John Wood. Thank you for taking the time to comment on my article, and for your interest in my being awake when I’m learning about economics. Unfortunately, I must tell you that the points you make in your response are either wrong by assumption, or simplistic and misguided.
In the first instance, you claim that Tax Credits are equivalent to basic income. They are not. Tax credits are tax incentives which allow some taxpayers to subtract some amount of the total that they owe to the state. In the United States, for example, tax credits vary wildly as a function of income, employment status, or participation in a healthcare exchange. On the other hand, a UBI is an unconditional and universal transfer payment from the state to citizens- a fixed amount calculated to be sufficient for subsistence, and given regardless of income, work status, or any other status. Part of the appeal of UBI, according to its advocates, is that it could significantly reduce the need for and complexity of existing tax credit systems (although the two programs would not necessarily be mutually exclusive).
Second, and more importantly, you seem to think that a UBI would “only benefit the politicians and the government that enacts it,” presumably by increasing tax revenues. You should first understand that a proposed UBI would almost certainly be tax-exempt. Therefore, it would not raise tax revenues directly, which I presume you believe “only benefit the politicians and the government that enacts it” (a statement which, by the way, says a lot about your political and economic ideology).
Next, you seem to believe a UBI would cause inflation, by increasing the “Supply of Cash” and that that would be a bad thing no matter what. Firstly, UBI does not mean an increase in the money supply — again, it would be a transfer of existing wealth, much like existing welfare programs like Medicaid and social security.
Now, let’s imagine for a second that a UBI did cause an increase in the supply of currency. It’s still very plausible to think that it would not cause inflation without an accompanying increase in purchasing power. Your contention that “the price of goods in a market will be equivalent to the volume of cash available in that market,” is a rough approximation of the quantity theory of money (QTM). Of course, as Keynes and many other economists have shown us, changes in the money supply effect all kinds of variables in the economy, such as output, and that price level is not solely determined by it. We can apply that truth to the UBI example in the following way: more money distributed equally among citizens — particularly low-income individuals and families — would increase demand and spending on all kinds of goods (those are not the kind of individuals who sit on wealth in the form of luxury assets or tax-exempt foreign accounts). Lagging effects notwithstanding, suppliers would seek to increase the availability of those goods to maximize their own revenues. Over time, it’s very plausible to think that any actual increase in the consumer price index brought on by a UBI would be offset by the same rise in real income brought on by the UBI, as well as the purchasing power of average people. What would change is that many low-income individuals would have the freedom to invest in education, better nutrition, and the basic goods that could give them a better quality of life (while also growing overall levels of human capital in the economy, reducing state healthcare costs, and, potentially, increasing total factor productivity). Of course, the topic of whether or not inflation of itself is a good or a bad thing, or how much inflation is appropriate over time, is a highly controversial topic. I’m sorry to say that it’s much more complicated than “Economics states” (as if that was some divine decree) as you seem to believe in your response.
Thanks anyways for your response, and let’s keep thinking about and debating policies that will improve human lives!
