Tuesday, July 30, 2013

In Which I Fix Everything

A while ago I started thinking about how I would go about designing a functional welfare state. As a libertarian bordering on anarcho-capitalist I'm not a big fan of the concept in the first place, but if it had to be done we could certainly improve upon the idea and fix a bunch of other problems while we're at it. I limited myself to preserving existing institutions in some form, since traditional libertarian shibboleths like abolishing the Federal Reserve in favor of a 100% reserve requirement gold standard or ending all welfare payments immediately don't really address the problems of institutions that we're basically stuck with whether we like it or not. So, if I had the power to reform political institutions but not replace them outright, I would approach the problem with the goal of eliminating the following problems:

I. Unnecessarily complex and divisive tax policy.
II. Obscure individual costs of government programs.
III. Welfare system is wasteful and creates disincentives to work.
IV. Ineffective, unfair monetary policy tools.

I'll discuss each of these in order.

Unnecessarily Complex and Divisive Tax Policy


So, first up is the tax system. Taxes cause deadweight loss that increases proportionate to the square of the tax rate. Economists across the political spectrum agree on this, but those who favor higher taxes generally view that the government is just so much better at spending money than the rest of us that it's still a good idea to have high taxes. Deadweight loss is also affected by the price elasticity of supply and price elasticity of demand with smaller deadweight losses suffered when elasticity of supply and demand are relatively low. To maximize revenue for a given deadweight loss, tax rates would be inversely proportionate to price elasticity.

However, actually figuring out price elasticity is very much like shooting in the dark at a moving target. Nobody really knows what the demand curve for anything actually looks like since consumer preferences are only made known through purchases at a given price point, and changing the price of a good to get another price point only gives us one more point with which to construct a curve that is by no means a straight line. Furthermore, the greater the time disparity between the collection of purchase data at different price points, the more likely it is that consumer preferences have changed in the meantime. Consumers also take note of frequent changes in price, and this affects their purchasing behavior. As a practical matter, actually constructing an accurate demand curve is a pipe dream.

Companies hire economists to try to figure this stuff out anyway, since taking an educated guess is a bit better than nothing, but if we were to try to base tax policy on it, we would introduce a lot of inefficiency-inducing political pressures at every point where a judgment call is necessary, and the accuracy of the results would be even worse. It would also run counter to the goal of avoiding unnecessary complexity in tax policy.

So, what I would do is replace all current taxes (income tax, payroll taxes, corporate income tax, etc) with a Value Added Tax. It's basically a sales tax that is collected at each stage of production instead of just at the end. To eliminate the possibility of carousel fraud and not distort relative prices of imports and domestically produced goods, the VAT would also apply to the value of imports. The IRS would perform a function similar to the UK's HM Revenue and Customs, although there would be no exceptions or variable VAT rates for different goods. This would minimize the potential for abuse and inefficiencies induced by political pressure, as well as prevent nonsense like the case of Jaffa Cakes being a cake or a biscuit for tax purposes.

Aside from reducing compliance costs with taxation, a VAT would give everyone a stake in government spending. There is a very strong tendency in a representative system of government to try to make other people pay for things that benefit you. As a general rule of thumb, politicians respond to people according to their political significance. Swing voters (and in presidential elections, swing states) get subsidies and lots of political attention, while voters whose vote is a foregone conclusion will be exploited for all they're worth by politicians on the other side. Non-voters are a source of revenue at best, but there is no political capital to be gained by doing anything for them.

The complexity of the tax system means that any individual's actual share of the tax burden is extremely difficult to figure out. A good example of this is the payroll tax, which is supposedly paid 50% by the employer and 50% by the employee, but in practice the actual burden of the tax shifts according to the relative elasticity of supply and demand for labor. Remember when I talked about how hard it is to plot out an accurate demand curve earlier? You'd need to be able to do this to determine what your actual share of the payroll tax burden is, as well as every other tax on any transaction you are involved with. Good luck!

Once you've assembled a team of specialists including (at minimum) a tax accountant, an economist, and a wizard (to verify the accuracy of the economist's assumptions), you could look at the share of the budget that each government program comprises, and from there you could calculate how much a particular program cost you personally that year.

However, under a VAT this would be simplified somewhat. While people would still try to vote themselves disproportionate benefits out of the public treasury, under a VAT they at least wouldn't be able to use political influence to excuse themselves from taxation and push the costs of government programs onto others, which brings me to the next problem to fix: obscure costs of government programs.

