Implementing universal basic income could cut poverty rates up to 40%: PBO
OTTAWA - The government's fiscal watchdog says a guaranteed basic income program at the federal level could cut poverty rates in Canada by up to 40 per cent.
As someone in a high income bracket, I'd gladly pay more in taxes in exchange for a low-overhead direct equalization program such as UBI.
Something that's always bothered me about these discussions, however, is how it always seems to be treated as a binary choice. As if they only two options are to do nothing or flip on the UBI lightswitch. But this is IMHO stupid given the way economies work. Something like UBI would take 3-5 years to fully influence the economy, and anyway, economies tend to do better with stable long-term changes rather than sudden shocks.
So, if it were me, I'd instead implement a UBI program like so:
In my opinion, if the government did something like this, we'd have a long-lasting program that is agile enough to adapt to economic conditions or things breaking along the way. There is likely a sweet spot for UBI similar to that of an interest rate, and we'd be able to find where that line is empirically, without having to risk serious shocks to the economy, inflation due to supply chain shocks, etc.
I would expect such a program would gradually increase over the span of 10-30 years until basic needs like food and shelter are covered for everybody, but luxuries and "comfortable" lifestyles remain out of reach for those who are out of work. But, if I am wrong, it wouldn't matter anyway... the UBI rate would just wind up settling higher or lower according to the needs of society.
Go look up the Roosevelt Institute's study on UBI if you want a solid take on the strengths and weaknesses of UBI. Do not read Andrew Yang's summaries of it as he miscategorizes the data.
I am a proponent of UBI, but I'm also realistic about what it will likely look like in the future. The truth is that we do not really have a choice. We have to start working towards UBI.
If you want a realistic and likely scenario of what a global UBI implementation could look like, Iook no further than The Expanse book series (not well covered in the TV series).
I haven't read it yet, but I heard what it depicted wasn't actually UBI because you only get it if you are unemployed, and that it is a largely negative take on the concept
UBI in The Expanse was often referred to as "basic". Every citizen of Earth was entitled to "basic", full stop. Basic was enough to survive and not much more (food, shelter, ans no frills living). It is a floor below which you cannot sink. The "negativity" comes not from basic but from the fact that there just isn't enough work for everyone so there isn't a way to rise above basic for most. This is a reality we are going to face whether we implement a floor like UBI or not.
In other words, UBI is something we HAVE TO implement, but it isn't realistic to believe that it will make everyone's existence idyllic.
Here's a link to the actual PBO report, not behind a paywall.
Let's do it already!
Making people less poor reduces poverty. Wow. Was Sherlock Holmes involved in this research?
When you give money to corporations, they hike up their profits at the expense of workers and individuals. When you give money to workers and individuals, corporations hike up their profits at the expense of the workers and individuals. Because they have the control needed to do so. Everyone's being willingly dumb just to have something to talk about and pass time, so they wouldn't have to think about this fact.
Implementing a UBI is a net positive action.First year of implementation would bring some inflation, but after that hings would propay get micb better.
An alternative would be to implement a global UBI at first. A global UBI would be about 30 USD per month and would eradicate extreme poverty worldwide at once
then nations could choose to implement a second part that wwohld increase the ammount to any level, preferably to a 75% of living wage.
Conservatives believe it will cost them their cultural purity. Purity is a huge issue for the conservative mind. Progressives and conservatives are both concerned with fairness, but the conservative version of fairness is more like making sure the right people get punished. Poor people need to suffer for the crime of being poor.
I always found it funny in the mid-2010s when the central bank was struggling to meet inflation targets why nobody seemed to suggest UBI could help fix that... seems to me that giving people money directly is at least as stimulating to the economy as dropping interest rates. Difference is one benefits capitalists, while the other benefits the working class...
maybe they should allow us to do fractional reserve spending to invent new money ;)
I kinda laughed when I read that headline - give people money and they won't not have money! Hehe. But I've always wondered what kinds of upward or downward pressures that would make on the prices of certain things. Or on purchase patterns in aggregate. I'm no economist, so I'm not aware of all the history of similar programs. I have seen some really weird things happen in closed systems like FSA benefits that people 'use or lose' here in the US causing weird purchase patterns that cause shortages of certain things that people end up over-purchasing just to not feel like they've lost a benefit. Dunno if you have a similar program there. But in a scenario where it's just money, I imagine the patterns would be completely different.
In my opinion, this is an issue that can be avoided by implementing UBI gradually.
Shortages and inflation don't just arise from people having more disposable income. If that were true, inflation would've been worse and supply chains would be facing shortages decades ago when everyone had more disposable income in real terms.
Rather, these issues are more a function of three factors:
During COVID, we saw all of the above, for example. Supply chains disrupted, people had more disposable income due to CERB and changed their consumption behaviours dramatically during lockdowns/work from home (rapid shift in demand), while large corporations such as Loblaw's & Sobey's engaged in well publicized price-fixing schemes.
This lead to the inflation crisis we are just now recovering from.
However, there's no inherent reason why UBI needs to include any of these things. You could instead, for example:
At the end of the day I don't see it as all that different from setting interest rates, for example. Like YES the central bank COULD tank our economy by raising the interest rate 2000 basis points tomorrow. And YES they COULD also drive inflation through the roof by setting the interest rate to 0% as well. But they ain't gonna, because it'd cause... inflation/deflation and supply chain shortages.
The Roosevelt Institute did a study 15+ years ago that showed UBI only creates growth if the money is entirely funded through the creation of debt. You cannot create growth in an economy that utilizes UBI for the UBI itself unless the money falls from the sky and you need a griwing economy to fund an entitlement program like UBI.
