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 (48)
No. 1-48
Tengen
Tengen

I suppose Lowrey is operating under the assumption that if we're going to create massive amounts of money out of thin air and give it to bankers, we may as well give it to regular people instead. In reality we shouldn't be conjuring up these vast sums to hand over to ANYONE.

It would be wonderful if people really thought about basic income, wrapped their heads around its shortcomings, then applied that same logic to the Fed. Sure would be nice.

TheWindowCleaner
TheWindowCleaner

Too many misconceptions, orthodox blindness and wrong headedness for me to address all of them here. UBI must be paired with an additional policy of a high percentage discount/rebate policy strategically implemented at the point of sale throughout the entire economic process and also at final retail sale which just happens to also be the terminal expression point for any and all forms of inflation....thus eliminating any possibility of inflation and actually implementing what Austrians say they want to see, namely price deflation painlessly and beneficially integrated into profit making systems. Not looking at the temporal universe effects of this additional policy....doesn't change the truth about it.

TheWindowCleaner
TheWindowCleaner

It doesn't matter your opinion about inflation is....only that its terminal expression point is final retail sale. And you and Austrians are always barking about how deflation would be good because it would get rid of malinvestment. I've seen that expressed so many times here I can't count them.

Six000mileyear
Six000mileyear

Is Ms. Lowrey a graduate of the George Soros school of destruction?

JonSellers
JonSellers

Up front I am not a fan of a UBI. However I think it could be paid for through a 2% tax on assets. That would also be beneficial in getting poor stewards of assets to sell to someone who would be a better steward. Secondly, from a moral standpoint, it is no different than someone living off an inheritance.

But like both poor welfare recipients and trust fund kids, it leads to a lot of social dysfunction and a lack of willingness and ability to contribute to society.

Democritus
Democritus

My country already has a patchwork of a few dozen income redistribution policies, with overlaps and holes and tons of bureaucracy. A simple single policy that states something like "all pay 16% of income into fund X, then divide it equally over all adults that breathe" sounds good to me if it replaces most of it.

I'm not advocating more or less redistribution, rather keeping it simple.

Realist
Realist

Hi Democitus.While I understand the desire to ”simplify” things, it is rarely the correct answer to complex problems. One size, rarely fits all. Sometimes a multitude of smaller ”targeted” programs is actually more effective and efficient than a simple universal program.

Liki_Weaks
Liki_Weaks

Of course! There are any number of ways to 'pay' for UBI. However, all calculations assume dollars, systems and cultural practices remain the same as they are now. They won't. The price of something will go up because, you know, I know, they know that everyone has at least a $1000 bucks a month, so why keep the apartment rent at $1400? Just boost it 'a little'--they'll still be able to afford it! Oh, and heck, while we're at it, we 'know' folks didn't flinch at a $4 latte and since they've got that extra thousand, well, heck, we'll just make it $5--cuz, you know, they can afford it. Pretty soon the calls will be to raise that UBI another $500 a month, cuz, you know, 'inflation'.You are forever chasing your tail trying to keep up and the motivation to work drops, the motivation to produce, drops.

You can't solve inequity with handouts. Jon, you're a smart guy. How is it you've missed the Venezuela thing?

shamrock
shamrock

The theory is the UBI provides less disincentive to work because there is no penalty for working. Under current welfare you lose it if you have income, often resulting in effective tax rates around 100%. Secondly, the UBI could replace Social Security, that's over $1T right there. Add that to the elimination of $500B of other welfare spending and you are well on the way to the $2T needed to give away an average $500/month to every citizen. Non citizens don't get it, reducing the incentive to come here for the free stuff.

KnotchoLibre
KnotchoLibre

I think you have two very foundational problems with all concepts of UBI.

The first being inflation. No one seems to argue that there will be no inflationary effects as the result of this venture. It will be very similar to the problems introduced with various forms of minimum wage or union wages forcing prices higher and greater automation to replace those under-productive humans.

The second one being politicians. Let's say you get something simple enough as "everyone gets $X a month as long as they have a pulse and are over 18" there will be inflationary effects which no one seems able to discredit that argument. And then the inflation will have to get fixed for the poorer more than the rich... And you are back to the same graduated, dissected, and proportioned welfare system that you have today with only bigger numbers.

