I am not an economist, although much of my business experience has given me a sense of how markets and money work. Several friends are economists and most of those are among the proponents of MMT that is just now receiving the attention of mainstream economists and politicians in spite of many correct predictions of our nation’s economy when more orthodox thinking failed.
Sending every adult in America a monthly check for $1000 would make avoiding inflation rather difficult unless it was clawed back by some elaborate scheme of taxation that would negate the “universal” part. I don’t believe that the simple existence of more dollars is inflationary, but it would certainly cause many to upscale their homes and/or autos, two prime factors in driving costs. Such upscaling would also lock the beneficiaries into requiring more income while providing a lot of economic activity in the short term, regardless of the present employment environment. It is anything but countercyclical and offers no additional production to absorb the added demand of the benefit.
Inflation that isn’t matched with increased income initially creates thrift among those fortunate enough to be able to save, but then gives an incentive to purchase goods that most believe will be more expensive in the future. This is especially true in the housing market anytime people see a rising trend in prices that would be fueled by the additional income and demand for homes. Indexing the benefit to inflation would be the opposite of what is generally considered the proper method of inflation control, reducing demand via tax increases and/or spending cuts.
I think we agree that selling a UBI politically without offsetting its cost, at least in part, by eliminating many safety nets is a pipe dream. This makes any inflation incurred a hardship for those unable to work and the workers making the least, harming the very demographics the program is intended to help. Anyone now majorly dependent upon those safety nets might even see a reduction right off the bat, but it eventually gets worse for the majority as well.
There would be little to drive wages to offset inflation if everyone has their basic needs covered. It wouldn’t take long for employers to catch on to the fact that they primarily only need to offer “spending money” to workers, not a livable wage, making inequality only that much worse in an already shrinking job market. Inflation is harmful enough without adding an effective wage freeze. The first conservative Congress would end or distort the inflation index and place employers in even more control with far less incentive to respond to inflation with a larger share of productivity going to workers.
I’d be interested in how you arrive at the thought that an additional $1000, or even less, every month to every adult wouldn’t be inflationary.
Here’s a friend, Dr. Stephanie Kelton, econ advisor to Bernie and prior advisor to the Senate Budget Committee, giving her take on UBI vs JG.
https://www.youtube.com/watch?v=tttbkALDlqI
A couple of more friends, Steven Grumbine and Pavlina Tcherneva, discuss the same topic.
