unfair to evaluate it as an anti-poverty program because that’s not what it purports to be. I’m not an economist, but to me it seems more like an economic-acceleration plan or a there’s-a-huge-structural-economic-disruption-we-need-to-avert plan. UBI is aimed squarely at otherwise employable people whose jobs are at risk of being automated away. Every other adult just happens to have the ability to opt in if they so choose, and we expect most will because it’s free money. It’s not a panacea and it’s not designed with solving poverty or disability in mind, so to claim it doesn’t is, well, accurate but not really getting the point of it.
In re: how the VAT impacts those receiving UBI, except for the poorest of the poor everyone else should do ok. If I’m getting an extra $1,000 per month and VAT is 10%, unless I’m spending more than $10,000 per month I should have some of that Freedom Dividend left over. And most people, certainly not the working poor, are not going to come anywhere close to consuming $10K per month of goods and services.
Yang has more to say about addressing poverty in the third leg of his major policy triad (along with UBI and Medicare for All) and that is Human-Centered Capitalism. Basically, he wants the focus of the economy to be on maximising human welfare and not corporate profits. I know, I know, it’s pie in the sky. But just imagine that kind of world…anyway, if you’re looking to poke holes in his anti-poverty stance, that would be the place to start.
Interestingly a mild VAT (5%) was one option analyzed by the Congressional Budget Office when considering option for reducing the deficit.
Any discussion of Yang’s proposal should begin with an understanding of how VAT works, and who pays it most. Bolding mine.
So to add to the regressivity of the benefits, the tax funding system proposed is itself also regressive, impacting those with lower incomes more than those with higher incomes.
That graph doesn’t say anything about UBI. UBI doesn’t yet exist. That’s a graph of how it currently stands. The reason that the lower deciles don’t have more money is because the EITC doesn’t apply to people without a job, so people with no income get no help. UBI would solve that by giving money to people regardless of their income.
From your source:
According to your source, in the next sentence of the paragraph that you pulled your quote from, it says that there are ways to create a VAT that would ameliorate distributional concerns.
The rest of that article is about ways to structure a VAT to reduce the regressive concerns.
The article’s solution is to apply a cash flow tax but only gives one line about how it would work or the issues involved in it. Changing the funding source for the UBI shouldn’t be a problem. But the logic of why Yang chose that source is that’s where the profits that would have gone to the workers now lies. If there are better ideas about the sources of the revenue, that could be discussed and quickly changed. It doesn’t negate or change the concept of UBI.
For anyone interested in learning more about UBI, Yang’s website has some resources that are in one place. (Under the tab “Is there evidence to support the case for UBI?”) There’s a lot more information on UBI than I thought - 461 research papers.
I’m really impressed with his website. That’s a lot of information packed into bite-sized pieces with a nice layout. I’m also enjoying his graphic showing his progress to the debates. So cute! He’s been reliably getting at least a thousand donors a day. He’s at 42.5K of 65K needed to make it to the debates before May 15.
I’m also enjoying an article in the New Yorker from July 2018 on UBI. Yang is mentioned in it, as running for President.
Who Really Stands to Win from Universal Basic Income?
It has enthusiasts on both the left and the right. Maybe that’s the giveaway.
Here’s a bit more about the moralizing that happens with means-testing programs. Means-testing requires defining the most deserving. That comes with a certain amount of moralizing about what it means to be deserving. UBI doesn’t have that problem.
Many of the super rich are also in favor UBI. With the system so currently rigged in their favor, they can hold on to the myth that they deserve their wealth while giving a bit to the poor.
It’s still mostly an illusion though. Chris Hughes, the co-founder of Facebook, realizes he didn’t do much for his fortune. He just happened to be Zuckerberg’s roommate in college. He is giving a million dollars to the Stockton UBI test trial that is currently being held.
The author of the article ends with the wistful pondering about how life might have gone differently if Nixon was successful with his UBI program. At the time, many Republicans were in favor of UBI. Perhaps the political divide would not be as big today if the economic inequality was not as wide.
In that same CBO article are some passages that describe the advantages of a VAT (bolding mine).
The poor, whose main expenses are arguably food, clothing, shelter and healthcare, would feel less of a hit than those buying discretionary goods. We can tweak VAT to diminish the impact to the poor.
The article then discusses two VAT variants, one that would have raised $2.7T and the other $1.8T during 2016-2018. Those are consequential sums.
In re: the “burdensome” admin costs to implement VAT - that is a bit of a red herring in my opinion. It smacks of the consultant-speak I used to spew back in the day when trying to bulk up our project fees. Spread some FUD around to bolster your (otherwise weak) point. Sure, there may be some initial pain and incremental cost, but every other developed nation figured it out. I’m pretty sure the US could, too.