It sounds great on paper and in theory you certainly could just combine all forms of social security, welfare programs for poverty, disabilities, etc. and divide that by 328 million to get a UBI number. But the next day politicians will start arguing that the Veterans should get more, or the disabled, or the "extra poor", or that is needs to be adjusted for Living Standards (NYC is slightly more expensive than BFE)... And soon after it will be broken, complex, impossible to negotiate, and fraught with loopholes on what you can do with the money or not. You can't use it for contraception, CBD oils, cigarettes, alcohol, firearms, ammunition, sex toys, luxury goods etc. or you can only use it at pre-approved businesses similar to how WIC cards are used today.

Our government is incapable of leaving something that's carrying billions of dollars of vote-swaying power alone. Once you realize that truth you'll understand that UBI is only good in text books and class rooms.

KidHorn
KidHorn

I would prefer guaranteed jobs instead of guaranteed income. There are many projects that could be beneficial that aren't done because they're not cost effective. Why not give people jobs doing these things since the money would be paid one way or another? Pay them based on their job performance in order to discourage slacking. It would be similar to what they do with inmates, except people can quit and get another job.

killben
killben

"In a New York Times Op-Ed Annie Lowrey says Trump Should Just Give People Money."... Mish, if I remember right you have mentioned many times that you had sent many Op-Eds to NYT but they were never got published. Looks like you do not qualify as you have got to a PRIME IDIOT to get published. I cannot even imagine how one can talk of UBI without explaining how the money that they want to give away is going to be generated in the first place (and that too in great detail).

aqualech
aqualech

She graduated from Harvard. Got a journalism degree. Works at New York Times. Lives in DC. Is married to liberal WaPo columnist Ezra Klein.

My question is, why does she say "Trump should....."? Would UBI be something that the Administrative Branch could cook up unilaterally? Don't bother answering that. Everyone knows that poverty is the creation of the Donald (/sarc).

superDuper
superDuper
  1. Money isn't a new concept.
  2. Taxes aren't a new concept.
  3. Politicians that pander to the public aren't a new concept. If UBI worked it would have existed hundreds if not thousands of years ago. Over the last 2000 years of human history "free money" never got traction. Because it doesn't work. Because math.

Unfortunately every genius that comes up with the idea of "free money" thinks he invented the concept. So dumb.

RedQueenRace
RedQueenRace

You did, but then went on to explain how you thought it could be financed.

His response largely attacked that. I am seeing an argument on his part that any attempt to show how it can be "paid for" is doomed to failure because, along with attendant disincentives, it will turn into a positive feedback moving target.

In fact, this is summarized in his line : "You are forever chasing your tail trying to keep up and the motivation to work drops, the motivation to produce, drops."

TheWindowCleaner
TheWindowCleaner
KnotchoLibre
KnotchoLibre said: I think you have two very foundational problems with all concepts of UBI. The first being inflation. No one seems to argue that there will be no inflationary effects as the result of this venture. It will be very similar to the problems introduced with various forms of minimum wage or union wages forcing prices higher and greater automation to replace those under-productive humans. The second one being politicians. Let's say you get something simple enough as "everyone gets $X a month as long as they have a pulse and are over 18" there will be inflationary effects which no one seems able to discredit that argument. And then the inflation will have to get fixed for the poorer more than the rich... And you are back to the same graduated, dissected, and proportioned welfare system that you have today with only bigger numbers. It sounds great on paper and in theory you certainly could just combine all forms of social security, welfare programs for poverty, disabilities, etc. and divide that by 328 million to get a UBI number. But the next day politicians will start arguing that the Veterans should get more, or the disabled, or the "extra poor", or that is needs to be adjusted for Living Standards (NYC is slightly more expensive than BFE)... And soon after it will be broken, complex, impossible to negotiate, and fraught with loopholes on what you can do with the money or not. You can't use it for contraception, CBD oils, cigarettes, alcohol, firearms, ammunition, sex toys, luxury goods etc. or you can only use it at pre-approved businesses similar to how WIC cards are used today. Our government is incapable of leaving something that's carrying billions of dollars of vote-swaying power alone. Once you realize that truth you'll understand that UBI is only good in text books and class rooms.

