Andrew Yang's Siren Song of Free Money Will Cost You Dearly
I’ve been following Andrew Yang here and there for several months now. I paid close attention because I noticed he’s a smooth operator. Yang sells Americans on the idea that the ever elusive money tree exists and he has the seeds to prove it. According to Andrew, with him as President of the United States corporation everyone above the age of 18 will receive, $1,000.00 a month in free money!
Let us be realistic though, who would pass up that kind of offer? Nobody I know would. How about you? So yes, in theory, it sounds like a wonderful idea, but it is not practical. Free money doesn’t land anywhere close to the bull’s eye, in fact, the promise of free money for all, is so far off the mark, it falls outside the boundaries of reality, and that is the problem.
Before the most recent debate, I predicted Andrew Yang as the dark horse. Soon into the event, Lester Holt grilled Yang about his free money fairy tale, and Andrew revealed we will pay for his plan with a value-added tax. It was at that moment I thought people will put one and two together to see just how bad the idea was.
Yang’s execution during the debate was so poor; it had me almost certain he’d be down for the count. However, he already planted the money tree seed in the minds of the people months in advance. The seed sprouted, and it began to grow large enough for the free money dreamers to forgive his initial performance. On a Drudge poll after the debate, Andrew Yang came out ahead of all other participants.
What's the Problem with Free Money?
The problem with Andrew’s plan is the value-added tax. Most Americans have never heard of it before, so when they hear those three magic words, it does not register. The idea bounces off of their heads as if it were a ping pong ball. This phenomenon is called cognitive dissonance and causes Americans to only focus upon the so-called "free money."
Just so you know, the UK has a value-added tax and it adds 20% to all services and goods sold in the country, and the UK doesn't give out free money to everyone. That said, you can bet if America gave out free money to everyone that we'd have instant inflation of about 20-45% on all goods and services.
The costs of living will rise, and this will offset the benefits of the not so free money. Additionally, when you receive this money, taxes will automatically be withheld on the reoccurring 1,000 dollar payments. Yeah, don't think for a moment that uncle sam will forgo his cut. In essence, they aim to get you coming and going, Democrats have resorted to shuffling deckchairs on this titanically indebted ship of state.
When the illusion fails, and it will, people will feel extra entitled because of all that free and worthless money. They will be angry, there will be riots, and they will want more. They'll look to the haves, which they've always done longingly, but this time it will be with violence in their eyes, and blood on their minds. Socialism is the road to hell, a road that America should not take.
It's the inflation feedback loop that I think most people don't understand.
Most people I've talked to about it understand that there will be taxes that "pay for" the distribution. But they haven't thought through to the next step.
What happens when everyone has 12,000 more dollars per year?
Prices will go up by 12,000!
Personally, I'd be fine with a neutral shift from the current welfare programs to a universal distribution system. But the numbers there are more like 2000-3000 per individual instead of 12000 per adult.
Thanks for the feedback @neal.pal! You know, Milton Friedman advocated something called the negative income tax but I haven't read into it enough to know what potential problems may arise with that.
Yeah I'm not well-versed on Friedman.
We do have a negative income tax for a large portion of the population though. If you are married with 3 kids under 17, you don't pay income tax below about 75k USD.
You know that Alaska has the longest running ubi? Or that ubi has been studied for quite some time and it'll be pretty safe to conclude that prices won't suffer and that it would be a overwhelming success by both reducing poverty and giving people opportunities both to educate themselves and to find employment, meanwhile it will be a guarantee that the demand will not explode, yes, the first check will probably be party time, but as is consistently demonstrated, people will make the most out of it. A lot of people have a very low brow opinion of people in general, many refer to this as "human nature", as if humans by nature are pety, as if by nature we are greedy to a fault and that we are completely self centered, by nature. The only problem with that is that every single one of those low brow wearing people, don't consider themselves in "human nature" or as afflicted as the rest, and if they do, like the ones that don't, it's only their opinion, and nothing more. When ubi been put to the test, it delivered every single time, directly so because people aren't stupid, callous or greedy.