One fun anecdote about sales tax (US) vs. VAT (the rest of civilization) - my European friends are forever getting caught out by sales tax when they visit the US. They pick up an item marked $4.99 and go to the register with a $5 bill, only to have to dig out the additional 25 cents to pay the “actual” price of $5.24. Why not just label it $5.24 they all want to know? Over here we pay the price on the sticker. The VAT is already baked in. Not a reason to switch systems but just an observation about differing approaches to taxation.
Are you referring to the proposal of some other Yang? The thread is about Andrew Yang.
As President, Yang “will Propose an end to favorable tax treatment for capital gains and carried interest. Ending the carried interest treatment loophole alone would generate $18 billion per year in revenue and ending favorable treatment of capital gains would generate tens of billions more.” Yang also proposes a 0.1% tax on financial transactions. These are not taxes which would “increase wealth inequality.” :smack:
I’ve not studied Yang’s plans in detail. Are child credits deducted from the $1000 UBI? I’d question that, since the UBI is not paid to kids. (This is why I’d start with simple programs like single-payer health and subsidized childcare before disrupting the entire financial system.)
Yang’s concern is that as we rely more on automation and less on human resources for production, we will end up having fewer sources (i.e. people) to collect incomes from. I think he could be right in his assessment that it’s a potential future problem, but even he would have to concede he might be talking about a problem that doesn’t necessarily exist yet.
Emphasizing the bold, I think that is the key element to address. Taxation and raising revenue in and of itself doesn’t really achieve much, and VAT tax countries know that. What matters is using that revenue to provide value to the general public: healthcare, quality schools, quality infrastructure - things everyone can use and benefits that the market itself doesn’t distribute evenly. This is the deception that American conservatives will engage in to undermine national sales taxes or VAT taxes – or any tax. Conservatives will tell you taxation is harmful because it just raises taxes and they ignore the part about redistribution and providing value to the public. And when they do get around to talking about it, they respond with the “robbing Peter to pay Paul” rubbish and how, on a philosophical level, it’s inherently “unfair”.
Stepping away from the issue of the VAT, what’s not only inherently fair but also inherently wise is that government should tax and keep taxing until the highest income earners no longer have an incentive to produce more wealth. And Paul Krugman cites several Nobel laureates who conclude - like Alexandria Ocasio-Cortez, interestingly enough - that this hypothetical marginal income tax rate is around 75%. I would probably be satisfied with gradual tax increases over a 10-year period that approach 50-55%, then using that money to invest in universal health care, and welfare program consolidation that evolves into a guaranteed minimum income, with perhaps some additional allowances for housing and transportation - again, gradually. We also need to guarantee that everyone have some kind of access to basic banking services.
He quite clearly was talking about Yang’s VAT proposal in conjunction with Yang’s UBI. I have no idea what confused you.
My point is that, barring a political miracle almost immeasurably greater than Trump’s success, he’s not going to become the nominee.
But he can certainly play a significant role in making whoever is the nominee look worse by the time they get into the actual election campaign, simply by being several attractive things that that person cannot.
Well, for one thing, I’m not a conservative. On the contrary, I believe in significantly greater wealth redistribution and government support than exists either in the US or over here in Blighty. But I’m also a keen student of political psychology, and thus recognise that, if introduced into a place where social obligations are seen as radically less important than the acquisition of personal wealth, UBI represents a clientist trap.
Put bluntly, if you can get enough people to support introducing UBI as a new and untested policy, it will go one of two ways: either it will fail in the first instance and be discarded as an option (possibly forever, if the failure is severe enough), or it will succeed in the first instance, thus creating an insatiable political appetite for its increase. After all, if free money works, why not have more of it?
And the reason this is such a problem is that, by the time you realise you’ve increased it too far, the political disincentives to reduction will be too great to overcome. This is why mass-scale populist clientism is inherently inflationary in the longer term. If UBI is ever to work, it will have to be off the back of a sales pitch that doesn’t treat it as free money for everyone paid for only by the fabulously wealthy.
For another thing, the institution of US Social Security was nothing like as revolutionary as a switch to UBI would be, not least because the former had long been instituted in other comparable countries, whereas the latter would be a leap in the dark. Moreover, those early social security systems were far less radical in scale or scope than any form of UBI would need to be if it were to effect any meaningful change. Social security schemes could achieve their goals of stability and poverty alleviation fairly easily by targeting the resources where they would have most effect.