Obscure Individual Costs of Government Programs


With a VAT, the tax burden is quite a lot easier to figure out. You wouldn't even need to know what your income is; you'd just need to know what the VAT rate is, which is about as hard as knowing your local sales tax rate. As an example, the cost of Medicare, Medicaid, and Social Security together comprise about 40% of the federal budget. Under a VAT with a tax rate of 30%, you could say that the cost of those programs was 12 cents on the dollar, for everybody.

Having the cost of government programs framed in such a way makes them comprehensible to everyone. I've got a strong suspicion that on some level, voters think that a billion is about ten million, and a trillion is about ten billion. The human brain sucks at actually comprehending large numbers.

A good demonstration of this was the Occupy Wall Street protests. A poll showed that 94% believed that the government spent more on the military than it did on education or healthcare and pensions. In reality, the government spends more than twice as much on healthcare and pensions as it does on the military. While it's tempting to say that liberal protesters are just particularly awful with large numbers, I think that ignorance of the costs of government is probably a little more widespread than that.

Making it so that the cost of government programs is easily comprehensible to the average voter can only improve political outcomes. At the very least, the political discourse would be a little harder to overwhelm with misinformation, and a VAT would make it harder to divide voters on tax issues by pushing the costs onto some other group.

Welfare System is Wasteful and Creates Disincentives to Work


This is one of those issues that suffers disproportionately from the difficulty in calculating individual tax burden. How much does a given person pay in taxes for welfare? How much does a household below the poverty line actually collect in benefits? The amount of money going into the system compared to the amount of money going out in benefits would give us a good idea of how much money is being lost to administrative costs or government waste.

Last year, the Senate Budget Committee found that combined state and federal welfare spending combined amounted to about $60,000 per household below the poverty line. This isn't to say that every household below the poverty line collected this much in benefits; some of these benefits accrue to households above the poverty line. But still, that's 20% higher than the median household income in the United States, so what gives?

Well, that figure includes Social Security, which accounts for an awful lot. There are also administrative costs for each of the wide variety of programs aimed at poverty. There are subsidized housing programs, food stamps, medicare/medicaid, and so on. The total cost of welfare spending is another one of those things that most people remain oblivious to. To the Left it's not enough and to the Right it's too much, but despite how often people bicker about this it's pretty rare for anyone to actually bring up hard numbers and break down where they all come from. To make matters worse, poverty statistics in the United States are based on income, but do not include government programs in that figure. A family of four with a cash income of $20,000 per year (which is below the poverty line of $23,550 for that family in 2013) and government benefits totaling an additional $30,000 would be living on median income, but would still count as impoverished just because we don't count the government benefits that account for 60% of their income.

I did some thinking about how I would design a social safety net that minimizes administrative costs and does not produce disincentives to work for those at the low end of the income spectrum. The current system has benefits that phase out in stages as income increases, so additional income is partially offset by decreasing benefits. It's also split into countless different programs. Nobody pays taxes on welfare benefits, which makes for a fundamental divide between those who collect benefits and those who pay taxes. From the perspective of the zero-income welfare recipient, they don't care what tax rates are required for a particular government program because their share of it is zero. Their cost-benefit analysis doesn't include costs, and they will consistently advocate greater spending on anything that they like.

What I would do is replace the entire array of social welfare spending (including social security, medicare, food stamps, subsidized housing, etc) with a universal basic income. It's the simplest possible solution: give every adult citizen a regular payment. When combined with a VAT, this would mean that there is a social safety net, but also that everyone would have a stake in the cost of government. It would also resolve one of the major objections to replacing the income tax with a consumption tax like a sales tax or a VAT, specifically the non-progressive nature of those forms of taxation. Some people really like the idea that a person with more income pays a higher percentage of their income, and oppose consumption taxes on the basis that they are not progressive. They occasionally claim that sales taxes are regressive, but I think it's just beyond stupid for anyone to make such a claim. Everyone facing the same tax rate is by definition neither regressive nor progressive.

Milton Friedman supported a negative income tax; he supported subsidies for people making less than a set amount, and taxes paid on income above that amount. That system still features a skewed cost-benefit analysis for people making less than the tax free amount, since they don't face any of the costs of any program that they support. Otherwise, there are similarities.

Here are some sample incomes to show what this would look like for various income levels with a VAT of 50% (meaning that 33% of the total cost is in taxes) and a universal basic income of $15,000. The break even point using these values is $30,000, where a person making less than this effectively gets a subsidy and a person making more than this is paying more than they are getting.