It makes more sense to target those that need the money than give everyone money.
Edit: “ For all three designs, enacting a UBI and paying for it by increasing the federal debt would grow the economy”
The above is from the cited paper. There’s zero growth if you fund it through taxes and only growth if you fund it through debt. As increased debt payments require more of the budget to pay back said debt year to year after time the ability to provide UBI is threatened. UBI is not a long term solution.
Citation, please. Everything I'm reading from the Roosevelt Institute seems to directly contradict your claims.
We examine three versions of unconditional cash transfers: $1,000 a month to all adults, $500 a month to all adults, and a $250 a month child allowance. For each of the three versions, we model the macroeconomic effects of these transfers using two different financing plans - increasing the federal debt, or fully funding the increased spending with increased taxes on households - and compare the effects to the Levy model’s baseline growth rate forecast. Our findings include the following:
For all three designs, enacting a UBI and paying for it by increasing the federal debt would grow the economy. Under the smallest spending scenario, $250 per month for each child, GDP is 0.79% larger than under the baseline forecast after eight years. According to the Levy Model, the largest cash program - $1,000 for all adults annually - expands the economy by 12.56% over the baseline after eight years. After eight years of enactment, the stimulative effects of the program dissipate and GDP growth returns to the baseline forecast, but the level of output remains permanently higher.
When paying for the policy by increasing taxes on households, the Levy model forecasts no effect on the economy. In effect, it gives to households with one hand what it is takes away with the other.
However, when the model is adapted to include distributional effects, the economy grows, even in the tax-financed scenarios. This occurs because the distributional model incorporates the idea that an extra dollar in the hands of lower income households leads to higher spending. In other words, the households that pay more in taxes than they receive in cash assistance have a low propensity to consume, and those that receive more in assistance than they pay in taxes have a high propensity to consume. Thus, even when the policy is tax- rather than debt-financed, there is an increase in output, employment, prices, and wages.
Edit: “ For all three designs, enacting a UBI and paying for it by increasing the federal debt would grow the economy”
Yes, I quoted that in my other comment that sparked your edit.
The above is from the cited paper. There’s zero growth if you fund it through taxes
I also quoted the two paragraphs after your quote, and the paragraph before your quote, all of which discussed tax-funded UBI. I even bolded some text. And yet,
However, when the model is adapted to include distributional effects, the economy grows, even in the tax-financed scenarios. This occurs because the distributional model incorporates the idea that an extra dollar in the hands of lower income households leads to higher spending. In other words, the households that pay more in taxes than they receive in cash assistance have a low propensity to consume, and those that receive more in assistance than they pay in taxes have a high propensity to consume. Thus, even when the policy is tax- rather than debt-financed, there is an increase in output, employment, prices, and wages.
Let me repeat that again, since you have missed it three times now:
Nothing you said about tax-funded UBI is reflected in that report. You have blatantly misrepresented their position.
I do appreciate that the counter argument is that the elite class will just raise prices to counter this so worst case scenario it’s like nothing happened
Which is bullshit. People are bad at saving money, they end up spending the surplus anyway so these companies end up selling more stuff, increasing their profits without having to change prices.
Inflation is caused by money velocity. If everyone suddenly has more money, that means more money is chasing the same number of goods and services. This pushes up prices. UBI would absolutely increase inflation if major countermeasures are not taken. Classical countermeasures include significantly raising taxes, significantly raising the central bank lending rate, and significantly lowering government spending. Probably some combination of all three plus more would be required to mitigate inflation.
It gets worse, though, because the types of goods and services that lower socioeconomic groups purchase are different to that of the rich. So to mitigate inflation on specific goods like food staples and rent, measures to remove money velocity must be targeted at the low end. Arguably, these measures should cancel out any UBI benefits, meaning the net gain is moot. So the exercise is a waste of time in aggregate. The solution, then, is to increase supplies of lower end goods and services. Governments are traditionally terrible at command style economic incentives, and I trust the market to fill the gap. It just takes time. Which is to say, food inflation should eventually normalise.
Housing, on the other hand, would not. And this is because of Canada’s (and really most Western country’s) NIMBY laws. Making dense development expensive and impossible close to jobs keeps house prices and rent high. Massive deregulation at the federal level would be required to allow massive housing developments to stave off massive house price and rent inflation should UBI be implemented. It must be done in tandem or the net social damage would be incalculable. I’m not convinced the federal government would have the balls to do this, and home owners are quite self-interested when it comes to their property values.
An alternative (or perhaps parallel solution) is massive reductions in immigration. Net zero for five years at least. This would give the existing (broken) construction sector time to catch up with existing demand and mitigate the worst of property inflation.
I am an advocate for UBI as I think it will become an inevitable requirement in the near future. However it comes with great cost in various obvious and not so obvious ways, and advocates rarely acknowledge these. For example, many UBI advocates are simultaneously open borders activists, and seem perfectly happy to live with that dizzying level of cognitive dissonance.
There is a related solution: land value tax. This has been championed by economists for more than a century. It is considered a “near perfect” tax. It cannot be offshored, hidden, or channeled through shell companies. It aligns social wellbeing with individual incentives (these are currently at odds). It encourages investment in businesses instead of land. It can radically reduce house prices and rent. It incentivises high density housing and productive use of high value land. This makes public transport economically viable for many. LVT can generate huge taxes which can be used to provide UBI, for example. Even if it doesn’t, halving rent for everyone produces a similar or even greater effect on poverty for low socioeconomic groups. They can afford to live close to work, and they have access to cheap public transport. This is compounded by the effect of far greater economic activity. LVT tends to be much more easily stomached by older and conservative voters.