UBI, by contrast, carries a much less obvious cost-benefit relationship. If it goes wrong, it could cause serious problems for the state’s finances, with all the attendant consequences. And, while it may very well fix some labour market issues, paying for it will inevitably create unintended costs elsewhere. Sure, you might well get a short-term economic boost from increased liquidity but, for what I hope are obvious reasons, that can’t carry on indefinitely without getting into the inflation problem mentioned above. So when you take away the ‘free money is good in itself’ part, you’re left asking whether there aren’t much more important reforms that can be achieved by much less risky means (such as genuinely universal healthcare, the cost-benefit relationship of which is both strongly evidenced and strongly positive).
That’s possible. It’s also possible that Trump has ushered in a new era of politics where big ideas communicated directly to the public via social media and with no intermediaries (or filter, in Trump’s case) can outmanoeuvre the backroom, king-making political apparatus. You’re saying lightning can’t strike twice. I’m saying the fact that lightning struck once already tells us it can happen again. Yang picked up over $500K in donations in February. That is nontrivial.
I did not mean to imply you are a Tory. I’m in Blighty as well, by the way. Yang seems to have anticipated your criticism as he’s called for a move to human-centred capitalism, which is precisely as you describe: de-emphasis on financial profit, focus on the welfare of the citizens.
And did you mean clientist or clientelist? I had to google both but I’m thinking you meant the latter - that UBI is a form of political patronage? No argument there.
I think perhaps you underestimate American Conservatives ability to demonise any government program that would seek to redistribute wealth, irrespective of the benefit to the populous. Social security was likened to slavery and Sovietisation; Goldwater, as the Republican candidate for president, mockingly suggested that Medicare didn’t go far enough, that the government should hand out cigarettes and beer as well. The UK has a quaint “Conservative” party but they are about a century ahead of their American namesakes, many of whom have yet to stop fighting the Civil War. UBI is going to be put through the wringer.
With respect to the inevitable inflationary spiral you predict, you may be discounting the central thesis of Yang’s argument - the robots are coming and they will soon displace millions of workers. But, at the same time, they will usher in an era of abundance. Technology drives down the cost of goods. It’s anti-inflationary. The places Americans are experiencing painful inflation are housing, healthcare and higher education, and Yang has policy positions on how how he would address each.
I’m not a political philosopher or psychologist, so perhaps my grasp of the issues is not as keen as students of those disciplines. But I do see that this whole discussion has moved away from the Yang candidacy in total and has seized on UBI in isolation, and I don’t think that is the right way to evaluate his whole platform. UBI is a major pillar, but it’s not the only one. UBI in conjunction with changes to the tax code, accessibility to healthcare, affordable housing, technical/trades skills trading, human-centred capitalism and so on will be transformative to society. The skeptics all agree changes that radical can’t happen. Until they do.
First off something last night apparently got swallowed by the hamsters.
How much will it cost and how much does a VAT raise?
Cost of $12K/adult over 18/y is estimated at $3.8 trillion a year. I’ve read other sources though saying less, down to $3 trillion. We’'ll go with that.
Now the idea not actually give an additional $12K/yr to every adult. If you otherwise get $6K is assistance, for example, you have to lose that first, you get $6K more than now, not $12. And indeed some of the cost can be recouped by eliminating other benefits that the half of the population with less income get. Let’s leave healthcare alone and consider that
From that link:
So including eliminating social security, etc. we still need to raise about $1.6 trillion a year more in new tax revenues.
The CBO analysis has a broad-based VAT (one that includes “purchases of new residential housing, food purchased for home consumption, health care, and postsecondary education” has a 5% VAT averaging $252 billion per year, double that to get to about half a trillion per year at 10% VAT. We are still only a third of the way there.
Ooops.
Yes. It demonstrates that most people in the lower half would lose some money that currently receive in order to receive any UBI, but most in the have no benefits that they would lose.
Let’s illustrate the impact with my household and a common fictional one.
My household currently is me, my wife, and my 17 year old daughter soon to leave for college. Others are in post graduate education now or working. We are two professionals and are in an upper income bracket. If the proposal went into effect we’d get $24/K/yr for our household. We get no current benefits so would lose none. Our purchases are not so extravagant. Purchases are a small portion of my income so my VAT won’t be so high. So that $24K will go towards increasing my family’s wealth (I’ll use it to pay for tuitions for the one to start college and the ones in grad school helping them avoid debt, or maybe pay down my mortgage.)
