Objections To Universal Basic Income Debunked (Updated Re-Post)

Back in 2017, there was an article in The Week by Damon Linker titled, "The Spiritual Ruin of a Universal Basic Income".  He basically argues that it is a Very Bad Idea for the left to pursue the idea of a UBI because 1) it fails to address (and perhaps even intensifies) the psychological and spiritual consequences of joblessness, which are (in his view) distinct from and worse than the economic consequences, 2) most people couldn't handle joblessness even with a basic income, and would thus become depressed and purposeless and give themselves over to video games, porn, and/or drug addiction, and 3) the left should not concede that automation (and the resulting job losses) is in any way inevitable.  Because reasons, obviously. 

And all of these things are in fact false.  (Or to be exceedingly charitable, highly subjective at best.)

First, only a person of relative privilege could possibly see the economic consequences of joblessness as somehow entirely separate from, and less significant than, the (admittedly real) psychological and spiritual consequences of same.  The former can indeed cause or contribute to the latter in a big way, and it is very difficult to disentangle them.  Material poverty and desperation are in fact well-known to be objectively harmful to the mind, body, and spirit, and only meaningful work (as opposed to work for the sake of work) can really be said to be beneficial to same.  And when the economic consequences are resolved via a UBI, the remaining noneconomic consequences of unemployment would in fact become that much easier to tackle in practice.  Think about it. 

(Maslow's Hierarchy of Needs, hello!  Only when the lower rungs of basic physiological and security needs are satisfied (which UBI does) is it even possible to even partially achieve the higher rungs.)

Second, there is NO logical reason why a UBI and the sort of New Deal 2.0 jobs program that Linker advocates would be mutually exclusive.  The TSAP, in fact, advocates exactly that combination, with both a UBI and a scaled-up Job Corps style program for everyone who wants one (even if not quite a guarantee).  We also advocate shortening the workweek as well, which would spread the remaining work among more workers, thus more jobs.  (The vaunted 40 hour workweek is literally a relic of 1938, and even then was almost going to be set as low as 30 hours.)  Thus, the noneconomic consequences of joblessness can also be adequately dealt with as well, and in any case, one can always choose to do volunteer work (and there most likely will still be plenty of that available) to get the same ostensible psychological and spiritual benefits as paid work.  So that is NOT a valid reason for the left to abandon the idea of UBI, anymore than it would be a reason to abandon the idea of a social safety net in general.

(Actually, John Maynard Keynes, along with many other futurists, predicted that with the increases in productivity due to technology, the average workweek would eventually shrink to 15 hours by the end of the 20th century.  Of course, that didn't happen, since the oligarchs took nearly all the fruits of the productivity gains since the early 1970s, thanks to neoliberalism.)

Third, the idea that UBI will cause most people or even a particularly large chunk of the population to become lazy and/or self-destructive is NOT borne out by the facts.  Numerous experiments with UBI and related schemes have been conducted in diverse cultures and locations in the past half-century, and the overwhelming weight of the evidence to date strongly suggests that this will NOT occur.  If anything, one notable effect is an increase in entrepreneurship due to a decreased fear of failure and more time and money to invest in their goals. Students and new mothers will likely work fewer hours than before since they are no longer forced by dint of economic necessity (the effect on hours worked is likely negligible for everyone else), but is that really such a bad thing?  Of course not.

No serious proposal for UBI has advocated one large enough to "live large" on that alone.  (The most common proposals, including the TSAP's, rarely exceed $1000/month per adult and $500/month per child under 18.)  Thus, there will still be plenty of incentive to work, since unlike traditional means-tested welfare programs, there is no penalty for earning more money than some arbitrary threshold.

In any case, with or without UBI, workers will work, and shirkers will shirk regardless.  Employers may (at first) not be pleased about having to pay somewhat higher wages than before to attract and retain quality employees, but them's the breaks for solving collective action problems.  In other words, it would now have to be entirely by mutual consent, not desperation or coercion.  And ultimately, even the employers themselves will benefit in the long run as well, as Henry Ford famously noted long ago.

(If we really want to incentivize work in the event of a labor shortage, we can, in addition to UBI, expand and convert the EITC to a simpler "reverse payroll tax" that automatically tops up workers' paychecks by matching dollar for dollar up to a point.  Such carrots would work far better than sticks in the long run.)

(And to all of the truly horrible and insufferable bosses out there, well, hear that?  That's the sound of me playing the world's smallest violin for you.  So go swallow your pride (and greed, envy, gluttony, sloth, wrath, and lust, while you're at it), before it swallows you whole.  And at the same time, to all of the users, welchers, leeches, dregs, and ne'er-do-wells, there's the door.  Don't let it hit you on the way out!)

Nor is there any credible evidence that substance abuse would significantly increase either as a result of UBI, and it may even decrease.  But just to drive the point home even further, Silicon Valley entrepreneur Sam Altman argues that even if 90% of the population sat around smoking weed and playing video games instead of working, a UBI would still be better on balance than not having one, as everyone would be free to pursue their passions, and the remaining 10% would innovatively create new wealth.  Not that he thinks that 90% would actually do that, of course, and nor do we, but the point was well-made nonetheless.  One can also point to the Rat Park studies as well.  It is amazing how addiction of any kind diminishes or even disappears when rats (or people) are not treated like caged animals in the aptly-named "rat race"!

(Some cynics will inevitably bring up the infamous Universe 25 "mouse utopia" experiments, but that would really be a gross disanalogy, since a gilded cage is still a cage regardless. And in any case, at the end of the day, rats and mice are not people.)

