[11thEarlOfMar]

- To a large extent, it is expected to replace current programs like welfare and social security. So those budgets, in theory, would be reduced or eliminated and supplemented with Basic Income.

- It will be a taxable income. So a family including two adults would have an additional $24k on which to pay taxes. Those taxes help pay for the program by effectively reducing the additional funding that needs to be raised.

- Theoretically, it will increase wages and employment since there will be a lot more money spent, increasing economic activity. Increasing both wages and employment increases tax revenues, which would again offset some of the cost. I think this is really the biggest factor that needs studying, as it seems to have the most influence on the decision to deploy BI. Ultimately, it is a macro economic decision. It is also the most difficult factor to model and predict without actually implementing it on a large scale. The most important question, in my mind, is what is the extent of inflationary pressure applied by BI?

[dctoedt]

> The most important question, in my mind, is what is the extent of inflationary pressure applied by BI?

Agreed that this might well be the most important question. A study by the NY Federal Reserve Bank concluded that college tuitions skyrocketed when easy money became available from the feds. [0] The abstract says:

<quote>

The causes of the rapid growth in the price of college education have been the source of much debate in recent years, and the similarly quick growth in student borrowing, funded largely through federal student loan programs, has also been of substantial concern. This paper studies the relationship between these twin increases, and in particular, the extent to which increased access to student credit has contributed to rising tuition. To disentangle the simultaneity of the education cost and credit, we exploit detailed student-level financial data and changes in federal student aid programs to identify the impact of credit on tuition.

We find that institutions more exposed to changes in these programs increased their tuition disproportionately around these policy changes, with a pass-through effect on tuition from changes in subsidized loan maximums per qualifying student of about 60 percent, and smaller but still positive pass-through effects of Pell Grant aid and the unsubsidized federal loan program.

The subsidized loan effect is most pronounced for more expensive degrees, for those offered by private institutions, and for two-year degrees or vocational programs.

</quote>

(Emphasis and extra paragraphing added.)

[0] https://www.newyorkfed.org/medialibrary/media/research/staff...

[chimeracoder]

> Theoretically, it will increase wages and employment since there will be a lot more money spent, increasing economic activity.

At a macroeconomic level, that money comes from somewhere (generally taxes), which means that it's also decreasing consumption and/or investment by an equivalent amount. You can make the argument that collecting the taxes to fund a program is still desirable in the end, but it's mathematically incorrect to say that it would have a net increase in economic activity.

To put it another way: what would the money be spent on if it weren't collected as tax revenue? Some portion of it would be spent on consumable goods, and the rest would be saved (invested). Money saved is very important to the economy, because that's how society gets access to capital for long-term investments (whether public works projects or private investments).

[11thEarlOfMar]

> "which means that it's also decreasing consumption and/or investment by an equivalent amount"

I am not sure about this, because the net amount is still new money in the economy, being spent for services, saved, or invested. Yes, a typical person is paying more taxes, but they will have net more money to spend or save: $BI - [Tax on $BI] is still > $0.

As a further example, let's say there is a salon that employs 2 beauticians before BI. After BI, they see an increase in business, and now can employ 3 beauticians, increasing employment by 1. The 3rd beautician is now paying taxes that were not paid before. Those taxes in part can help fund the BI.

[chimeracoder]

> I am not sure about this, because the net amount is still new money in the economy

No, the net amount is zero. Unless you're talking about literally printing money (in which case the costs are spread about in the form of inflation). There is no 'new money'.

> Yes, a typical person is paying more taxes, but they will have net more money to spend or save: $BI - [Tax on $BI] is still > $0.

You're ignoring the number of people who will be paying more in taxes than they will recieve. Even if you make the moral argument for taking their money and giving it to others, you can't ignore the fact that, without the additional tax, the money would literally be used in some other way, either as consumption or as investment.

As a ballpark, if the payout is $5,000/person/year * 300,000,000 people = $150,000,000,000/year, that's $150,000,000,000/year that needs to be raised in taxes in order to cover the program. Every dollar that gets paid out has to be funded through money that would otherwise be in someone's bank account, and which they either would spend or would save (invest).

[orlandob]

Money supply increase does not necessarily lead to inflation.

[11thEarlOfMar]

Got it. Thanks.