The answer to any and all inflation is the second policy of a 50% discount/rebate at the point of sale and final retail sale. The point of sale is the self determined totaling of all costs for any item or service plus profit margin. Hence if you implement the above policy at that point and require that the consuming business "pass on" that discount to their customer in order to receive their rebate of it back by the monetary authority...you've linearized a 50% discount to prices throughout the entire length of the economic/productive process and also doubled the $1000/mo UBI...as well as everyone's purchasing power that they've earned from work for pay. When was the last time any economist or pol has doubled everyone's income and consequently the total free and available demand for every business's product and service??? If everyone 18 and older has $24k/yr and $64k if they have a part time job making $20k/yr...what is the reason to have transfer taxes paid by both businesses and individuals??? Or for social secuity for that matter after some form of phase out. As for all of the concern about everyone becoming lazy, if this were going to be true except perhaps for a smallish percentage, the wealthy would have killed themselves long ago. It's just an unconscious fear that is irrelevant because the set of positive and constructive purposes is larger than the set of purpose through employment only, and if we grew two neurons and had a cooperative effort by the clergy, helping professions and the government to acculturate and guide the populace toward leisure, which is not idleness, but rather self chosen focused and attentive activities...we'd have a much happier, healthier and creative society than we have now...and much more prosperous too.

CautiousObserver
CautiousObserver

Robbing Peter to pay Paul, no matter how it is framed, will not ever lead to a more prosperous society. The number of votes the scheme buys before all Peter’s in the world close shop is another matter.

Hanomy Manifesto
Hanomy Manifesto

I believe that you are right to a degree. UBI alone as is will not be the right way to go. We need to get a foundation that allows it to work. I like to invite you to review the Hanomy Manifesto at Hanomy.com It is all for free because it has to be. Hanomy is a worldwide paradigm shift in the social, financial, and political system. Numbers work ... now need the mass to aware and understand it. I think that is the only way forward from where we are today. I sure like to get your take on this if possible. Collaboration is welcome. Thank you. WisateK@hanomy.com Highlights of Hanomy:

• Fundamental human needs met throughout life’s existence • Basic human rights observed everywhere • Sovereign debts worldwide are settled and eliminated • Upheld liberty and freedom • Financial contributions drawn from a portion of idle/unutilized money • No taxes on income, profit or spending • Interest charges and usury practices abolished • Power of money creation where it belongs - the people • An end to the fractional reserve system • Upheld free market principles (true capitalism but with social responsibility) • Decreased or dissolved inflation and hyperinflation • Reduced income inequality • An end to corporate welfare • Advanced technology benefiting humanity • Freedom of time for quality of life and caregiving • Prohibited conditions for authoritarianism • Preserved sovereignty and respected borders • An end to “modern day slavery” (this includes you) • Improved care of the environment and world resources • A world we’re proud to claim and pass along

ReadyKilowatt
ReadyKilowatt

Not to worry, there will be a downturn soon enough and these folks will go back underground.

SleemoG
SleemoG
Hanomy Manifesto
Hanomy Manifesto said: I believe that you are right to a degree. UBI alone as is will not be the right way to go. We need to get a foundation that allows it to work. I like to invite you to review the Hanomy Manifesto at Hanomy.com It is all for free because it has to be. Hanomy is a worldwide paradigm shift in the social, financial, and political system. Numbers work ... now need the mass to aware and understand it. I think that is the only way forward from where we are today. I sure like to get your take on this if possible. Collaboration is welcome. Thank you. WisateK@hanomy.com Highlights of Hanomy: • Fundamental human needs met throughout life’s existence • Basic human rights observed everywhere • Sovereign debts worldwide are settled and eliminated • Upheld liberty and freedom • Financial contributions drawn from a portion of idle/unutilized money • No taxes on income, profit or spending • Interest charges and usury practices abolished • Power of money creation where it belongs - the people • An end to the fractional reserve system • Upheld free market principles (true capitalism but with social responsibility) • Decreased or dissolved inflation and hyperinflation • Reduced income inequality • An end to corporate welfare • Advanced technology benefiting humanity • Freedom of time for quality of life and caregiving • Prohibited conditions for authoritarianism • Preserved sovereignty and respected borders • An end to “modern day slavery” (this includes you) • Improved care of the environment and world resources • A world we’re proud to claim and pass along

I went very carefully over your list and did not see "free puppies" anywhere on it. Please revise.

TheWindowCleaner
TheWindowCleaner

The policies I advocate are not socialist/re-distributive but rather directly distributive but implemented at the point of retail sale in a digital manner (equal amounts of debits and credits sum to zero thus a 50% discount followed by a 50% rebate back to the discounter enables the business to be whole on his overhead payments and profit margins and the consumer's purchasing power is doubled.