And finally, a real pragmatist would realize that automation really is inevitable in the long run.  Contrary to what the neo-Luddites like to argue, fighting against it will NOT stop it, only delay it a bit.  The best that we genuine progressives can do is admit that fact and do whatever we can to ensure that the fruits of this automation will benefit all of humanity, and not just the oligarchs at the top.  To do so, we must take the power back from the oligarchs.  And a crucial step to that goal is a Universal Basic Income, so We the People can actually have some bargaining power, no longer dependent on our employers for survivial.  No longer would anyone have to be at the mercy of the all too often merciless.  Whether we get this one right will basically be the difference between a futuristic pragmatic utopia or protopia (as Buckminster Fuller envisioned) or a horrifying technocratic dystopia straight out of 1984, Brave New World, or [insert other dystopian novel here].  So let's choose the right side of history!

After all, as the late, great Buckminster Fuller--the Leonardo da Vinci of the 20th century, famously said all the way back in 1970:

We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.

Thus, on balance, a Universal Basic Income Guarantee for all is a good idea regardless.  A win-win-win situation for everyone but the oligarchs.  And the only real arguments against it are selfish, patronizing, paternalistic, and/or sadistic ones, which really means there are NO good arguments against it in a free and civilized society.  So what are we waiting for?

For more information and a much deeper dive into this topic, see the TSAP's "Why UBI?" page.

P.S.  I realized that the above arguments are largely utilitarian or consequentialist in nature, which still leave the reader wondering about nonconsequentialist or deontological arguments.  For the latter, Immanuel Kant's categorical imperative can also be said to apply to UBI:  "Always treat humanity as an end in itself, and never solely as a means", as well as his principle of universalizability.  Or as Robert Reich says, "The economy exists to make our lives better. We do not exist to make the economy better."  And let's not forget the Golden Rule:  "Do unto others, what you would have others do unto you", per Jesus Christ, plus the more subtle Silver Rule "Do NOT do unto others, what you would NOT have others do unto you," per Confucius, as well.  Thus, even when ignoring all utilitarian arguments, the case for UBI still exceeds any case against it.

(See also some recent articles that directly or indirectly mention the concept of UBI, here and here.)

And regardless, if we make the perfect the enemy of the good, we ultimately end up with neither. 

(Mic drop)

UPDATE:  And in case anyone brings up the "original intent" of the Founding Fathers of the USA, keep in mind that one of them, Thomas Paine, actually advocated for some flavor of what we would now call UBI, what he called a "demogrant".  So UBI is actually well within the envelope of the Founders' idea of limited government, and truly transcends the usual left-right political spectrum.  Such disparate thinkers from Dr. Martin Luther King Jr. to Milton Friedman to Charles Murray to Nina Turner to Andrew Yang to Ellen Brown to Rodger Malcolm Mitchell to even (however briefly) Hillary Clinton have all gone on the record supporting some flavor of UBI, as has the entire libertarian-leaning red state of Alaska since the 1970s.

A "Job Guarantee", Without The Guarantee?

The TSAP has once endorsed the MMT idea of a Job Guarantee (JG), which is exactly what it sounds like.  Of course, we also supported Universal Basic Income (UBI) with NO strings attached as well for years now, but still maintained that a JG would be good in addition to that.  However, we no longer support that idea anymore.  JG, in all of its flavors, has far too many conceptual, logistical, and ontological problems to be workable at scale, as Rodger Malcolm Mitchell notes in his article, and several others.

So what do we at the TSAP support instead of JG?  Well, we clearly support UBI, hands down.  But beyond that, we support a scaled-up version of something like Job Corps, and which is basically a Job Guarantee but without the "guarantee" part.  That is, simply a jobs program, both for finding and creating jobs as needed, and one that provides only useful work rather than the Sisyphean make-work boondoggles that would inevitably occur in a true JG program.  Otherwise, it is guaranteed to fail.

Don't Want A Worker Shortage? Stop Paying Starvation Wages!

The media hype over a supposedly widespread worker shortage gas been rife lately, and of course being blamed on a supposedly over-generous social safety net, particularly the expanded unemployment benefits put in place during the pandemic and still continuing to this day.  That supposedly makes it pay more to stay on the dole than to go back to work.  But the "absent referent" here, the biggest elephant in the room, is that wages are currently still too low.  If the federal minimum wage had kept up productivity gains since 1968, it would be about $22/hour today, similar to the current de facto minimum wage in most of the Nordic countries.  Given how the worker shortage is primarily concentrated in the lowest-paying jobs, the solution is very simple:  if employers want employees so desperately, then stop paying starvation wages, and pay the workers at LEAST what the market says they are really worth, and of course enough to, you know, LIVE on.  Problem solved.  Next.

In the meantime, as for the idea of unemployment benefits being too generous, if a true labor shortage were really a widespread problem, all they would need to do is take the extra $300/week bonus and instead repurpose that money as a wage subsidy to low-wage workers.  The latter bonus could be a sort of "reverse payroll tax" that automatically tops up one's paychecks directly.  Otherwise, leave the current benefits as is, albeit perhaps reinstating the work search requirements after some time, and require furloughed workers who are called back to their jobs to return to work after a reasonable amount of time.

It is worth noting that an actual Universal Basic Income (UBI) contains no such perverse incentives (unlike over-generous unemployment benefits), since one can still receive it regardless rather than have to give it up upon returning to work.  But it can still effectively increase the bargaining power of workers, increasing the de facto minimum wage.

A Better Way To Solve The Mother Of All Fiscal Cliffs

With the extra $600 per week in unemployment benefits set to expire today, combined with the income tax deadline that just recently passed (July 15), the country faces the mother of all fiscal cliffs.  As a result, the money supply would shrink in August, and millions of Americans would have less money to spend right while the eviction moratorium expires and several months of their rent effectively becomes due all at once.  And the timing could not be worse, given the fact that the GDP apparently shrank by nearly a third (32.9%) in the second quarter of this year, the worst quarter in American history (and even worse than the European average now!), while any hope of recovery is currently sputtering now at best.

