Stop Falling For UBI
“Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone.”
― Frederick Bastiat
A primary justification for universal basic income (UBI), or rather the totalitarian national socialist welfare state (not optional, no one on mars or in other countries is getting it, paternalistic government), is that technological advancement in artificial intelligence is going to make human workers obsolete, thus causing mass unemployment and societal upheaval.
From this premise they then draw the conclusion that the only way of preventing mass unemployment and societal upheaval is by relying on a benevolent and paternalistic federal government to distribute income to its citizens.
Andrew Yang, the main proponent of the UBI claims that such policies are not socialist per se and are even purely “capitalistic”. Yang further declares that paying for the “UBI” is possible via a value added tax.
In order to demonstrate how Yang’s policies are socialist I will first elaborate on the distinction between capitalism, socialism and communism. After establishing distinct definitions between economic systems I will describe Yang’s policy as is. Lastly the consequences of this policy will be discussed in a practical light.
A capitalist society is one in which goods and the means of production are privately owned by individuals. Ownership is only private if it is not subject to the whims, wishes and actions of 3rd party actors.
In both socialist and communist systems goods and the means of production are “owned” by the public. Socialism is a democratic dictatorship of the 51% whilst communism is a dictatorship of those with guns. Public ownership in socialist and communist systems is a flawed idealistic theoretical concept. It is merely a disguise for the ownership of state dictators.
Marx and other early communist famously quipped “Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen” in English this reads as “From each according to his ability, to each according to his needs”. Keep in mind that communism and socialism are consequentially synonymous and only differ in method of implementation, after all USSR Stands for the Union of Soviet Socialist Republics.
Rather than having income as a function of productivity generated by the individual Yang and other central planner hobbyist suggest that income should be distributed (but first stolen from someone else) according to the individuals need. In the case of UBI Yang arbitrarily and subjectively defines the individuals “need” as $1,000 month regardless of wether or not they actually provide goods or services to other members of this species.
Yang’s UBI seeks to finance itself via a value added tax, which is tax levied at each stage of production. UBI is just a fancy term for collective ownership of the means of production. Every member of the public collectively owns part of the economy, each individuals profit from her ownership is collected via the value added tax. Yang’s VAT is merely a tool for extracting the publics “fair share” of the profit and the UBI his communist propaganda slogan for Soviet style redistribution.
Across the economic political spectrum all advocates of interventionism ie. involuntary exchanges fail to understand that the central planning they implement will have secondary, tertiary, quaternary, etc. consequences which are not predictable and almost always run counter to the goals they are trying to achieve. Yang simply can’t pull money out of thin air for “the people” by implementing a value added tax.
A value added tax or VAT is a method of wealth confiscation in which at every step along the way to creating a product a tax is levied, basically a sales tax at every point in production.
Seldom do Yang and other central planners respect the limits of their knowledge. Because of the asymmetry between the massive and near infinite amount of mundane information available in the economy and the finite (and very tiny) bandwidth of information that government officials (parasites) can process it will be fundamentally impossible for any government bureaucracy to track the price of products at each stage in the chain of production.
Are we going to tax barbers on every the snip? Are we going to tax writers by the word? Are we really going to tax NFL players for each rep they complete in the weight room in proportion to the weight? Are coders going to meticulously keep track of the function calls and lines of code in their programs and report them to the IRS? Such totalitarian endeavors are impossible to accomplish and even if they were implemented they would be draining productivity and value out of the economy ie. impoverishing people.
When someone on their own or from within a company creates something there are cost for the components of the creation namely those time, skill and raw material. Based on the supply and relative demand for the time, skill and raw materials it takes to create something the value of the final product will be derived from these factors.
Ultimately the value added tax will add additional cost at each increment of production. Ultimately these increments of taxation will be added on to the final cost of the product paid by the consumer. Yang like many communists comes from a school of economic thought where anyone making money is the bad guy, and thus they deserve punishment via taxation.
Proponents of UBI have failed to see how implementing a value added tax will force businesses to increase the price of their goods so as to not lose revenue. At the end of the day the consumer is the class who bears the economic cost of the value added tax, the price of goods and services would sky rocket.
Yang’s tax proposition likely assumes that everyone will happily go along with his utopian plan and willingly submit to his massive and totalitarian tax rate hike. He’s somehow failed to realize that taxes suck and everyone hates paying them.
If a value added tax were implemented no one would be lining up to pay it. Companies and individuals would leave the U.S. for places with less expensive tax codes and lower cost of living. The people that were left behind at the end of the diaspora would hide legally or legally most of their money from the value added tax. Because economics is not predictive there is simply no guarantee that the implementation of the value added tax will be able to generate the revenue Yang desires.
It is pretty easy to determine how much the United States would have to distribute each year for UBI to work the equation is as follows:
(number of citizens)*($1,000)*(12months) = UBI $ per year
and the math:
(330,000,000 people)($1,000 per month)(for 12 months) = $3,960,000,000,000 or $3.96 trillion
One should keep in mind that the U.S. national debt is around $27 trillion which is to say that the U.S. has negative $27,000,000,000,000.00 . So despite having negative money Yang is suggesting to give out money, but you can’t give out something if you do not have it.
Apparently an economics degree from MIT isn’t worth that much because any preschooler would have the wisdom to tell someone with negative 27 trillion apples that they don’t have the ability to distribute 3.96 trillion apples annually.
As stated before it is highly unlikely that a value added tax will be able to scrape in anything close to 12 zeros. The only way for Yang to magically come up with this $3.96 trillion would be to print or borrow more money both of which are awful ideas.
Value is a function of supply and demand, the demand for money stays the same whilst the supply increases because it is magically printed into existence. Therefore by printing money Yang will be decreasing the value of the money itself, hence making people poorer which is undesirable to him and most of his supporters.
The second option is for Yang to borrow money. Not a good bet either considering that the United States already owes $27 trillion. Adding more debt to the United States would make it harder for the United States to avoid having its interest kick in, once interest kicks in and it cannot afford to pay its debt off economic collapse ensues. After just 1 term of Yang’s presidency the United States would be adding over 12 trillion dollars to its debt along JUST FROM UBI ALONE.
So every measure Yang is taking is actually exacerbating the conditions he is alleging that they will help fix. This sort of illogic, lack of rigor and cluelessness regarding complexity is exactly why economist are not scientist. If Andrew Yang’s polices collapse the economy I will say “I told you so!”.
“Roman tyrants . . . provided the city wards with feasts to cajole the rabble…. Tyrants would distribute largesse, a bushel of wheat, a gallon of wine, and a sesterce: and then everybody would shamelessly cry, “Long live the King!” The fools did not realize that they were merely recovering a portion of their own property, and that their ruler could not have given them what they were receiving without having first taken it from them.”
― Étienne de la Boéti from The Politics of Obedience: Discourse of Voluntary Servitude, p. 70