Income of $0 plus $15k minus 33% = $10,000 ($10,000 subsidy)
Income of $15k plus $15k minus 33% = $20,000 ($5,000 subsidy)
Income of $30k plus $15k minus 33% = $30,000 (No subsidy)
Income of $45k plus $15k minus 33% = $40,000 ($5,000 tax burden)
Income of $60k plus $15k minus 33% = $50,000 ($10,000 tax burden)

As income increases, the real tax rate approaches 33%. Higher tax rates or lower payouts push the break-even point lower. A VAT combined with a universal basic income ends up producing a progressive tax system without actually charging anyone different rates or granting exemptions. It gives everyone a stake in government spending, clarifies the cost of government, simplifies the tax code, and removes one of the most divisive tendencies in representative systems of government. Not only that, but it provides a perfect framework to reform our banking system, in particular the role of the central bank.

Ineffective, Unfair Monetary Policy Tools


Here is an overview of monetary policy tools available to the Federal Reserve. The biggest one is open market operations, which is sort of like a steering wheel that is connected to a few different cars at once. They try to influence the Fed funds rate and the monetary base using the same tool. If they want to influence one but not the other, that's not possible. If they want to increase the availability of funds to the public as a macroeconomic policy move, they use open market operations to expand the monetary base, making those funds available to banks who then lend money to the public.

There are two problems evident with this. The first is that it's unfair. Increasing the money supply diminishes the real value of debt, so there is a transfer of wealth from creditors to debtors. The devaluation of dollar-denominated assets such as savings accounts is what most people talk about when they complain about how unfair inflation is. However, if the change in the money supply is anticipated, it will be reflected in interest rates to account for this. Half of the Federal Reserve's job is just bluffing banks into doing what the Fed wants them to do.

That's not the really unfair part, though. If the increase in the money supply is known well enough in advance that interest rates can account for it, then it's a wash. The really unfair part is related to the distorting effects of monetary injections. When the money supply expands, prices rise, but they don't all rise at the same time. The people who get the new money first get to spend it before prices rise, and as that money circulates through the economy other prices rise as the new money reaches them. The Federal Reserve expands the money supply through commercial banks, meaning they consistently get the money before anybody else. This gives banks an opportunity to buy assets secure in the knowledge that they are paying a lower price than they'd have to pay for those same assets after their money has had a chance to slosh around the economy for a bit.

The ineffective part is something we've been seeing recently. If you're trying to add money to the economy through commercial banks, that's rather contingent upon the banks actually lending that money out instead of sitting on it. Which is exactly what they've been doing. The less money that banks lend, the more desperate the Fed is to give them money in the hope that they will lend it out. I think banks have caught on to this, and now have nearly two trillion dollars in excess reserves while the Fed scrambles to do anything it can to throw more money at them.

Coincidentally, if banks are holding more than the Fed's reserve requirement, then changes in the reserve requirements become entirely useless as a means of enacting macroeconomic policy unless you raise the requirements high enough that banks have to cut back on lending even with the extra money they were already sitting on. Lowering the reserve requirement won't have any effect no matter if banks don't do any extra lending with the extra slack you've given them. It's like pushing a rope.

So, what would I do to fix this? I would use the universal basic income as the outlet for monetary creation. The Fed would still retain control over monetary policy to distance it from political pressures to increase the payout, but changes in the money supply would come in the form of changes in the universal basic income. It's a blending of monetary policy and fiscal policy, but as long as the decision is made by the central bank rather than politicians, it's more insulated from the political pressures that produced awful monetary policy back when monetary authority was vested in Congress.

Rather than having interest rates derived from the fed funds target rate which is aimed at through open market operations, interest rates would be derived from the supply and demand for loanable funds, which is inherently counter-cyclical. In any case, it'd be a lot more reliable than just throwing money at the economy while eyeballing the Consumer Price Index in the hope that it'll tell them when they're doing too much.

8 comments:

  1. Charles Murray also suggested something along the lines of the UBI. The politics surrounding the issue is intense, obviously, but the idea has a long and fairly respectable history, at least when compared to the status quo.

