If you were to hand out $1k a month to everyone in my area an immediate result would likely be that rents would increase by somewhere close to $1k a month.
Everyone needs somewhere to live. Everyone wants to live closer to where they work and where there friends and family are. Housing is in limited supply. If everyone had more purchasing power, then everyone's going to collectively bid up what they're willing to pay for housing simply because they can.
This is the basic uncertainty I have about UBI, and I've never heard an argument against it that went step by step and explained how that wouldn't happen. It seems intuitively like it would. In response, I've hear the equivalent of "don't worry, they've thought of that already, and the math still works". Maybe, but I'd feel a lot better if somebody could walk me through it.
- At a macro level, if a program is "paid for" i.e. revenue neutral, it does not result in inflation (at least in aggregate).
- UBI/Negative Income Tax (NIT) is not a handout to literally everyone, only the unemployed and lowest income folks will actually net money. Anyone with a modest income or larger will likely either see no changes to their net income or even a reduction in net income (due to higher taxes to pay for the program).
- Assuming a UBI of $1k (just making a number up, but it gets tossed around a lot), you would only get that full amount if you were unemployed, so that means you are pulling in $12k a year. Someone making $12k a year isn't really going to be renting an apartment by themselves. They are probably going to crash on a couch, live with relatives, or maybe rent a single room.
- As you go higher up the income ladder, the UBI phases out. I am also just making up numbers here, but maybe the phase out starts when you make $1k/month and stops at $3k/month. So someone making $12k a year in income would actually get $24k/year with UBI, but by the time you are making $36k/year you get $0 UBI. There are not a lot of areas in the country where you can rent apartments on these incomes. The places where you can do that, housing is probably not in as much demand and will likely not suffer from much if any inflation. So again, even if you are making a small income and bringing in some UBI, it will be designed to phase out long before someone could afford a one bedroom apartment in a high demand area.
- And I think a nice feature of this type of program, is UBI would actually help even out the demand imbalances between VHCOL and LCOL areas. No one living solely off UBI is going to be comfortable in SF or NYC. But there are a lot of regions in our country that have minimal job prospects and could desperately use some revitalization. UBI would go a lot farther in those areas and would create some monetary inflows back into those regions. That in turn could reduce some of the housing pressure on the VHCOL areas (although I am not sure it would be a huge effect).
It is worth mentioning that I assume most proponents of UBI are also acutely aware of the housing crises. To solve that, we need to build more housing. For the reasons listed above, I don't think UBI would cause much housing inflation, but even if it did, the solution to that problem is to build more housing, not to forgo welfare programs.
Thank you. Is what you're describing what is commonly referred to as UBI? It sounds like a different formulation to me. Most of the time I hear about UBI, the emphasis is on it being universal—everyone gets it, not just people living in poverty. That's where the intuition problems arise: if everyone you are competing for real estate with has more money, why wouldn't the cost of real estate increase?
I think anyone who has thought deeply about the topic recognizes that NIT is probably the only practical implementation (if you search this thread it gets mentioned a lot). There are the MMT folks that think you could finance UBI with deficit spending, but I think the recent bout of inflation we experienced has them on their heels.
At the end of the day, if someone is making $500k/yr and we give them $12k/yr in UBI, that isn't really going to move the needle for them. And from a practical standpoint, we are probably going to have to raise their taxes by a bit more than what they are getting in UBI to pay for the program. So it is kinda pointless. NIT solves this. And as an added bonus NIT can be implemented by the IRS, eliminating the need for another bureaucracy (although some UBI folks suggest that the social security admin can handle things, but I would argue that we should get rid of social security and just have a bigger NIT for seniors).
I still consider NIT to be "universal", because everyone would qualify for it. You do not need to apply for it. And it will kick in automatically when you need it. A lot of our current welfare programs are a bureaucratic nightmare. There is an entire industry of non-profits that exist solely to help people navigate that mess. A lot of people don't get the help they need because of this, or because they don't like the stigma of being on welfare. NIT/UBI eliminate that, so that is why I consider both to be "universal".
I agree, in my opinion, a common misconception I've seen is people saying wealth isn't zero sum. It can be created from thin air, but as long as there are needed and scarse resources (housing, maybe medical, maybe ivy league college), the market will adapt to consume more of the wealth.
So wealth can be created but it makes everyone else slightly poorer in different ways
The post you responded to leaves out that supply of housing can increase - in the US, we stopped building to meet demand decades ago and are only in the last few years showing signs of reversing that trend in some major metro areas. We also have a "missing middle" of housing density that can be further built in.
At the margins, more people would have more ability to try to work around the market power of landlords. More time for political advocacy to rollback NIMBYism, or loosen zoning, or to build their own home, or to make an additional purchase that makes a marginally cheaper rental more acceptable.
The whole point of UBI is that everyone gets the money.
When you give a select few extra money they can do things that they otherwise wouldn't. When you give everyone money the value of the money just decreases.
Negative income tax (NIT) solves this. At this point, when anyone says UBI, I just substitute NIT in my head. It is really the only practical implementation of a UBI scheme.
Further, if a UBI-like program is funded with new taxes (or cuts to existing programs), it should have a negligible impact on inflation. It is only when you do deficit spending that you risk inflation.
Good points. I think NIT would cause some inflation though as the cost for some things is related to the geography so kind of like what we saw with the pandemic some people would change location so they could afford a better lifestyle and end up driving up the prices of things in other locations. But maybe then they could base the amount on wherever someone is a resident however I’m sure this would be gamed. Maybe a state issued debit card for NIT could solve this though or banks could be required to pass transaction details to government. This could possibly assist government in information gathering for tax compliance.
I think a major feature of a UBI/NIT would be to make it entirely location independent. There are tons of areas in our country that are economically depressed, largely due to a lack of jobs. These areas typically have low cost of living, so someone on UBI would be able to live a lot more comfortably there than they would in a high cost job center.
And this in turn would provide some monetary inflows into those areas that could help revitalize them. A lot of these areas are occupied by seniors living off of social security. An influx of younger folks with UBI checks would help balance things a bit better.
UBI represented as a progressive tax system would be so wildly different from our current brackets it would be qualitatively different. Some brackets would be negative.
"negative brackets" is a truly great idea and would help many affected by poverty.
but that's not what adherence to UBI is about. UBI is about chasing an impossible utopia and burning ourselves in the process so that we have greater net inequality.
Stick to the plan. Call out anyone who tries to make UBI work by watering it down from our idealized end-goal as nay-sayers. Clutch to random hypothesis'.
It's the only way we can bludgeon them through democratic or revolutionary means.
If you were to hand out $1k per month to everyone in a country that has vacant housing in places where there are no jobs, some people would move to and revitalize these places.
Everyone needs somewhere to live. Everyone wants to live closer to where they work and where there friends and family are. Housing is in limited supply. If everyone had more purchasing power, then everyone's going to collectively bid up what they're willing to pay for housing simply because they can.