More Give Everybody "Free Money" Idiocy

Annie Lowrey, the author of a new book on universal basic income says Trump should "shower people with money".

In a New York Times Op-Ed Annie Lowrey says Trump Should Just Give People Money.

Lowrey claims Trump should "shower people with money, no strings attached".

Lowery makes two blatant lies in her op-ed.

  • Universal income is a method backed by extensive research.
  • Universal income has a bipartisan pedigree.

Lesson in Scaling

Actually, there is zero research because it has never been tried in scale.

Free money was tried once in Canada. It seemingly "worked" only because everyone in Ontario gave "free" money for the benefit of residents of a single town in the province.

The town did benefit, but next up the scale would have been for everyone in the rest of Canada to give "free" money to everyone living in the province of Ontario.

Once you get to the stage of giving everyone in the country enough free money to abolish poverty, where the heck does the money come from?

Socialist Pedigrees

Lowrey notes that Mark Zuckerberg, Hillary Clinton, the Black Lives Matter movement, Bill Gates and Elon Musk are just a few of the free money policy converts and supporters.

Under such a proposal, Uncle Sam would send every American $500 or $1,000 a month, likely eliminating other stingier and less-effective programs.

Lowrey cites an absurd study from the Journal of Poverty, a socialist organization that supports a negative income tax. Here is the pertinent snip:

A group of prominent welfare economists recently examined such a policy and concluded it could be funded by getting rid of programs including SNAP, T.A.N.F. and the earned-income tax credit. Adding it onto what the government already does would cost something like $200 billion or $300 billion a year, which could be easily financed by repealing the Trump tax cuts and closing loopholes for rich companies and individuals.

Hallelujah!

Wait a second, first, let's do the math.

The US Population is 328 million. Giving everyone $1,000 a month would cost $3.936 trillion.

Read that carefully. Yes, that is close to $4 trillion a year.

Let's assume Lowrey really meant $1,000 a year, not month, although that is not what she said.

SNAP Math

Let's do the SNAP math.

126.75 * 12 = $1521.

Oops. To break even with SNAP we would have to give everyone at least $1521 a year.

And what about Earned Income Credit? Medicaid?

Fancy that, so ensure that no one loses under the program we might have to give everyone $2,000 or $3,000 a year.

At $3,000 per year, the cost would be a "mere" $0.984 Trillion. At $2,000 per year the cost would still be an unaffordable $656 billion.

One More Try

If we gave just those 43 million people living in poverty $12,000 a year, the cost would be $516,000 billion a year, assuming they all made zero, which they don't.

However, the suggestion does not coincide with Lowrey's Universal Basic income for everybody. And it does not factor in things like inflation and the incentive to not work.

If you are making $12,000 a year and can get $12,000 a year for doing nothing, there will be many millions more who elect to not work.

What If?

Returning to Lowrey's actual proposal of giving everyone $12,000 a year to live on, how many people would be scaling Trump's wall to get into the US?

In Europe's migration crisis, why did the migrants all scramble to get to Germany rather than stopping in Turkey, Greece, or Italy?

The obvious answer is Germany had the most free benefits.

There is no limit to demands for free money and services. Want more unborn, out of wedlock kids? Just give everyone in the US $12,000 a year and you will have millions more of them.

Math Challenged on Every Front

Are these "free money" advocates math challenged on every front? You bet.

They are also economic illiterates.

No Such Thing As Free Money

Returning to the initial absurd premise, there is no such thing as free money.

It has to come via taxation from productive members of society or via inflation from the printing press.

The latter has indeed been tried countless time with the same miserable results every time.

If everyone got a free $12,000 then rest assured $12,000 would be worth perhaps what $1,000 is worth today. The economic illiterates would then want $100,000 free money to "live on".

Dear Ms. Lowrey

Dear Ms. Lowrey please take a look at Venezuela, a socialist "paradise" in the midst of hyperinflation.

If you prefer, please take a look at Zimbabwe and check out what happened to Zimbabwe Prime Minister Robert Mugabe's monetary redistribution schemes.

