@Kcmatt7 said in The magnitude of DNC technical ineptitude...:
I am not worried about paying for it. To me it isn't a budget issue. The potential risk of hyperinflation combined with it likely turning into an economic disaster is what scares me.
According to the link you sent me, to make the funding work they have to increase the VAT to 22%. Which is outrageously high when combined with sales tax. Already in Wyandotte County, Sales Tax is 9.13%. Adding 22% more to that number is insane. Adding 22% more to middle-man transactions too.
Let's set up a scenario.
Hanes T-shirt costs $10 today at Walmart. With tax it is $10.92.
Under the Yang proposal, the Cotton company sells it to the manufacturer at .50 a shirt (roughly). With the tax, they are now .61 a shirt. Then there is the manufacturer who sells to Hanes. They used to sell the shirt at $1. But now that they are buying at .61 they increased their cost to Hanes to 1.15. With the tax that comes to $1.41. Now, Walmart used to buy the shirt for $4.00. Now the shirt costs $4.40 and after the taxes is costs $5.36. And now Walmart sells the shirt for $11.99 and the final total comes to a total of $15.72 after local and state sales tax.
That is a 44% increase in goods, that will be passed on to the consumer, at the very least. This doesn't include the increases companies will have to pay for items just to operate. Over 50% is not out of the question.
It is very likely in my mind that goods would increase 35%-50% and massive layoffs would ensue. Tanking the economy.
This doesn't take into the account that demand for housing would likely increase during this same time period. What I'll call the "period of bliss." This is a year to six months of the UBI where companies haven't adjusted yet and people feel rich from their additional income. Because of this, banks and lenders will take advantage of poor unsuspecting people who are bound to get laid off. So we end up with another banking and housing bubble.
I hate the idea of relying on the government for income. I could be convinced that giving college kids $1000 a month instead of free tuition would lower the barrier for entry to college and level the playing field, sure. Or even people 18-26 to get their lives started. I'd hear that argument.
Now you take all of this into account before getting into taxing capital gains at such a high rate too. Capital Gains taxes are stupid. I'm going to say it again. Capital Gains taxes are stupid. They are part of the reason inferior companies and products routinely win out. And people invest less because of Capital Gains. Where if you could just invest when you had the cash and pull it out when you needed it, you'd have more flexibility and invest more money into the economy and into better companies.
I simply cannot support a candidate who wants UBI. It has been proven that increasing sales tax (VAT) disproportionately hurts the poor. Even if you are providing them cash, it's all relative. There would be 6-12 months of bliss for lower-middle income families. And then the economy would collapse, with them being the first people to get laid off. And they'd never have been so poor after the essentially mandated inflation.
I can't imagine the regulations that would have to get implemented at the same time as this to even get it close to working. The amount of predatory lending and bankruptcy regulations that would have to get put in place would be insane. To stave off mass layoffs you'd have to raise the cost companies pay in unemployment to astronomical levels.
Perhaps I need to try to find the positives in it. I just don't really see any...
You should be concerned about paying for it since all this is related: increases in government debt do one of two things: either crowd out private investment, in which case the money supply is unaffected OR is purchased by the Federal Reserve in which case "prints" the money and deposits it in banks which loan it out, increasing the monetary base. Each dollar increase in the monetary base increases money supply by some factor greater than 1 (depends on a few ratios). That's really how inflation happens, assuming tight markets like we have now. So a deficit financed UBI would drastically increase the amount of net spending throughout the economy and put inflationary pressure on the macroeconomy. Paying for it through taxation would suck a lot of that money back out since taxes reduce aggregate demand.
Empirically, there's no evidence a VAT would lead to any kind of hyperinflation in the medium to long term. There may be a short term bump, but hyperinflation is a sustained monetary phenomenon. Last study I saw was from France in the early 10's. They increased the VAT a percentage point and inflation rose about .5% points for a year or two then returned to pre-increase trends. Market forces cause prices to stay someone in check. In the t-shirt example, if Firm B would eat some of the tax and sell the shirt for $15, Firm A would have to respond by lowering its prices. And most VAT's, at least in the EU, exempt necessities.
I'm not a huge fan of VAT's just because they're hard to enforce and can be somewhat regressive, but I'm not concerned about inflation given the likely macroeconomic impact.
As far as a UBI, I'm a big fan so long as A) it replaces the current welfare state and B ) is deposited electronically into a bank account and C) has a sufficient clawback provision where we're not sending $1000/month to Bill Gates. Something like a 30 cent reduction for every dollar over $100,000 could suffice, but those parameters are certainly negotiable and budget dependent. I'd like to pay for it with the current tax structure or with something like the Hall-Rabushka flat tax. A UBI would be much more efficient than the current system since it's much easier to administer (no case agents verifying eligibility, etc.), it's less paternalistic, and brings people into the financial system.
