So, I normally like to stay out of the dumpster fire that is the drama surrounding Joe Rogan lately, given lefties complain WAY too much about this guy (seriously, who cares what some random podcaster thinks?), but given my own blog's subject matter, I feel like this topic is worth covering.
The fact is, Rogan has recently had a rant against UBI in which he expressed now being against it. This is significant since as I said various times on this blog, including yesterday, Rogan was the major breakthrough moment that allowed Andrew Yang to make the mainstream. Seriously almost no one took him seriously before then. Not even me. But, Yang's performance was so strong there, that it changed my mind on him, and made me support the guy for roughly 10 months afterward, where I didn't fully transition back to backing Bernie until late 2019/early 2020. And I'm going to be honest, that podcast affected me emotionally on a level that I can't even fully express on here. So I feel like I need to cover this one.
Rogan basically goes on about how he used to be pro UBI, but then he goes all boomer claiming COVID "opened his eyes" to the true nature of human beings, and how no one wants to work any more, and his buddy had trouble hiring people with the COVID unemployment, and how no one wants to work because government gave people free money.
And here's my response to that. Joe Biden's COVID unemployment is NOT a UBI. And you can't even compare the two. Biden decided to give people $600 a week extra over what they would normally get for unemployment benefits. And let's not forget what unemployment benefits are. Conditional aid given to unemployed people. They are temporary, and only provide aid WHILE the person is unemployed. In other words, it pays people to NOT work.
So...say you get $300 normally per week on unemployment. And then Biden comes along and tops that with an extra $600. So you're getting $900 a week just to sit at home and do nothing. Say you are offered a job that pays $500 a week. What do you do? You decline the offer. Because you would lose unemployment. You would go from making $900 a week doing nothing to $500 a week working. This is what's known as a welfare or poverty trap, and it's a problem with traditional welfare. The fact is, if it pays more to not work than to work, or it pays similarly, why would you work? You would face a 180% marginal tax rate on every dollar earned working. In other words you lose $1.80 in benefits for every dollar earned working. This is BAD.
And this is why back in the 1960s, Milton Friedman actually supported a UBI type program with the Negative income tax. Now, let's ignore Friedman's idea about getting rid of welfare and how NIT was a compromise position of his. NIT is a relatively good policy. Say you get an NIT with a $300 a week max benefit. So if you dont work, you get $300 a week. Say you take a job for $500 a week. Friedman's NIT had a 50% clawback rate. In other words, a 50% marginal tax rate, every dollar earned you pay back 50 cents of your NIT. So someone taking a $500 a week job would pay $250 back of his NIT and get $500 from working. This leaves him with $550. The point of this is to leave people who work better off than those who don't work. If you dont work, you get $300 a week. if you work, you get $550 a week, you're better off working than not working.
Now let's move into my own UBI, which has a 18% flat tax roughly (varies by year). For the purposes of this, let's say 20% for ease of calculations. Say you get a $300 a week UBI (not far off from my $1200 a month UBI these days). Say you get offered a job for $500 a month. You would pay $100 back into the tax to fund a UBI. And you would keep the $300 UBI. So you would get $700 a month total. You'd be more than twice as well off working as you would not working. And yes, I know people pay other taxes, so let's go over that. Say 7% social security tax with a 2% medicare tax, and half of their income being taxed at around 12% in income taxes (so 6% total given the $12k personal deduction). Then maybe some state taxes around 4-5%. That's around another 20%. So people would face a 40% marginal tax rate give or take including ALL taxes. Higher, more scandinavian in practice, but still. That's $200 a week lost to taxes. You get $300 from UBI, $500 from working, and you pay back $200. So that's $600 a month total. You're still twice as well off working than not working.
What I'm trying to say is that UBI would NEVER have the same problems as Biden's unemployment. I havent seen much macro evidence that Biden's unemployment deterred workers from taking jobs long term. It was a temporary benefit that has long since run out and previous times I've covered it on this blog most studies I've found indicated that the temporaryness of unemployment compensation would make it where most people would prefer to actually work than to collect. Still, I could see how on some anecdotal level that these stories would come up. And when they do, it's a problem with conditional welfare. I keep saying it. Welfare sucks. I don't know why the left defends it to death. It's terribly designed, and Biden's UC expansion was an extremely braindead policy to implement during a "workers' shortage." But, that's welfarist democrats for you. You try to encourage them to adopt good policy and they'll tell you it isnt practical. But they sure do love their crappy band aids with obvious economic consequences. But that doesn't mean UBI would cause the same effect.
Now, will some people choose not to work with a UBI? Sure. Will it be enough to turn against the policy? No. I feel like everyone is trying to frame this inflation crisis as related to greedy workers and government money from policies that have been stopped many months ago by this point, but that isn't really the whole story. The story isn't one of "no one wants to work any more". It's the fact that the economy is out of balance from the COVID shutdown and reopening. When we reopened, we had too many jobs for too few workers. The economy tried to reopen all at once and the finely tuned machine wasn't tuned. Here's the thing. Normally, the fed acts as a pacemaker to balance between unemployment and inflation. And this is done by controlling the interest rate. This influences how many jobs are created. See, we can turn the flow of jobs on and off at will. Sometimes we'll have the government struggling just to incentivize BS job creation like occurred from 2008-2020 (hence why I turned anti work, I realized how BS this whole situation was). Other times, too many people will want to hire, and there just arent enough workers to fill the positions. Generally, the government aims for a policy of "full employment" where it tries to employ as many people as possible, but it still keeps the supply of jobs relatively low compared to the workers to avoid inflation.That is what's out of whack. The fed needs to constrain job creation to bring the economy back into balance there.
That's all the economy is. The government trying to encourage everyone to get a job, trying to create just enough jobs so most people can find one, but not everyone, because you keep inflation down by ensuring that not everyone can get a job. I said this all the way back in 2016 when I had that article about how the economy is rigged against workers. 0% unemployment rate is bad because it would lead to a wage price spiral. But that's what the issue is. Unemployment is nominally 4%, but it's arguably too low where there's just too many jobs out there. Rather than blaming the workers, they need to crack down on job creation. This might mean fewer businesses looking to hire, but it would restore balance to the economy.
And let's face it, that isn't even the whole story either. Most of the inflationary pressure is from worldwide supply shortages. Gas is high because of the global demand of oil, combined with cutting out a major supplier (Russia) for being genocidal maniacs. We have these complex supply chains where we mine raw resources in Africa, and then ship them to Asia where they're assembled in factories by workers making terrible wages, and then sent to the US for people to buy. But if there's some logjam somewhere in that process, and demand for those goods is high, you get inflation. And shutting down the global economy (not just the US) for COVID has created many logjams coming together.
And that's the real reason there's inflation.
I just felt like I had to go over this because more and more people seem to be reacting with this off base boomer logic about "no one wants to work any more" when that's LITERALLY the worst possible way to frame the issue. I admit, I am anti work, to some degree. But I'm also fairly smart enough it, and would try to implement my ideas in ways that avoid...these problems. Unfortunately, COVID has created an economic monster and it's gonna take a few years to pick up the pieces. I'm just gonna say, don't blame workers, don't blame UBI. That ain't the core issue. It's a very hacky and dishonest framing and I feel like the right is leaning into it in order to shift us to the right. And it scares me. Because this is the kind of environment that led to Ronald Reagan.
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