So, UBI has been coming under fire since the economy reopened. While it seemed to be heading toward a breakout moment during COVID and even before during the 2020 primary, a lot of people seem to be cooling on it, pushing BS "no one wants to work any more" sentiments and blaming the current inflation on free money. As if those $1400 checks are why inflation reached like 9%. That said, I want to discuss all of the reasons why UBI should not be blamed for the existing inflation wave.
1) Most existing inflation is from price gouging and supply chain problems
Under normal circumstances, rising labor costs are the core reason why inflation happens. If "no one wanted to work any more", and it were genuinely a problem, we would be seeing that right now. But instead, corporate profits have accounted for 54% of inflationary pressure, supply chain issues for 38%, and the other 8% is wages. Heck, an economist fears that if we don't get this inflationary wave under control, it could be the end of capitalism, because existing inflation is actually greedflation. It started off as supply chain issues, but then corporations used the cover of those issues to push for higher profit margins, and are now experiencing record profits. This is the scenario leftists claim would happen if we had a UBI, and sure, if it was done via helicopter money it could have happened, but yeah, obviously any decent UBI plan is going to be funded by taxes and existing spending, which would greatly rein in the ability of people to extract larger profits from it. Even if it did happen, just like how economists are considering price controls and a windfall profits tax now, we could consider that if greedflation actually did happen. I'd probably lean toward the windfall profits tax idea as long term price controls can lead to shortages, but in the short term it could put the brakes on inflationary pressure.
2) Pandemic programs were funded with deficit spending
Again, I support funding a UBI via tax dollars and reduction in other social services, not just injecting money into the economy, because injecting money directly can be bad. Although sometimes we do do that. Especially when interest rates are already as low as we can go, and we still have high unemployment. Keynesian economics are big on counter cyclical spending in which they deficit spend in the middle of a recession and then be more fiscally conservative when times are good. This is to reduce the negative effects of recessions. In essence, the spending packages during the last year of the trump administration and first year of the Biden administration were counter cyclical spending packages, funded by deficit spending. While it's unclear how much these spending plans had on the current inflationary wave, even if it were the case, the problem is just large amounts of deficit spending injecting additional money into the economy without productivity to match. Ideally, UBI would not be funded in this way.
3) Pandemic Unemployment was not UBI
A common complaint I hear about pandemic unemployment is that it caused people to not work any more. I will come back to this a bit later, but even if it were true, UBI is NOT the same thing as this plan. Trump's plan was $600 a week in ADDITIONAL money for unemployed people. And yes, that happened during the Trump presidency. Biden's was a bit less, at $400 a week additionally. So we're talking $1600-2400 in additional aid per month. Meanwhile, my UBI would be $1250 a month, and Yang's would be $1000 a month.
In addition, keep in mind, unemployment is a social insurance program contingent on not working. As in, you're only being paid if you don't work. if you find work, you lose the money. This can cause a potential welfare trap that would discourage people from working in theory. Whereas UBI would NOT cause people to drop out of the labor force in the same way, as it would give much lower amounts that you recieve regardless of whether you work or not. This is why Milton Friedman preferred NIT (a sister policy to UBI) over traditional welfare. The economic incentives under UBI are much better.
4) There isn't even any actual evidence that people dropped out because of pandemic unemployment
I mean theres a lot of anecdotal claims like "yeah I know a guy who knows a guy who is just sitting at home on pandemic money" and stuff like that, but this stuff has been disproven time and time again. People did not stop working due to unemployment benefits, which are temporary in nature, and people didn't go back to work when they stopped. This was a completely manufactured crisis by employers to castigate workers, oppose nice things, and even push for child labor to come back. I mean, the evidence is clear at this point. The inflation issues aren't on the worker side of things. It's on the corporate side of things.
5) Even if workers were to blame, so what?
I'm an indepentarian, I support freedom as the power to say no, not just to any job, but to all jobs. I am a human centered capitalist. For me, the economy is made for people, not people for the economy, and work is a means to an end, not an end in itself.