That is, the US economy literally shrank by a greater annualized percentage in just three months than in the entire four years (peak to trough) from 1929-1932, the worst of the Great Depression, when GDP shrank by 30.5%.  Let that sink in.  Meanwhile, the UK is currently experiencing their worst recession in at least 300 years.  Now that really says something!

Thus, a very, very big stimulus is necessary right now to prevent a long-term, full-blown depression of epic proportions.  Depressions are fundamentally caused by a shortage of money.  After all, GDP is literally just a spending measure, and most of that is consumer spending and government spending.  The caveat, of course, is that not even all the money in the world could fill (and can barely even briefly paper over) the inherently massive hole left in a shuttered-by-fiat economy until after the economy is fully reopened, at least not for very long.  Thus, the TSAP recommends the following steps be taken, yesterday:

• Expand the $600 per week to ALL Americans period, not just those receiving unemployment benefits, no strings attached.  Anyone with an SSN or ITIN gets it.  Maintain such payments until at least December 2020.
• Create a permanent UBI for all Americans, of $230 per week ($1000 per month) for adults and half that amount for children and young people under 18, for when the temporary extra $600 finally expires.  Again, no strings attached.
• Pass the HEROES Act and all of its associated stimuli, not the cheap Republican knockoff version.  After all, without essential workers, civilization would have collapsed by now, so it is literally the LEAST we can do to thank them.
• Extend the eviction moratorium until September 1 or until enough of the funds from the above are disbursed into the pockets of the people so they can pay enough to avoid eviction, whichever occurs later.  Consider also cancelling (and directly compensating with federal funds) landlords for all past due rent dating from March 1 until August 1.
• More funding to shore up small businesses, which are the very bedrock of the economy.
• Keep the US Postal Service running with whatever federal funds are necessary.
• Increase aid to the states, and funding for hospitals as well.  And while we're at it, implement Medicare For All as well.
• Three words:  Green New Deal.
• And of course, DON'T shut down again!

As for the so-called National Debt, that is really a non-problem for a Monetarily Sovereign government like our federal government, since they can literally just print the money.  And right now we have far more to worry about from deflation than we would from inflation.  Even if inflation did occur, all the federal government would have to do is resolve the shortages in goods and services that caused it, by directly purchasing such goods and services at a premium and selling (or giving) them at a loss.  And failing that, the FERAL Reserve (which, we gotta say, has been doing the heaviest financial lifting in terms of shoring up the economy just enough to prevent a total collapse thus far) can always raise interest rates and/or the reserve ratio (both of which are at rock-bottom levels), sell bonds to shrink its massive balance sheet (Quantitative Tightening), and/or drain and sterilze excess bank reserves if and when the "inflation dragon" ever does rear its ugly head at some point.  Thus, it would really be a non-problem.

So what are we waiting for? 

Raise The Floor, And Also Trim The Top

It is well known that excessive inequality is very harmful to both the economy and society at large.  Even before we learned the truth about Monetary Sovereignty (MS) and Modern Monetary Theory (MMT) in 2018, the TSAP has long supported both a Universal Basic Income for all, and has also supported hiking taxes on the rich as well.  And even after learning about MS and MMT, we still support hiking taxes on the ultra-rich, and for good reason.

Some may be scratching their heads.  Why do we even need federal taxes at all, if our Monetarily Sovereign federal government has infinite money?  They clearly don't need taxes to pay their bills.  But taxes also have other useful functions as well:

• Taxes compel the use of the official currency, thereby giving it value in the first place.  
• Taxes automatically "claw back" excess liquidity in the money supply due to the "velocity of money", thus to an extent crudely preventing demand-pull inflation before it happens.
• Taxes can be used for social engineering (think vice taxes and Pigouvian taxes) in ways that are otherwise difficult, impossible, illiberal, illegal, and/or unethical to do by other means.
• And finally, progressive taxes can be used to "trim the top" when levied on the top 0.1%, thus reducing inequality without leading to runaway inflation.  Rodger Malcolm Mitchell compares this to a "trophic cascade", such as when wolves (i.e. the federal government) keep elk populations (i.e. the oligarchs) from getting out of control and devouring everything in sight.

So what sort of federal taxes would be suitable for this purpose, knowing what we know now?

• A rich-only, steeply progressive income tax like the kind that prevailed before WWII.  At least the first $100,000 to $500,000 would be exempt, and the new brackets would include marginal rates of 50% above the first $1 million, 70% above the first $10 million, and perhaps 90% above the first $100 million.  With NO LOOPHOLES this time. 
• Tax dividends and capital gains the exact same as ordinary income, but index the basis to inflation for capital gains.
• For the largest corporations, especially those who are "too big to fail", a top tax rate of at least 50%, with NO LOOPHOLES this time.  Tax only retained earnings.  Smaller corporations should not be taxed at all.
• The Universal Exchange Tax, i.e. a tiny tax of 0.1% or less on all electronic transactions.  It would actually be highly progressive in practice since the rich make a disproportionately high amount and number of transactions compared to the non-rich.  "The more you play, the more you pay."
• Various vice taxes (alcohol, tobacco, cannabis, etc.) and Pigouvian taxes (pollution and resource depletion).
• Land value taxes and severance taxes on natural resources such as oil and gas.
• And, of course, the estate tax needs to be made more progressive as well.