WildBull
WildBull

If I walked down the street with a gun and robbed everyone I saw, and gave it to the poor, I'd be thrown in jail for armed robbery. If I formed an organization and extorted the money from local businesses, I'd be a crime boss and be thrown in jail. When the government does it, they are "compassionate". There is no moral basis for income redistribution. It is robbery and extortion. If it is immoral on a small scale it cannot be moral on a larger scale.

As the parasitism expands, society crumbles. It's been one hundred years plus a few months since the October Revolution. Socialism has had a 100% failure rate. The West is stumbling toward the same oblivion, as the mountains of debt that are crushing us all attest.

WildBull
WildBull

The value comes from somewhere. By diluting the money pool, value is transferred. Theft just the same.

Tezza
Tezza

If 12,000 a year is good then why not 120,000? We'll be slaves to the indigent. The pyramid has finally been inverted.

CautiousObserver
CautiousObserver

I fail to see how the “monetary authority” injecting 50% new money into the economy with retailers on each transaction at the point of sale solves any problems. If anything, that sounds like a good way to make all prices double overnight, and then again the next night, and then again the next night after that...

MissionAccomplished
MissionAccomplished

"If votes were wings, beggars would fly!"

I say "Heads up!"

They'll be giving it a shot en masse any time now. LOL!

TheWindowCleaner
TheWindowCleaner

Simple, if you get a 50% discount from your vendors and do not pass it along...you don't get any rebate....while just one of your competitors does pass it along....and your customers don't buy from you anymore because they can get what they need from someone whose not an anti-social idiot like you. The rules for such a policy would have incentives to honestly participate....and punishments for stiffing your customers even though your vendors gave you a 50% discount on your costs from them. And even if there was 2-3% inflation because of cheating...you just tweak the discount percentage at retail to insure a 50% or more reduction in price and hence a doubling of every individual's purchasing power.

pi314
pi314

You should definitely read about the Millennial socialist intellectuals mentioned in this piece. It is scary that many millennials believe in this propaganda.

Tengen
Tengen

Their socialism won't work, but neither will our current Fed sponsored, debt-driven ponzi scheme. With a system as bad as the existing one, it would be shocking if younger people didn't agitate against it.

TheWindowCleaner
TheWindowCleaner

It doubles the amount of free and available individual income in the system NOT the total money in the system.

Did you look at the way it will reduce taxes for both individuals and businesses?

MorrisWR
MorrisWR

Mish is right that this is ludicrous but that is what Leftists do best. Arguing something based on feelings instead of facts. If there are no supporting facts, they make something up. Why not just make it easy and instead of giving everyone free money, just stop taking their money in taxes? It would amount to a similar amount and we could just use all those tariffs to cover the difference. (that is a joke)

Deter_Naturalist
Deter_Naturalist

The industry rationalizing the last 100 years of monetary idiocy (where banks could create from thin air an "asset" on which they charged rent) can just as easily rationalize something as foolish as the UBI.

There's a special place in Hades for those who claim that without such "credit-from-nowhere" schemes an economy would be starved for investment capital. Their view supports the idea that an economy should be governed by positive feedback loops. Engineers weep.

TheWindowCleaner
TheWindowCleaner

Fiat is here to stay, gold bugs and libertarian fantasies of being able to cost cut our way to a free flowing economy to the contrary. The one thing no economic theorist on the left or right is willing to look at and see is that because of the ever increasing depreciation costs of fixed capital facilities there is no way to have a stable modern economy without monetary gifting being integrated into the debt based money system. Engineers....and everyone else must weep....until this reality is recognized and acted upon.

WildBull
WildBull

Windowcleaner, wealth is created through work and efficient use of capital. Money is a medium of exchange that allows us to trade the wealth we've created for the things we want and need. Even in a fiat currency system, where money is created by creation of debt, it is expected that the debt will be repaid as equivalent wealth is created over time. Money created out of thin air is not backed by an equivalent creation of value. It steals from everyone that has busted his hind end just to give to someone that hasn't. Still theft. Still something for nothing. Similar concept to perpetual motion. Can't happen. Doesn't exist.

WildBull
WildBull

Window cleaner, Please review the history of mass murder and famine that is Socialism. Millions upon millions starved, shot, enslaved, driven into mass graves. Give it up. 100% failure. Where is a sparkling success? There is none.

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?

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

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.

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. :-)

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.