We had all of the essential jobs filled during COVID itself, whereas most work that suddenly existed post COVID that we had trouble filling were...nonessential jobs. Service jobs, often in luxury fields like sit down restaurants, movie theaters, nail salons. You know, stuff that wasn't operating during COVID, but when the economy came back, suddenly there were allegedly too many jobs for the workers available, and people had trouble hiring.
I just want to say if this was in fact true, it would show up in the statistics I pointed out in the first point, and probably have been resolved by cutting pandemic aid as discussed in the fourth point, but it didn't so I think we can safely say that isn't the driver of inflation.
But let's assume it was. Should people be forced, by the threat of poverty, to work those jobs? Again, these are not "essential" jobs that the economy would fall apart without, these are jobs providing relative luxuries. Honestly, if we were having a genuine worker shortage, the answer would still be to raise interest rates to reduce the number of jobs available to meet the supply of workers willing to work, not castigating poor people into accepting bad jobs they wouldn't otherwise work if not for the threat of poverty.
I mean, we've discussed the phillips curve on here a lot and its role in governing the macro economy, and how there is generally an inverse relationship between unemployment and inflation. If there's too much inflation because unemployment is too low, then the answer would be to change interest rates to meet the supply of workers, rather than trying to force people to work.
This might mean a slightly smaller economy with fewer luxuries, which might send entitled middle and upper class people into a tizzy, but I personally value worker freedom over their creature comforts. if their creature comforts are supported by wage slavery, that isn't just.
6) If we did get excess inflation in this way from implementing UBI,we did something wrong
The problem with the COVID recession and the inflationary wave that came after it were these were the result of shocks to the economy. The economy is like a well oiled machine that changes slowly. If you force it to shut down, and then turn it on again, it isn't like a computer. Sometimes things don't come back on properly. The once fine tuned variables, like the place on the phillips curve that we were, are now totally out of whack. Suddenly there's too many jobs for the work force available, and that can be potentially inflationary (isn't the core problem in this case but you get the idea).
If we had this problem was implementing UBI, we did something wrong. Either we implemented it too fast, or we made the amount too high, or we fuelled it with deficit spending, or something like that. UBI would ideally be implemented slowly, over a period of years, let's say 5-10. It would start at a lower amount and be gradually raised over a period of time. We could then deal with complications more easily as they arise, knowing when to put on the brakes and stuff like that.
If UBI is done correctly, it shouldnt cause shocks. Because these shocks will be accounted for and dealt with before they become problems.
7) A lot of people who did drop out did so for good reason
A huge reason why there are fewer workers working today than before COVID was because boomers retired. This was also discussed on Yang's podcast last week with Derek Thompson that I reacted to. We tend to value people retiring in old age, so this shift is good.
I also remember there was some discussion about some people not going back to work due to being stuck at home watching their kids. Biden wanted to increase access to childcare to fix this, but congress shot it down. Congrats on the right playing themselves once again.
Conclusion
It's not UBI. UBI has nothing to do with this. The biggest driver of inflation is corporate greed, and the weakest one is pressure on wages. If free money was the cause at all, it was the deficit spending nature of it, but even then I'm not even convinced it was. If pandemic unemployment was a problem at all, it would be because of its structure, and there isn't a lot of evidence either. The only workers not really coming back in net are boomers retiring.
Even if we were having a genuine worker shortage though, and UBI were to blame, honestly, I'd rather the fed raise interest rates than to force workers into the work force. After all, the economy exists for people, people don't exist for the economy. Work is a means to an end, not an end in itself. And unless the jobs not being filled were absolutely necessary for the functioning of society, I don't think this is a problem. Workers SHOULD be able to stay home and not work if that's their choice. As long as the NECESSARY work is being done.
As such, honestly, let's dispense with this idea that UBI is a failed experiment, because it's not. UBI has like nothing to do with this, at all. And people blaming UBI are intellectually lazy and either pushing an agenda, or don't know how the world works. Probably all three of those things.
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