State and local governments, of course, are not Monetarily Sovereign, and thus need to raise revenue to pay their bills.  And they can piggyback on the aforementioned federal taxes and levy their own, especially the Universal Exchange Tax and the land value tax and severance taxes, and thus reduce or eliminate their currently regressive sales and property taxes.  Additionally, federal aid to the states should be increased for precisesly the same reason.

A UBI would indeed abolish absolute poverty, no doubt about that.  And that alone would have numerous individual and social benefits.  But without progressive taxation of the top 1% and 0.1%, it would do nothing to reduce relative poverty, and may paradoxically increase inequality.  And inequality in itself is harmful, over and above the effects of poverty.  Thus, it is not enough to either raise the floor or trim the top, we need to do both.  Yesterday.

Thus, Rep. Alexandria Ocasio-Cortez essentially has the right idea as far as taxes go.  And of course, the oligarchs and their sycophantic lackeys are coming down hard on her, but that just goes to show how effective her ideas are in terms of reducing the Gap between the haves and have-nots, which the oligarchs utterly depend on.  All the more reason to do it.

UPDATE:  Elizabeth Warren recently proposed a wealth tax of 2% on the assets of those with a net worth of $50 million and up (that is, on the top 0.1%), and up to 3% above the first billion.  Only the amount over the first $50 million would be taxed.  Controversial as it is, it actually makes a lot of sense, and the TSAP would certainly not oppose it. 

What "Give People Money" Gets Right--And Wrong at the Same Time

One of our favorite journalists, Annie Lowrey, recently wrote a book called Give People Money:  How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World.  As its self-explanatory title suggests, she is clearly in favor of the idea, at least in principle, and notes all of the many benefits to society that a Universal Basic Income (UBI) would have.  She does a great job of delineating such benefits and thoroughly debunks numerous myths about this big idea.  So overall, it is a good book.

That said, while her thesis starts out practically on fire in terms of ambition, it really starts to coast towards the end when the practical issue of cost starts to seep in.  Then, her proposals start to get significantly less ambitious than a true UBI, namely a negative income tax (like the kind Nixon once proposed and was ultimately weakened into what became the Earned Income Tax Credit) and/or a smaller UBI-style payment for children only.  True, those weaker versions would indeed be cheaper, and far better than doing nothing at all.  And it would certainly be more likely to pass through Congress, no doubt about that.  But the larger point is still being missed in terms of the nature of the cost issue.

And that larger point is that since the United States federal government is Monetarily Sovereign, the whole cost issue is really a non-issue when you think about it.  It is a Big Lie that federal taxes actually pay for federal spending, and that the federal government can somehow run short of dollars.  They can literally create infinite money, thus money is literally no object in that regard, if only they would act like it and dispense with the Big Lie once and for all.

In fact, Rodger Malcolm Mitchell himself advocates a form of UBI that he calls the Economic Bonus (EB), which is Step #3 of his recommended Ten Steps to Prosperity.  It is similar to Social Security for all, but without the FICA tax (which he believes should be abolished), and paid for entirely via money creation (i.e. spending it into existence).  Though the figures he provides are not set in stone, he advocates that we start with $1000/month for everyone over the age of 21 and $500/month for everyone below that age.  The TSAP fully agrees, except that we think the age threshold for the full amount should be 18 instead.  Or perhaps give the same amount (say, $500) to everyone regardless of age to start with.  Either way, once it is started, the numbers can be easily adjusted.  And $1000/$500 is a very handy number since that is roughly the amount that would be enough to eliminate poverty as well as give workers much more bargaining power than they have currently, while still not being so ludicrously high as to trigger runaway inflation or other adverse effects.  And best of all, it wouldn't cost the taxpayer one penny.

And Presto!  The square has thus been circled--or is that the other way around?

Oh, and about that inflation thingy, keep in mind that despite three rounds of QE, nearly $30 trillion in secret bailouts for the banks, $21+ trillion in national debt, and the Pentagon "losing" another $21 trillion despite putting two (or four) wars on the proverbial credit card, all of this money created out of thin air in fact, and economic growth finally roaring back to life (for now), we are still nowhere near the point of runaway inflation.  Not by a long shot.  If anything, we are still under the shadow of what Larry Summers calls "secular stagnation" thanks to chronic, extreme economic inequality and related socioeconomic ills.  And if ever we did get anywhere near that point, we know now exactly how to prevent and cure such inflation via interest rate control, and failing that, simply create less new money going forward.

So what are we waiting for?

The Big Lie of Economics

Big Lies have a very long history indeed.  As the infamous Nazi propaganda minister Joseph Goebbels (who knew quite a thing or two about lying) noted, the bigger and dumber the lie is, the more likely people are to believe it.  And you know what, it works. Counterintuitive, perhaps, but true nonetheless.

So what if some politician, pundit, academic, or activist were to make the following claims, which you probably have heard over and over again, ad nauseam?  Would you believe them?  Here goes:

• Federal taxes pay for federal spending, and any shortfall in revenues (i.e. "deficit spending") must be made up by the federal government borrowing money to cover the deficit.
• It must be this way, because otherwise the federal government will run short of dollars, which are finite.
• The federal government is literally bankrupt and can no longer afford to keep paying for Social Security, Medicare, and Medicaid, let alone anything more ambitious and progressive.
• Things like Universal Basic Income (UBI), tuition-free public college for all, state-of-the-art infrastructure, and single-payer Medicare For All sound like good ideas on paper, but we literally can't get the numbers to add up.  Sorry.  Oh well.
• If the national debt as a percentage of GDP rises above some arbitrarily high level, the federal government will have no choice but to default.
• Thus, we will have no choice but to accept an austerity "menu of pain" at this point, both large tax hikes and/or deep spending cuts. (Austerity for the bottom 99%, that is.)