    Anyway, the inflation thing concerns me. No matter how the Fed pushes money into the economy, there are going to be inequities to it, and I think you underestimate the effect that the UBI will have on inflation and the degree of control over it the Fed would have. Right now, established banks benefit from OMO to the degree that they already own bonds that the Fed buys off of them with the printed money. With your plan, the inequity would benefit commodity producers, who would rake in more money by selling more to the bottom of the income spectrum when the Fed decides to push more cash onto the markets through their wallets. Broke people would spend the money they get from the Fed to stimulate the economy; what would this do to inflation? And given that market power dictates restraint on price increases, what could the Fed do to create more competition if it wasn't using QE to stimulate top-down investment? They can't do that much with the interest rate alone.

    The current system holds an advantage for exactly the reason you talked about, but as if it were a problem. The banks who get the QE money just sit on it, which has given us a mild boom on Wall Street as they find places to park the money, and little productive investment happens. It could be worse, like if we were putting money in the hands of consumers while producers with market power just raise their prices, pretty much like they did in the 70's with the union wage/inflation spiral. QE has been politicized, and there is no doubt a UBI would get politicized, too.

    I prefer the liquidity trap to hyperinflation, personally.

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  2. Part 1 of 2:

    "Anyway, the inflation thing concerns me. No matter how the Fed pushes money into the economy, there are going to be inequities to it"

    While this is unavoidable with any system of monetary expansion, parceling it out with a lump sum payment to every adult citizen is an awful lot better than the current system, where injection effects benefit banks exclusively.

    "I think you underestimate the effect that the UBI will have on inflation and the degree of control over it the Fed would have."

    The UBI would replace other programs, not supplement them. The effect on inflation should be zero. If you give someone $100 worth of food stamps or just $100 in cash, the impact on prices is going to be the same. The Fed would control monetary policy, enacted as part of the UBI, but not the entire UBI program itself. The Fed's contribution to the UBI would invariably be a small percentage of the total; we've got about 240 million people over the age of 18 in the United States. Even during years of heavy monetary expansion (QE1 increased M2 by about $600 billion between Q4 2008 and Q2 of 2009) that's still a very small fraction of a hypothetical payment of $15,000 to every adult citizen (or $10,000 after a 50% VAT is taken into account).

    Using the UBI as the distribution mechanism for monetary expansion is not an argument for greater monetary expansion itself, it's just a convenient delivery mechanism that has significant advantages over the current system, wherein we basically just throw money at banks and, if we're lucky, they lend it out in a timely manner. This doesn't always happen, as demonstrated by most of QE2 ending up in the excess reserves of European banks with branches in the United States. You've expressed concerns that this would lead to inflation, but that's rather the point of expansionary monetary policy in the first place. Again, I'm not arguing for expansionary monetary policy here, I'm just saying that when we decide that it's time to expand the money supply, this would be a much better way to do it.

    "With your plan, the inequity would benefit commodity producers, who would rake in more money by selling more to the bottom of the income spectrum when the Fed decides to push more cash onto the markets through their wallets."

    You're forgetting that this would replace other programs. The idea is not to increase the amount of money going to welfare, but to replace welfare programs with the UBI. I'm not suggesting we give the poor more stuff, just change the manner in which we do it. With the new money being distributed across a much broader swath of the economy than before, injection effects would be significantly reduced.

    "Broke people would spend the money they get from the Fed to stimulate the economy; what would this do to inflation?"

    The whole point of monetary expansion is to create inflation. The problem with the current system is that the convoluted manner in which it operates does not always result in that money going into circulation where it can affect prices. Monetary expansion is completely impotent as a macroeconomic tool when it just goes straight into a vault someplace.

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  3. Part 2 of 2:

    "And given that market power dictates restraint on price increases, what could the Fed do to create more competition if it wasn't using QE to stimulate top-down investment? They can't do that much with the interest rate alone."

    The Fed should not be trying to stimulate top-down investment at all, and their track record with setting interest rates is more than just a little bit spotty. Currently, interest rates are set by the Fed to tweak the money supply. If the monetary policy is enacted as part of the UBI, the interest rate is no longer a lever for the Fed to pull on when they want to encourage or discourage monetary creation. Left to their own devices, banks would set interest rates based on the supply and demand for loanable funds, which has a couple of very nice features. For one, it's inherently counter-cyclical, and for another, it allows interest rates to fluctuate according to people's time preferences.

    "It could be worse, like if we were putting money in the hands of consumers while producers with market power just raise their prices, pretty much like they did in the 70's with the union wage/inflation spiral."

    Those with market power to charge higher prices don't wait until times of monetary expansion to do it. Inflation during the 70s was a result of excessively easy monetary policy, not market the power of any particular group.

    "QE has been politicized, and there is no doubt a UBI would get politicized, too."

