The evidence for 2) is literally all around you. Why is an empty shack-sized lot in Palo Alto worth $1MM+? Simply and only because the people there earn enough money to buy it.
Typical UBI proposals are funded, e.g., by additional progressive taxes, and so no actual income surplus is generated (in a first-order analysis), income is redistributed, compressing distribution.
Not really. The fundamental problem of means-tested welfare programs that UBI addresses remain:
(1) Eliminates multiple sets of inefficient benefits/eligibility bureaucracy that duplicates functionality already performed as part of taxing authority.
(2) Eliminates a counterproductive incentives associated with typical means-tested benefit eligibility, which has clawbacks at low income levels and rapid marginal rate (sometimes exceeding 100% with marginal income when tallied across all means-tested programs; this effect creates a barrier to progress beyond a low income level. (While progressive income taxes may be raised from previous levels to fund it, when viewed as clawbacks these changes typically kick in at much higher income levels and lower marginal rates than typical means-tested benefit clawback.)
From a US point of view, when was the last time any entrenched bureaucracy was eliminated? As a baby step in redundancy reduction, is it realistic to think that UBI going to get rid of a program like WIC, against the full power of big ag brandishing starving baby pictures?
Your second point acknowledges that taxing away UBI through progressive tax rates is a clawback. As I read it, your idea is that the increased marginal taxation due to the clawback will occur at higher income levels than exist with current programs. Why not just change the existing tax rates instead of sending out cash and taxing it back?
> From a US point of view, when was the last time any entrenched bureaucracy was eliminated?
The most recent that springs to mind is the elimination of most of the conscription-related bureaucracy post-Vietnam.
> Your second point acknowledges that taxing away UBI through progressive tax rates is a clawback. As I read it, your idea is that the increased marginal taxation due to the clawback will occur at higher income levels than exist with current programs. Why not just change the existing tax rates instead of sending out cash and taxing it back?
A baseline tax credit plus adjustments to existing rates is widely recognized as one mechanism for implementing a UBI, but even the there is often a desire to have an estimated advance mechanism, to avoid a delay of potentially more than a year from when people enter the UBI-covered population and when they start benfiting from it.
> elimination of most of the conscription-related bureaucracy
I was just thinking of that as an entrenched bureaucracy example but decided to focus things on an entitlement program. Despite having zero purpose for 49 years, Selective Service still manages to spend $26m/year [0].
> often a desire to have an estimated advance mechanism, to avoid a delay of potentially more than a year
The model for advance payments on an upcoming year's tax credits already exists [1]. I can see how this doesn't address downward change in income, but also don't see how that couldn't be added.
There are goods and services with income-elastic pricing, like housing.
UBI indirectly and unfairly benefits only the people who control those goods and services. If everyone made $1000 more per month, housing prices would raise up to that amount for everyone. This means the majority of the UBI raise would go into just the landlords pockets.
This is why many welfare programs are expense- or need-dependent, because it maximizes the benefit to those who need it without impacting price inflation as much.
That said, the UBI inflation would incentivize construction. But this requires zoning changes, approvals, and consecutive land reclamation anyways.
Might as well start with:
- Removal/reduction in zoning
- Automate construction approval workflows
- Leverage eminent domain to aggregate land, and sell for profit to the builders.
Its just a win-win-win (given the views / property values would be reduced regardless without extra housing causing SF/LA/Seattle levels of homeless people):
- Homeowners get paid, by the city / local gov, at market rate or slightly above market rate.
- The city / local government has a new profit stream, to be used for more housing / services / reduced taxes. They would aggregate land, re-zone it, get approvals completed, and sell the whole package to the highest bidding developers.
- Developers reduce costs to aggregate land and due to interest payments while waiting for all the land + approvals.
- City gets to better plan the hosing market, i.e. superblocks, transit, etc.
- City dwellers get more access to housing (i.e. cheaper housing), and possibly reduced taxes. Also reduced crime and homelessness because the city is affordable for everyone.
Whitewashing UBI as a "win-win" is pretty bold considering I just showed how UBI disproportionately benefits property owners and discriminates against everyone else.
There are ways to achieve all of the above that doesn't require destroying income-elastic priced markets. UBI is not a good solution.
The win-win-win was for "Removal/reduction in zoning", "Automate construction approval workflows", "Leverage eminent domain to aggregate land".
UBI doesn't work well at all, like you stated, if there isn't a big increase in the supply of housing. For example, Seattle needs 10x more housing than it has today, and in 10 years it'll need 100x more housing than it has today. Ideally, all of these should be new luxury condo buildings, with 1000-3000 sqft condos, driving prices of all housing down by 10x. I would really like to see the city make this their only priority.
> For example, Seattle needs 10x more housing than it has today, and in 10 years it'll need 100x more housing than it has today.
Seattle has about 740k people and about 370k housing units. 10 times the housing units would be enough for the entire state population at an average occupancy of 2 persons/unit. 100 times would be enough for roughly every US state bordering on or one state out from the Pacific Ocean.
Seattle pretty emphatically does not need that much housing.
Greater Seattle has 3MM people many of whom would like to be in the city core in a 3000sqft lux condo instead, or Airbnb space for concert nights. You’re also greatly underestimating the number of people from around the US who would rather live in Seattle but just can’t afford it right now. Seattle has a labor shortage and just can’t fill it right now. Restaurants and even many bars close early because it’s not cost effective to stay open later.
Density also facilitates business and pulls in even more workers, who are also customers and it’s a positive cycle.
Seattle needs 100x more housing in the next 10 years if it wants to continue to be a competitive city. As a resident I sure hope it does.
> He's saying that if everyone has extra money, then everyone can afford higher prices.
UBI only gives everyone extra money if it is unfunded; typical UBI proposals are funded by either increased progressive income taxes or cutting other spending (which produces income to the recipient), and so is (in first order effects) zero-sum. (Typically, it replaces rapid clawbacks from means testing with slow clawbacks by progressive tax increases.)
That’s not how market prices are generally set. Competition and demand keep them low. It might happen the way you describe sometimes but it’s far from a guarantee.
The theory is just supply and demand, which is how prices are determined in a competitive market. If you give everyone $20k, would you expect grocery stores to raise the price of bananas to $20/lb? Probably not, since people can just go to the grocery store down the street. Now if everyone suddenly wanted to buy more bananas with their new cash that would have an effect, but that’s how markets are supposed to work.
In practice it probably depends on a lot of factors and would need empirical studies.
Who would supply these bananas? After receiving $20,000, do you think the farmer's laborers will go to work the next day for the same wage as before? The trucker? The grocery store cashier? Will the "grocery store down the street" be immune to the higher labor costs?
The gocery worker and trucker will have a better bargaining position, yes. On the other hand, they can also affort to take a lower pay because their basic needs are already covered and any additional income can be spent on luxory. So yeah they will demand better working conditions and goods will increase somewhat in price - but there is no reason to expect that this will be proportionally to the UBI amount.
Why wouldn't rent just increase to capture this new income for most people? If UBI is high enough to afford mortgage payments on an owned house, housing prices will skyrocket (even more than now) until those receiving the UBI are priced out of the market once again. Because once the mortgage is paid off, the value of the property is expected to grow, and that's a bet lots of people are taking, even now in this crazy market.
We could do what they do in Japan and deprecate housing as it ages. Very few people buy second hand properties, so a house is a liability that needs to be demolished vs land without one. It also helps if no one believes in property speculation because of a huge property bubble that burst in the 80s.
2) Any income surplus generated by UBI is rapidly consumed by middle people and rent-seekers. That’s how we get inflation.