Well, guess what?  Each and every one of those specious statements is absolutely FALSE.  Period.  Not even a kernel of truth in there, except for the completely contrived self-fulfilling prophecy that believing such lies leads to, starting with the very first statement on that list, and it goes downhill from there.  Wait, what?  That's right, federal taxes do NOT actually pay for federal spending, because our federal government is Monetarily Sovereign.   They literally create brand new dollars out of thin air every time they spend money, with no need to borrow any money or raise any tax revenue at all.

So why do they borrow, if they don't really need to?  First, it is due to one of several arcane and archaic rules left over from when we actually had the gold standard, which we haven't had since 1971*, that requires matching spending with either taxes or borrowing.  Secondly, federal government borrowing is simply issuing Treasury securities, which are in practice  really a fancy kind of national savings account rather than "debt" as the term is usually understood.  And those Treasury securities are a safe haven for investors that helps to stabilize the financial system, and also provides a handy platform for the government to control interest rates.  So Congress could simply pass a law changing the rules and implement Overt Congressional Funding instead, thereby completely decoupling spending, borrowing, and taxes, while still allowing investors to park their money in Treasury securities if they so choose.

Oh, and how about taxes then?  Where exactly does all of that money go?  Well, that is where it really gets, um, interesting to say the least.  (Sit down before you read any further.)  For practical purposes, all of those trillions of federal tax dollars each year get....DESTROYED upon receipt.  Yes, you read that right, DESTROYED.  Since the federal government by definition has an infinite amount of money since they can create it at will by fiat, taking money from We the People is like bringing coals to Newcastle only to destroy them.  Of course, due to those arcane and archaic rules, the money does not get destroyed immediately, but rather it first makes a brief pit stop at the privately-owned FERAL Reserve. But the end result is exactly the same nonetheless.   

(In contrast, state and local governments are NOT Monetarily Sovereign, so they must either raise taxes or borrow money in order to spend, and their tax dollars are deposited in private bank accounts prior to spending them.  Ditto for the Euro nations as well.)

That does not meant that federal taxes are entirely useless, however.   For one, they can be used to give the official currency "teeth" by compelling its use to pay such taxes and not accepting any other currency as payment for such taxes.  They also function as a useful tool for social engineering that is difficult or impossible to do otherwise (think vice taxes and Pigouvian taxes, as well as taxes on the ultra-rich) as well.  And they can also act as a (rather crude) tool for inflation control as well, by being a sort of "automatic stabilizer" when the economy overheats.  But paying for federal spending and servicing the national debt?  If you believe that we need to actually take money out of the economy to pay for that which the government can literally just create out of thin air, well, we've got a nice bridge we'd like to sell you.

Thus, it follows logically that the rest of the aforementioned list of lies are, well, lies all the same.  Austerity (which does far more harm than good) need not be on the menu any longer, and we can opt for truly shared American prosperity instead.  And that means that all of the right-wing, neoliberal pack of lies about the economy also falls like the house of cards that it is.  All of those things that both corporate parties claim that we cannot afford can now be ours.  If only our politicians would just be honest for once (as tall an order as that may be).

Bottom line:  Money is really nothing more than a tool.  And like any tool, it can indeed be weaponized--in this case, by the oligarchs and their sycophantic lackeys in government against We the People.  They use the con-tricks of austerity and artificial scarcity to systematically widen the Gap between the haves and have-nots (and between the have-mores and have-lesses).  But it does not have to be this way at all, and in fact We the People can turn the tables on the oligarchs by electing honest representatives that know the true meaning of Monetary Sovereignty. 

So what are we waiting for?

(Hat-tip to the ever-insightful Rodger Malcolm Mitchell, Alan Longbon, and Joseph M. Firestone, for all showing us the wisdom of Monetary Sovereignty and the related Modern Monetary Theory, respectively.  Before first discovering their writings on the topic in 2018, even the TSAP had previously fallen for at least a few of the variations of the Big Lie above.)

*NOTE:  The Gold Standard in the USA functionally ceased to exist when Nixon suspended convertability of dollars to gold in 1971. Though originally intended to be temporary, this "Nixon Shock" was made permanent in 1973, ending the Bretton-Woods System for good, and any remaining nominal link between dollars and gold (along with any restrictions on private gold ownership and trading) was subsequently removed from the law books by 1976. The United States Dollar is now a purely fiat currency and the federal government is now fully Monetarily Sovereign (even if they don't always act like it).

We Endorse Andrew Yang 2020 (With Reservations)

As we have noted in the previous post about upcoming Democratic 2020 presidential candidate Andrew Yang, based on his stance on the issues, the TSAP hereby endorses him as our honorary candidate, albeit with the following reservations:

1. First and foremost, the TSAP beleives that the Universal Basic Income (UBI) Guarantee for all should either be the same for all ages, or at least half the adult amount for unemancipated young people under 18.  And people 18 and over should get the full amount, period, without any conditions, and seniors over 65 should be free to choose between UBI or Social Security, but not both. Yang's proposal differs from that in that only people aged 18-64 will get it, and if you haven't graduated high school, you won't get it until age 20.  That is ageist, classist, ableist, and paternalistic, and thus will not eliminate poverty for everyone, defeating the program's purpose.
2. Dovetailing with reservation #1 above, Yang's desire and ideas to help poor people and especially single parents (which the TSAP fully agrees with) kinda clashes with his age restrictions on the UBI.  Many younger mothers (and fathers) along with their children will thus remain locked into poverty until age 20 unless Yang removes that age restriction from the UBI.  And the effects of early childhood poverty can linger long after they are no longer poor.
3. For the American Exchange Program he proposes, the TSAP has quite a bit of skepticism, both logistically as well as in terms of equity.  And the idea of tying it to the UBI for recent high school graduates kinda defeats the purpose of UBI.
4. Nuclear power--the TSAP no longer supports expanding it any further.
5. The nuclear family--Yang does seem to idealize it a little too much at times, though still far less so than Republicans do.
6. His whole plank about the ubiquitous "kids and smartphones" issue, though more enlightened and nuanced than most proposals out there, does still seem to reek of ageism and paternalism a bit.
7. He does not appear to be calling for free college for all like we do, but rather "controlling the costs".  The TSAP believes that, while a step in the right direction, it still misses the mark.
8. He wants to "modernize" military spending, but says nothing about cutting it.  The TSAP says, why not both?  We need to cut our ridiculously bloated military spending yesterday, by at least half--and we will still have the strongest fighting force in the world, by far.
9. He wants to reduce the student loan debt burden, but not have a complete jubilee like the TSAP recommends.
10. And of course, not a single word about the FERAL Reserve and its usury-and-debt-based funny money that is the root of so many of our problems.  Which is understandable, since the banksters would like have him meet the same fate as JFK and Lincoln if he actually stood up to them and tackled this head-on while in office.

That said, the above reservations aside, we will nonetheless wholeheartedly endorse him for President of the United States.  Just about everything else on his platform we fully and enthusiastically support.  Given all the things he gets right, he will be a major asset to our nation and world.

An Honorary TSAP Candidate, Andrew Yang 2020

Imagine if you were to indefinitely receive $1000 per month, with no strings attached.  That is a whopping $12,000 per year.  Not enough to live large on by itself, but most Americans can certainly use the help these days.  And the only catch?  It would be funded by a certain type of business tax of 10% on most goods and services, that would predictably be passed onto the consumer and thus result in an overall 10% increase in prices.  Clearly, most if not nearly all people would come out way ahead.  Would you take it?

If the answer is yes, then Andrew Yang is your man.  The 43 year old entrepreneur plans to run for President of the United States in 2020, and is promising something than Hillary, Trump, and even Bernie did not--a Universal Basic Income (UBI) Guarantee for all, which the TSAP has also advocated.  And the tax he is proposing is a value-added tax (VAT) that most other countries have, similar to a sales tax but collected a bit differently and built into the price of the affected goods and services.  He believes that robotics and automation will eventually take so many jobs that our collective hand will be forced to come up with a UBI, and his VAT idea for a funding source would theoretically be the best way to capture the gains that businesses make from robotics and automation (and thus internalize the externalities that the resulting losses impose on society).  

Granted, the TSAP proposal is a bit different than his in two ways . First, we do not consider a VAT to be our preferred funding source (though we do not oppose it), as we prefer either the Universal Exchange Tax (UET), progressive income taxes, land value and severance taxes on natural resources, carbon taxes, luxury taxes, money creation, or some combination of these.  Secondly, our proposal would have it for all ages, not just 18-64 like he wants, and under our proposal those old enough to receive Social Security can choose either the UBI or Social Security, whichever is higher (but not both).  And those under 18 would receive at least half the adult amount if not the full amount, with it going to the parent(s) or guardian(s) by default (or to the young person directly, if emancipated earlier than 18).  But otherwise, Yang's bold-yet-modest proposal is right up our alley.  It is high enough to eliminate absolute poverty completely and give workers much more bargaining power, while still being low enough for society to afford as well as low enough to alleviate the largely overblown fear of disincentivizing work (since it is highly unlikely that anyone can live comfortably on only $12,000 per year for very long).  And since there are no means tests or discrimination, and it is strictly individualized, that also means that there are no perverse incentives, welfare traps, or gaming the system either.  And it would be like a giant, permanent B-12 shot for our currently secularly stagnating economy.  It's a win-win-win situation for everyone but the oligarchs, in other words. 

Thus, the TSAP hereby considers Andrew Yang as an honorary candidate for 2020.  We are not sure how he stands on other issues--though we do know he's a Democrat--but unless his stance on other issues proves us wrong, we will nonetheless wholeheartedly endorse him in the meantime.

UPDATE:  Looks like his stance on other issues is also generally within the bounds of what the TSAP supports as well, including (but not limited to) single-payer healthcare for all.  Thus, we hereby endorse him as our honorary presidential candidate for 2020 unless he does an about-face and proves us wrong.

The Real Cause of "Secular Stagnation": Extreme Inequality

Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past.  Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions".  And at least since the Great Recession, the data do indeed seem to bear this out.  Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth.  One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.

But why is this happening, exactly?  Some blame demographic changes, particularly population aging, as one of the causes.  But while this theory may be at least partially true, it only seems to explain, at most, one-third of the trend of secular stagnation.  Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth.  That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.

But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels.  Or should we say, at banana republic levels these days.  The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs.  Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity.   The oligarchs at the top took nearly all of the gains.  And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt.  Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.

Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth".  They really hit the nail right on the head here.  After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.

Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII.  The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system.  And we also had a trade war from 1930-1934, which further deepened the Depression.  The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.

But what about in the long run?  Well, the Keynesian punch line to that is, "in the long run, we are all dead".  Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well.  That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral.  Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.

Thus, policies designed to tackle economic inequality would be beneficial in this regard.  In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well.  And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy.  Problem solved.

At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale.  Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well.  Yesterday.

So what are we waiting for?