In case you are too shell-shocked from this math to look it up, here is the answer: Human and capital flight in Zimbabwe led to hyperinflation.

Next, Ms. Lowrey, please ask yourself why the US has Google, Apple, and Microsoft, while France and the EU don't. Similarly, why is Italy a basket case in the EU?

The answer is the US lets businesses thrive. The EU would breakup Google, Apple and Microsoft.

Please think about Google for a second. Google has all high-paying jobs. Starting as a mere search engine, Google has spawned massive amounts of technology in use in phones and under development in self-driving cars.

Only economic fools want to tax growth engines like that.

And for what? For your mathematically challenged notion that people can thrive on allegedly "free" money.

Dear Ms. Lowrey, please get a grip on reality.

Mike "Mish" Shedlock

Comments
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Mike Mish Shedlock
Mike Mish Shedlock

Editor

The US is 90% citizens. Over 18 population is 76%. That is roughly 68% of 328 million. Thus the US citizen population, 18 and older is roughly 223 million. The cost would be $2.2 trillion. Free Money - Yeah! Many people would choose not to work, the cost of living would skyrocket, guaranteeing that people would want $20,000 or $40,000 in free money as a "living wage". Anyone who cannot comprehend this is an economic illiterate or a charlatan purposely peddling nonsense for some sort of personal gain. I am certainly all in favor of slashing military and other government spending, but free money is insanity.

charlescmt
charlescmt

Mish is making a straw man to knock down. I know of no proposal for BI that includes kids or non citizens. If you cut Fed spending 65%, mostly domestic spending but some defense as well, you would free up enough funds to send every adult citizen about $10K per year with no new taxes, debt or money printing. No more welfare, student loans, farm subsidies, tax loopholes etc. A VAT tax to replace FICA payroll tax would ensure all non citizens pay some taxes but get no benefits since BI would be the only benefit and they are excluded. Hence less incentive for illegals to stay. If BI works, then we would need a constitutional amendment mandating that BOTH Fed spending and revenues cannot exceed 21% of GDP except in time of war. Also mandating that, by default, 2/3s of those Federal revenues (14% of GDP Max) must go into the BI unless voters approve in yearly referendum to give up a portion of their BI checks for some specific spending priority such as subsidies for libertarian bloggers. Social Security benefits will be cut dollar for dollar as BI checks arrive for seniors as well. SS can then be phased out as well as BI becomes the one and only safety net. I have lots more to add if Mish wants to let me write a general outline on this site. :-)

Deter_Naturalist
Deter_Naturalist

Here after 400 years of Leftist Theological dominance there are any number of political theories intended to fulfill everyone's wishes. Once even Protestant Christianity was jettisoned in favor of Leftist dogma, no rules...no natural laws exist (to Leftists.) Man-is-God (or maybe Woman is) so your pesky little rationality is apparently irrelevant.

Money doesn't represent a claim on prior production to such people. It is simply a means by which they get whatever their little hearts desire, and can give everyone what they want.

clovisdad
clovisdad

Having "money" with no goods to buy makes no sense. The "money" people spend needs to reflect the creation of goods and services, which requires "work." Without "work," money would have no value, and that lack of value would be recognized by inflation. For some reason people persist in the concept that goods and services are delivered by the tooth fairy. For example, "free medical care," is a complete misnomer. Someone has to build the hospitals, provide the electricity, water, heat and sewage systems. Someone has to serve as nurse and doctor. These capital and labor requirements (and the capital requirement is actually invested labor also), "cost" something which must be compensated by the money delivered to pay for these services. Which means that the money delivered to pay for them must have been created by the development of other goods and services. The idea that one can distribute "free" money and that there will be goods and services to buy with it is absurd, unless the "free" money is taken away from the people who earned it by providing goods and services.

Deter_Naturalist
Deter_Naturalist

WindowCleaner, do you concur with modern theory, that without the creation of bank credit (monetary demand not preceded by any economically-valued production whatsoever) "a modern economy cannot operate?" Just curious.

Should the ability to enter the market and lay a claim on what someone else produced be contingent on you having brought something of economic value to trade, or should you (or anyone) be afforded the luxury of putting consumption before production?

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