    I fail to see how this makes it inferior to the current system. If you wanted to be extra sure, you could go with a rule-bound approach to monetary policy, rather than the current discretionary system, but that's really not the debate I'm looking to jump into with this post.

    "I prefer the liquidity trap to hyperinflation, personally."

    There is nothing inherent in my proposed method of monetary expansion that makes it more vulnerable to hyperinflation than the current system. If anything, the reliability with which people spend tax returns suggests that the macroeconomic effects of that style of monetary expansion would be more predictable than the current system, where potentially very large amounts of new money are stashed away, only to enter the economy on the timetable of whichever private bank holds the reserves.

    Any system of monetary expansion has the potential for hyperinflation if easy monetary policy is followed for too long. It's the responsibility of the central bank to not do that. I think they'd have an easier time meeting that responsibility if they had better tools for managing the money supply than what they have at present.

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  4. I think you're missing my point. What you consider a curse of the current system - the link between interest rates and monetary expansion - I consider a blessing, precisely because it's top-down. The way the current system works, banks and investors get the money to start with, and they're obligated to at least try to make a profit. Under most circumstances, this results in money going into some kind of productive industry, or alternatively, getting parked where it won't make it to the economy. That's exactly how it should be. Monetary expansion was not always intended to work by directly increasing inflation, it's just that the status quo looks at it that way because people think of economic manipulation on demand-side terms. If used properly, QE would work by increasing investment, employment, and eventually, production, not just prices. It hasn't lately, because investors know they are playing with cold dice and aren't going to waste the cash.

    Basically, money going into the economy top-down at least gets a shot at being used for increasing supply. With monetary expansion happening through a UBI, the first and possibly only thing to increase would be demand. It's a monetarist's nightmare. And say what you want about the current systems, but at least with SNAP/food stamps, the effects of the policy stay in the agriculture industry, which has always had problems with unstable demand and helps to assure year-over-year price stability.

    Given the inevitability of UBI becoming politicized, what do you think politicians would do if they had essentially direct control over inflation during a recession? Avoiding this is the entire point of having an independent central bank. It would absolutely be more vulnerable to hyperinflation than the current system. Giving consumers money without that money having been acquired through production is how the Soviet Union got bread lines and a useless currency. You have to make people work to get the money.

    The politics between the Fed and the government over when to increase the UBI would have their own radical consequences. Fed and government would become hopelessly intertwined as they tried to figure out who had the prerogative to increase UBI, when they could do it, and what ratio of funding should come from taxes and what ratio should come from printing money at any given time. This will, in the end, likely end up empowering the government, not the Fed, particularly if the Fed chair is still being selected by Washington.

    Everything else about the case you're making, from the impotence of interest rate manipulation, to the critique of easy money in the 70's, to the desire for counter-cyclical interest rates, basically builds the case for a stable, non-inflationary money supply. We'd be better off going back to the gold standard or even going to Bitcoin.

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    1. "I think you're missing my point. What you consider a curse of the current system - the link between interest rates and monetary expansion - I consider a blessing, precisely because it's top-down."

      I don't consider the monetary authority directing investment to be a desirable feature. With banks as the sole point of entry for new money makes financial asset bubbles more likely.

      "The way the current system works, banks and investors get the money to start with, and they're obligated to at least try to make a profit. Under most circumstances, this results in money going into some kind of productive industry, or alternatively, getting parked where it won't make it to the economy. That's exactly how it should be."

      You're overstating the usefulness of what banks spend money on. Let's look at the possibilities:

      Some of it is loaned out to those same people you were decrying for spending it on other stuff, which accomplishes nothing except to put those people into debt servitude to the bank who loaned them money that the bank didn't even earn themselves in the first place. We could get to this same point (minus the debt servitude bit) by giving money to these people directly instead.

      Some of it gets dumped in a vault someplace. Money that doesn't get spent might as well not exist so far as macroeconomic impact is concerned. When you're creating new money, if it gets immediately stuffed under somebody's mattress, it accomplishes nothing. This is what happened to most of QE1 and QE2. Giving money to banks instead of distributing it more widely opens up the possibility that monetary policy will fail outright due to the actions of just one or a few private parties.

      Some of it gets spent in secondary markets for stocks. Contrary to popular belief, this doesn't direct resources toward any productive purpose; it's just a bunch of investors playing a zero sum game with each other while stockbrokers collect fees.