How to Prepare for the Next Big Crash (Part Deux)

As we have noted before, things are really not looking good for the global economy this year.  Whether we actually experience another financial crisis on the order of 2008 or even 1929 (or worse) is a matter of debate, but the time to prepare for such a scenario is yesterday.  At the very least, another recession is inevitable at this point by 2019 at the very latest, since no economic expansion has lasted much more than eight years straight in this country (with the notable exception of 1991-2001 that lasted exactly ten years).  Granted, the expansion from July 2009 to the present mostly benefited the rich, and until around 2014 practically entirely benefited the rich, but it was still technically an expansion of the economy even if the growth was largely uneconomic in practice.  And expansions can only go on so long before a contraction (i.e. recession or depression) inevitably occurs--it's just a fundamental truth of the business cycle.

One thing is for sure--things are very different this time around at least in terms of monetary policy.  At least in 2008, interest rates were well above-zero, and could be cut to stimulate the economy (or, more accurately, stop or slow down the hemorrhaging).  When that proved to be futile, then the Feral Reserve and many of the world's other major central banks resorted to "quantitative easing" (i.e. creating money out of thin air and giving it to the banks directly).  In late 2014, the USA tapered off and ended its QE policy, and in December 2015 ended its zero interest-rate policy by raising the Fed Funds Rate to 0.25-0.50%.  Since then, the FERAL Reserve has raised rates five more times, most recently on March 21, 2018 to 1.50-1.75%, and many more hikes are on their way.  And combined with Trump's new trade war against China, that may have been enough to finally lance the massive bubble--make that the festering BOIL--that the stock market has been in for years now.  And since they now have a little bit of room to cut it--if they don't wait too long to do so--they probably seriously think that they can somehow engineer a soft landing if (and that's a VERY big "if") that is even possible at this point.  But not much room, really.

But many of the central banks of the world are still starting from zero or close to zero--and some banks including the European Central Bank and the Bank of Japan have even resorted to negative interest rates (!) by 2016.  That means they are effectively charging depositors for the "privilege" of depositing money, and effectively paying borrowers to borrow money, which basically turns the world of finance upside-down.  Such negative rate territory is uncharted waters, since until a few years ago no country has ever dared to do such a thing.  And there is currently no evidence to suggest that such a move will be beneficial in the long run, and may in fact turn out to do more harm than good overall.

So monetary policy basically needs a new set of tools and a new game plan to deal with the next crisis, whenever it occurs.  The Feral Reserve and the other central banks of the world are basically still using an outdated playbook.  In the near-term, two things need to change yesterday.  First of all, they need to abandon interest-rate targets altogether for the time being, and instead focus on targeting the growth of the overall economy.  Like Paul Volcker did in 1979-1982, but done in reverse since the "inflation dragon" is not the problem this time (unless the Trump tariffs really begin to bite). Secondly, implement Quantitiative Easing for We the People in general (as opposed to the banks, which only benefits the ultra-rich) by injecting newly-created money into everyone's bank accounts.  Granted, the latter measure would probably require an Act of Congress to allow it to occur legally, but as the Feral Reserve was just two years ago seriously debating the legality of negative interest rates, I'm sure they could find some sort of a loophole to allow it in an emergency such as a massive financial crisis.  And of course fiscal stimulus would likely be necessary as well, in additional to much needed reforms to regulate Wall Street and the big banks (a law that rhymes with "brass seagull" comes to mind, as well as a financial transactions tax and better regulation of the shadow banking system), but those two changes to monetary policy would go a long way towards preventing the next recession/crisis from turning into another 2008 or 1929 or even worse.  And the silly idea of negative interest rates really needs to be abandoned as well.

More fundamentally, of course, we need to nationalize the FERAL Reserve to make it a truly public national bank that creates money interest-free, and take the power back from the big banks.  Ellen Brown has written books about that very subject.  In the meantime, though, the aforementioned recommendations would still work in the near term.

But let's be brutally honest here.  What we are really witnessing these days is the slow and painful death of a woefully obsolete system, one that has been kept on life support for many years now.  And eventually we will have to pull the plug on it, sooner or later.  It's just a matter of time.

We Need A Carbon Tax-and-Dividend, Yesterday

We at the TSAP have long been pushing for a carbon tax-and-dividend (aka fee-and-dividend, feebate, fee with rebate, revenue-neutral tax, or Alaska Permanent Fund) since we first heard about the idea.  Steve Stoft, James Hansen, Elon Musk, and even some very unlikely supporters like the recently ousted Secretary of State and former ExxonMobil CEO Rex "Ruthor" Tillerson are known to support it to one degree or another.  And the list is growing.

Aside from the primary (and urgent!) reason for it-- mitigation of climate cataclysm--there is also another pressing reason for it:  simple justice.  The distributional impacts of a straight carbon tax (without any rebates) would be highly regressive, hitting poor people the hardest, and studies show that simply having the carbon tax replace other taxes would also be quite regressive as well.  And ignoring that fact would be a major intersectionality fail, to put it mildly.  But refunding 100% of the revenue to everyone in equal amounts would effectively make the tax quite progressive in practice.  And even better, it can also double as a Universal Basic Income (UBI) Guarantee for all, or at least a viable gateway to such a thing.  Once it becomes normal for every citizen to receive even a small amount money unconditionally with no exceptions, then the Overton window of political acceptability would have shifted enough to make it possible to simply increase the amount and/or finance a larger UBI through other revenue sources as well.  After all, if everyone's on the dole, then no one's really on the dole.  And if everyone's a rentier, then no one's really a rentier.  Thus, the idea transcends the left-right political spectrum and becomes an idea that even hardcore libertarians and right-wing populists/producerists can support, not just the left.

What better time than now?