Now compare us with a household of a single mother and her three kids under 10. She is a sales clerk and makes $23K/yr, puts her in the 3rd decile, actually in the middle half. Don’t count Medicaid if she is on it, and she still currently gets a bit more than $5K in benefits which she’s give up to get her $12K. So her household of 4 would get about $7K more than now. Less than a third of the amount my household would get. Her non-housing, non-education expenses are likely not much different than mine; she has three kids to feed and clothe. By far she is paying more of her income to VAT than I am
Is it right that my upper income household gets three times more benefits than hers does (that goes to family wealth), more than her household’s current annual income (!), while she pays a larger share of her income to (partially) pay for the program than I do? Why should this money be redistributed to my household?
Hey I’ll take it!
To reduce but not eliminate. In any case the funding is still regressive, if not as much so as the payouts.
They discuss going with a narrow-base VAT which would be less regressive … and raise much less of the already not enough money. Or tax credits … same. Or scrap VAT altogether and go with different ways to raise revenue. And yes there are ways to tax that are not what Yang has suggested to use to pay for this that are less regressive as funding, even if the payout portion remains regressive. But there is a simple reason Yang does not go there - he is trying to sell the idea that a VAT is something the tech companies pay, not actually a tax that impacts us all and in a regressive manner. He knows Americans don’t know how VAT actually works. Putting in terms of a regular tax increase, even one progressively stratified but one that the average voter understands that they will pay, would simply not sell.
Yes, septimus this is Yang’s proposal with how he proposes to pay for it.
And per cites already provided might never.
And as far as
But the “burdensome” cost (in reality highly efficient) of the administration of the current social safety nets are herrings of a different color?
Only that’s not Yang’s proposal. It’s your take on VAT based on your own assumptions. Here is Yang’s proposal, complete with his assumptions, directly from the https://www.yang2020.com website:
That’s Yang’s proposal. If you want to argue against it that’s great, but please stick to the facts and don’t misattribute your reasoning for his.
I’m the originator of the “burdensome” quote, not asahi. And I maintain my contention that the current array of 126 separate aid programs is not efficient, and that introducing a VAT would be less problematic than the naysayers would have us believe. We have 160 working models to choose from around the globe.
Do you have direct experience with current aid programs? I know, anecdote does not equal data, but from what my family went through the only efficient part is getting the figurative cheque mailed out at the end. Which, by the way is another sound bite from Yang in support of UBI - one of the things the US government really excels at is sending regular cheques to large numbers of people.
And what part of how I have represented his proposal do you believe is an incorrect interpretation?
His proposal to fund with a Value-Added Tax (VAT) of 10% or the part in which current welfare and social program beneficiaries would be given a choice between their current benefits or $1,000 cash unconditionally, cutting out welfare programs, food stamps, disability and the like?
Is your issue that you distrust CBO estimates of what even a broad-based very regressive VAT would raise? Or that you think a VAT of 10% would raise not twice what a VAT of 5% would but more than 3x it? Nice that Yang claims (a still way too small) number of $800 billion … but where does that number come from?
Yang does not actually give a number for how much it would cost. Do you have other sources that claim a UBI of $12K would cost less than the $3 trillion I have found as the lower end estimate?
Or is it that I am not taking into account the eventual new revenue that is sure to occur (which if it eventually did, would first of all not raise enough on its taxation to make a dent in the shortfall and would be in the context of the negative impact of his promised Robo-apocolypse.) Or the magic that UBI would get everyone taking better care of themselves, solve crime, reduce health care costs prevent homelessness, make teeth whiter, and cause the wolf to lay down with the lamb?
Okay, here I made a mistake. Sorry to have put the wrong name as the quote. Otherwise though, I stand by my points.
Yes we have models of VAT around the world and they demonstrate that VAT requires “significant resources to addressing and enforcing compliance” It is not a magic wand that just happens anywhere.
I’ll do more than dispute that our current safety net programs are horribly efficient with huge administration cost, I’ll back it up.
The social safety net needs to be expanded, not cut down and replaced with a regressive system funded by a regressive tax. At least those other countries that use VAT as a major part of their tax base use it to support the social safety net … not to give money to those in upper income brackets.
Except Yang isn’t going to eliminate those 126 aid programs. That’s what an ideal UBI would do but Yang is specifically saying (in the very text you quoted!) “people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.”
And I have no idea what your objection is to DSeid’s analysis. The regressive nature of a VAT is well known and a monthly check that only goes to people who don’t currently need government assistance should be equally obviously regressive.
I never avoided the issue of burdensome administrative costs - they’re a thing. But those costs can be offset if we provide value, which is why I have modified my stance somewhat and moved away from what I thought I knew of UBI and instead clarified by saying I’m more in favor of minimim guaranteed income. I’m for reallocation not just pumping more money in everyone’s pocket. The UBI would work as a short-term stimulus, just like a tax rebate. Minimum guaranteed income would take money supply, and recirculate it to the part of the economy that needs it the most.