Roger Goun posted on his Facebook page a link to the article Why Should We Support the Idea of an Unconditional Basic Income?
If you want actual evidence of how much better capitalism would work with basic income, look at the pilot project in Namibia:
“The village school reported higher attendance rates and that the children were better fed and more attentive. Police statistics showed a 36.5% drop in crime since the introduction of the grants. Poverty rates declined from 86% to 68% (97% to 43% when controlled for migration). Unemployment dropped as well, from 60% to 45%, and there was a 29% increase in average earned income, excluding the basic income grant. These results indicate that basic income grants can not only alleviate poverty in purely economic terms, but may also jolt the poor out of the poverty cycle, helping them find work, start their own businesses, and attend school.”
Think about that for a second. Crime plummeted and people given a basic income actually created their own jobs and actually ended up with even greater earnings as a result.
I have read about the idea of Job Guarantee or Employer of Last Resort, but this proposal goes a step farther and puts the idea into words that are very appealing. The one “mistake” is to think that taxes must be raised to “fund” this proposal. It might be a good idea to raise taxes for other reasons (that may even be related to this), but it is not essential.
If the government just gave out this Unconditional Basic Income with created money from the Federal Reserve Bank (FED), then it might lead to too much money being put into the economy. To prevent this problem, the government could raise taxes to suck out some of that excess money. However, this understanding is an important nuance that is different from “we must raise taxes to fund this expense”. Putting in created money and sucking out money through taxes is not a useless circular exercise. This exercise would change the distribution of money amongst different types of people as described in the article. For one thing, it would take money from the excess saver and put it in the hands of the spenders. When unemployment is high, this is a very valuable shift in distribution. Please notice the qualifying clause on the previous sentence. I am not saying that one prescription should be applied at all times. I am saying it should be prescribed when appropriate.
See the article MMP Blog #42: Introduction to the Job Guarantee or Employer of Last Resort.
I thought of an existing government program to which we could compare this.
The FED has a program called Quantitative Easing. The following is part of the WikiPedia definition.
Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective. A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the monetary base. This is distinguished from the more usual policy of buying or selling short term government bonds in order to keep interbank interest rates at a specified target value.
USA Today has an article What exactly is quantitative easing? that mentions the size of the FED’s program.
The Federal Reserve is in the spotlight for its move to slow down its $85 billion a month of bond purchases, designed to pump money into the economy and nurture the recovery. USA TODAY’s Tim Mullaney explains the details.
On an annual basis this is $1.02 trillion. So the Fed creates this amount of money out of thin air in one year to buy almost worthless paper assets from the banks. At the moment that QE was meant to stimulate the economy, there was not enough economic demand to create much in the way of good investments for the banks to make or good opportunities to lend the money. The banks could actually make more money by giving the money back to the Treasury in exchange for Treasury securities.
Suppose that instead of buying paper from the banks, the Fed had funded a Basic Unconditional Income. The people who received the money would have bought a lot of goods and services. This would have created huge demand for more of these commodities than the economy was producing. Investment in new capacity and in more jobs would have been driven by the increased consumer demand. Even the banks could have profited from lending to and investing in building the new capacity (or at least reactivating mothballed production capacity).
How does this amount of money compare to an estimate of the cost of the proposed Basic Unconditional Income? Here is a quote from Why Should We Support the Idea of an Unconditional Basic Income?
Basic income is entirely affordable given all the current and hugely wasteful means-tested programs full of unnecessary bureaucracy that can be consolidated into it. And the cost also depends greatly on the chosen plan. A plan of $12,000 per U.S. citizen over 18, and $4,000 per citizen under 18 amounts to a revenue need of $2.98 trillion, which after all the programs that can be eliminated are rolled into it, requires an additional need of $1.28 trillion or so. So where do we come up with an additional $1.28 trillion?