Latest Minimum Wage Study Reeks of Junk Science

A new study claims that Seattle's minimum wage law cost jobs, despite the fact that their unemployment rate dropped dramatically since the new law began to be phased in, faster than the rest of the country, and is now one of the lowest in the nation at 2.6%.  But there is far less here than meets the eye, and their methodology is highly questionable.  For example, they curiously omit data from the entire fast-food sector, ostensibly due to lack of data (riiiiight!), and assume that any decrease in the number of workers earning below a certain wage is a result of fewer jobs rather than those workers simply getting a raise.  Yes, really.  All this specious study really proves is that if you torture the data enough, they will confess to anything.  And of course, Occam's Razor would strongly disagree with these results, which are way out of line with other recent studies.

One should note that the unemployment rate in Seattle has dropped so low that it has now reached Massachusetts Miracle territory, albeit for reasons unrelated to the minimum wage.  In the city's white-hot economy, restaurants are having a hard time finding help due to the tightness of the labor market, and are essentaily forced by the laws of supply and demand to pay employees significantly more as a result, regardless of the legal minimum wage. Keynes would have a field day.  And this alone could potentially account for the anomalous results in this yet-to-be-peer-reviewed study that should essentially be considered a radical outlier in the field.

With the issue of the minimum wage now in the spotlight again, we must keep in mind that the whole debate is a giant workaround. Thus, I will let the late great Buckminster Fuller answer the question:

"We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living."

And he said this back in 1970, mind you. With today's technology, it would apply *a fortiori* to our time, if it weren't for the greedy oligarchs who siphoned up all the labor productivity gains since then. How do we put his plan into action, you ask? A Universal Basic Income Guarantee for all is the best and most efficient way to do it.   Until then, by all means, raise the minimum wage.  Fight for $15!   But the root of the problem ultimately needs to be tackled as well, especially in a world of increasing automation and globalization.

The "Spiritual Ruin" of a Universal Basic Income? No, Not Really.

Recently, there was an article in The Week by Damon Linker titled, "The Spiritual Ruin of a Universal Basic Income".   He basically argues that it is a bad idea for the left to pursue the idea of a UBI because 1) it fails to address (and perhaps even intensify) the psychological and spiritual consequences of joblessness, which are (in his view) distinct from and worse than the economic consequences, 2) most people couldn't handle joblessness even with a basic income and would thus become depressed and purposeless and give themselves over to video games, porn, and/or drug addiction, and 3) the left should not concede that automation (and the resulting job losses) is in any way inevitable.

And all of these things are in fact false.

First, only a person of relative privilege could possibly see the economic consequences of joblessness as entirely separate from, and less significant that, the (admittedly real) psychological and spiritual consequences of same.  The former can indeed cause or contribute to the latter in a big way, and it is very difficult to disentangle them.  Poverty and desperation are well-known to be harmful to the mind, body, and spirit, and only meaningful work (as opposed to work for the sake of work) can be said to be beneficial to same.  When the economic consequences are resolved via a UBI, the remaining noneconomic consequences of unemployment would in fact become that much easier to tackle.

Second, there is no logical reason why a UBI and the sort of New Deal 2.0 jobs program that Linker advocates would be mutually exclusive.   The TSAP, in fact, advocates exactly that combination, with both a UBI and a Job Guarantee program for everyone who wants one.  We also advocate shortening the workweek as well, which would spread the remaining work among more workers, thus more jobs.  Thus the noneconomic consequences of joblessness can also be adequately dealt with as well.  So that is not a valid reason for the left to abandon the idea, anymore than it would be a reason to abandon the idea of a social safety net in general.

Third, the idea that UBI will cause most people or even a particularly large chunk of the population to become lazy and/or self-destructive is not borne out by the facts.  Numerous experiments with UBI and related schemes have been conducted in diverse cultures and locations in the past half-century, and the overwhelming weight of the evidence strongly suggests that this will not occur.   If anything, one notable effect is an increase in entrepreneurship due to a decreased fear of failure and more time and money to invest in their goals. Students and new mothers will likely work fewer hours than before since they are no longer forced by dint of economic necessity (the effect on hours worked is likely negligible for everyone else), but is that really such a bad thing?  Of course not.

Nor is there any credible evidence that substance abuse would significantly increase either as a result of UBI, and it may even decrease.   But just to drive the point home even further, Silicon Valley entrepreneur Sam Altman argues that even if 90% of the population sat around smoked weed and played video games instead of working, a UBI would still better on balance than not having one, as everyone would be free to pursue their passions and the remaining 10% would innovatively create new wealth.  Not that he thinks that 90% would actually do that, of course, but the point was well-made nonetheless.   One can also point to the Rat Park studies as well.  It is amazing how addiction diminishes or even disappears when rats (or people) are not treated like caged animals in the "rat race"!

And finally, a real pragmatist would realize than automation really is inevitable in the long run.  Contrary to what the neo-Luddites like to argue, fighting against it will not stop it, only delay it a bit.  The best that we progressives can do is admit that fact and do whatever we can to ensure that the fruits of this automation will benefit all of humanity and not just the oligarchs at the top.  To do so, we must take the power back from the oligarchs.  And a crucial step to that goal is a Universal Basic Income, so We the People can actually have some bargaining power, no longer dependent on our employers for survivial.  Whether we get this one right will basically be the difference between a futuristic pragmatic utopia (as Buckminster Fuller envisioned) or a horrifying technocratic dystopia straight out of 1984, Brave New World, or [insert other dystopian novel here].  So let's choose the right side of history!

After all, as the late, great Buckminster Fuller--the Leonardo da Vinci of the 20th century, famously said in 1970:

We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.

Thus, on balance, a Universal Basic Income Guarantee for all is a good idea regardless.  A win-win-win situation for everyone but the oligarchs.  And the only real arguments against it are paternalistic and/or sadistic ones, which really means there are no good arguments against it in a free and civilized society.  So what are we waiting for?