      Some of it goes toward buying stocks in primary markets; IPOs or newly issued stocks from corporations looking to raise money. This gives money to companies seeking to expand their operations, and is a productive purpose. Note that simply buying stuff from companies also gives them money to expand, so it's not like there's really any advantage to this approach.

      "Monetary expansion was not always intended to work by directly increasing inflation, it's just that the status quo looks at it that way because people think of economic manipulation on demand-side terms. If used properly, QE would work by increasing investment, employment, and eventually, production, not just prices. It hasn't lately, because investors know they are playing with cold dice and aren't going to waste the cash."

      I think the primary purpose of monetary policy is to maintain price stability by managing the money supply. Others are more interested in trying to trick the economy into growing despite itself, which I think is about as likely to fizzle out or backfire as it is to actually work.

      "Basically, money going into the economy top-down at least gets a shot at being used for increasing supply."

      That is absurd. Money going into the banks is at least one step away from going into the hands of firms; the banks have to lend it. Money going into the hands of consumers is likewise a step away from going into the hands of firms; the consumers have to spend it.

      (continued)

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    2. "With monetary expansion happening through a UBI, the first and possibly only thing to increase would be demand. It's a monetarist's nightmare."

      It's odd that you'd say that, since Milton Friedman emphasized the importance of controlling the money supply in regulating the price level, and a UBI is a far more precise method of accomplishing this than giving money to banks themselves.

      He also advocated a negative income tax, which has effects on income that are remarkably similar to the combination of UBI plus VAT, although the negative income tax doesn't include incentives for people in the non-taxpaying group to care about government spending.

      "And say what you want about the current systems, but at least with SNAP/food stamps, the effects of the policy stay in the agriculture industry, which has always had problems with unstable demand and helps to assure year-over-year price stability."

      You suspect that people are going to stop eating if you give them cash instead of food stamps? Really?

      "Given the inevitability of UBI becoming politicized, what do you think politicians would do if they had essentially direct control over inflation during a recession? Avoiding this is the entire point of having an independent central bank."

      They already have that, through fiscal policy rather than monetary policy.

      "It would absolutely be more vulnerable to hyperinflation than the current system."

      Replacing welfare with a UBI doesn't increase the government's spending capability.

      "Giving consumers money without that money having been acquired through production is how the Soviet Union got bread lines and a useless currency. You have to make people work to get the money."

      Giving banks money without them having acquired it through providing useful services is why banks offer basically zero return on money you deposit with them. A UBI would replace other social welfare programs currently in place. It wouldn't be any more vulnerable to people coasting on it than extant welfare programs, and the fact that it doesn't go away when people start working makes freeloading even less likely than it is on the current system.

      "The politics between the Fed and the government over when to increase the UBI would have their own radical consequences. Fed and government would become hopelessly intertwined as they tried to figure out who had the prerogative to increase UBI, when they could do it, and what ratio of funding should come from taxes and what ratio should come from printing money at any given time."

      The government determines the UBI, much the way that they determine the level of social welfare spending today. When the Fed wants to increase the money supply, the UBI is simply the mechanism by which they do it. As I've already pointed out, even a significant monetary expansion would be trivial compared to the UBI itself.

      Let me put this in perspective with current numbers: increasing M2 (~$11 trillion) by 2% (~$220 billion) and dividing that among the adult population of the United States (~280 million) would mean less than $800 per person. Considering that spending on medicare, medicaid, and social security put together is about $2 trillion per year, that gives the Fed room to adjust their level of monetary expansion by half either way and only affect the total UBI payments by about five percent up or down. This is trivial.

      "Everything else about the case you're making, from the impotence of interest rate manipulation, to the critique of easy money in the 70's, to the desire for counter-cyclical interest rates, basically builds the case for a stable, non-inflationary money supply. We'd be better off going back to the gold standard or even going to Bitcoin."

      A stable price level and a stable money supply are not the same thing. A stable money supply is deflationary in the face of economic growth. I'm advocating for a stable price level, which requires money supply growth that keeps pace with economic growth.

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  5. The founder of the modern movement is 40 years ahead of you: See www.libertarianinternational.org also OPERATION DIGNITY.

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    1. They are advocating a negative income tax. A negative income tax is not the same thing as a VAT combined with a universal basic income. The advantage of a VAT+UBI over a negative income tax is that it gives low income earners a reason to care about government spending, and simplifies the calculation of the cost of government programs on an individual basis.

      A negative income tax would be a better system than what we have at present, but I believe that a VAT+UBI would be an even better system than a negative income tax, for reasons outlined in the post itself.

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