Hello @bahh, and thank you for the feedback! Usually, places that try the UBI end up halting the program because it's not sustainable. In the case of Alaska, the permanent fund corporation is owned by the state and funded by oil revenues, therefore, they can afford to pay it out with no strings attached. As far as I know, they're not compensating for the loss with a statewide VAT either. So, that lets you know they have the money to do this in Alaska. However, when a nation doesn't have the money and has to impose a tax to make it so, then all those taxes are immediately passed down to the consumer at the cash register. I strongly question the feasibility of the program. Additionally, taxing people money to give them money doesn't make sense. Not only that, it opens the door for them to do the same with health care. They'll give people more money "free money" to pay for "free single-payer health care" and then they'll jack up the VAT even higher than before. As far as how people spend the money, I don't have any judgments about that, other than the fact it's stolen money just like all other social programs.
You're saying that free money creates inflation but that's not true. Like I said, before dismising it, go inform yourself on whet it is you're talking about, ubi has been studied for decades now and when you say that
https://reason.com/2018/08/01/ontario-ends-ubi-experiment-2-years-earl
That's a fairly recent article and, it hardly would make someone conclude that it was because it's not sustainable. In fact that is the bullshit rhetoric, word for word, that the "thieves" (as you surely suggested),use. What we find, in experiment after experiment is that ubi works, across the board. It creates more consumers, it gives people a chance to vote with their pocket, it let's them employ other people and to keep the demand up. Nations do not have money?
You know why the colonies went to war? No, it wasn't taxes. It was the lack of money. It was what having to pay taxes with Scarce Gold and Silver Coins created, leading The Most Prosperous Economic Times in History into rampant extreme poverty. It was not for the lack of labor, but the lack of money to buy goods and services, which dried up jobs and producers, and which led to massive unemployment that destroyed wealth. Money in proportion to the economy, that is what the thriving colonies recognized, yes some has hyper inflation but Franklin knew what he was doing when he recognized the genius of "money in proportion" so as to have enough for the free transaction of goods, because it's not only too much money that destroyers a nation but too little as well. Then again, he readily recognized that taxes are voluntary, something I think you'll die before considering it.
https://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil
In this case, the VAT that they will use to either fund or partially fund the UBI is what creates instant inflation in the price of goods and services. Take the UK as an example. When you add a 20% VAT the good or service is immediately transformed at the cash register from £100 to £120. When you figure in every good or service this happens to; things get out of control very quickly.
If a salesman came to your door and offered you $100.00 free every month and all you had to do was sign up for a book club membership which costs $120.00 a month and as a bonus, you got one free book a month up to 10 dollars in value. Then regardless of the fact that you're getting $100.00 in "free money" and one "free book" every month; the truth of the matter is the money ain't free, the book ain't free, and you're out an additional $10.00 a month. With the $120.00 monthly fee, you're paying for it all, and this includes the net loss.
This doesn't even touch on traditional inflation; so for example, let's say the VAT doesn't cover the entire cost of the spending, perhaps the government will subsidize a percentage of the difference for the first 3 years to get everyone on board before they incrementally start jacking up the percent of the VAT to a realistic number that will cover the entire program.
This means the portion government funded which wasn't covered by the VAT will have been covered with new money. Every time government does a spending bill they're borrowing new money from the fed, and that inflates the supply of the currency which eventually trickles down to the prices of goods and services.
The inflation is why you can't get a coke for a nickel anymore like it was for coke's first 70 years of existence, the value of a dollar goes down, and therefore the prices of goods and services go up, the price differential is passed along to the consumer. I don't know how the URV or the real would relate to the value of the federal reserve note. It doesn't seem like a solid comparison, but I hear things aren't going so well in Brazil. The socialism they engaged in set them back quite a bit.
The UBI is like trying to tap into free energy, we all want to believe it's possible, but until we see a working model that doesn't require adding water to get free water, then we'd be foolish to do so at the peril of civilization as we know it.
First you're confusing taxes with inflation. Taxes aren't a form of inflation, they are costs to goods and services.
https://www.differencebetween.com/difference-between-cost-of-living-and-vs-inflation/
The only argument I'll entertain isn't that it'll cause inflation, but that you think it'll guarantee an increase in cost of living.
https://medium.com/basic-income/wouldnt-unconditional-basic-income-just-cause-massive-inflation-fe71d69f15e7
But then again, inflation isn't as simple as you think, and what are you trying to say with something that has nothing to do with how Brazil dealt with their hyperinflation? Ubi has been studied, we know it's effects, it points to the opposite of what you're suggesting, it is not "a peril". You can open your mind, how do you talk about something you seemingly have no clue about? You think you know how inflation works? Why? And how do you come to that conclusion that you have any clue as to how inflation works, money creation or ubi?
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