Universal Basic Income

It’s creeping ever more deeply into the Progressive-Democratic Party’s psyche and ideology. It’s an idea that was first dreamed up in the ’70s, and it remains an idea that can only fail were it to be implemented.

Giving everyone a basic income won’t improve anyone’s income; it’ll only incentivize employers to pay a wage diminished by the amount of the guaranteed government payment.  But the failure runs much deeper than that.

Such a scheme is inflationary: the outcome can only be a spike in inflation followed by price stabilization at a higher price level.

Consider an economy in which a producer has two widgets to sell, and two consumers each have a dollar. The producer can sell his widgets for a dollar each.

Now give the two consumers their basic income of $1,000 (let’s say).  The producer still has two widgets, now the consumers each have $1,001 dollars, and the producer can sell his widgets for $1,001 each.  That’s price inflation to a new level—but the consumers’ buying power remains unchanged*: they each still have only enough money to buy one widget, and no more.

Nor is there any incentive—or buying power capacity—for the producer to make more widgets to sell. The producer is getting those same dollars, devalued by the same inflation, that his consumers are getting (from his sales) and so he’s getting no added value to induce him to produce more.  Furthermore, he still can buy the same amount of widget production inputs, and no more; he cannot produce more without incurring greater cost.


*Actually, buying power decreases on net for producer and consumer alike, not from the weaker dollar, but from fewer of them in hands of both.  The money for that guaranteed income can only come from one or more of three (sort of) sources. The money must come from the government’s printing press—but that’s the same as the guaranteed income; the dollars just follow a more convoluted path into economy than direct disbursement.  Or the money must come from taxes, which takes money away from consumers and producers directly and leaves them with fewer dollars with which to buy goods and services or to buy inputs to production. Or the money must come from borrowing—which is future taxes or future money printing.

It’s hard to believe that all of those politicians slept through their high school economics, whether they’re today’s crop, like Progressive-Democratic Party Presidential candidate and minor town mayor Pete Buttigieg, newly graduated from high school, or Progressive-Democratic Party Presidential candidates and Senators Bernie Sanders (I, VT) and Elizabeth Warren (D, MA), who were in high school the first time this idea was floated those years ago.

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