The Problems of Funding Basic Income Programs

Proposal Essay for Basic Income

Introduction

This paper provides a proposal essay on the subject of basic income. The aim of the paper will be to show why basic income is not a good solution to the problem of stimulating the economy or of providing people with the necessary income needed to maintain their quality of life as consumers. The essay will focus on why basic income will not work and it will do so by examining the problems associated with increasing the money supply, taxation, and debt monetization, which are the three ways in which basic income can be funded.

The Steps of the Essay

The essay will begin with some background information on what is necessitated by the state in order for basic income to be functional—i.e., money or access to money. As basic income consists of the re-distribution of money to those in need, an analysis of where the money is to come from is required. In order to do this, it is first necessary to explain what money is and how it has value. The paper will thus explain how confidence is required of money in a system of exchange and how money must be viewed as a store of value to facilitate that exchange. This understanding of money is vital to the discussion of basic income as it helps to explain why the essence of basic income is opposed to the current monetary system and why it is inherently flawed as a concept in the first place, as it goes against what the meaning of money really is.

To expand on the idea of money, a brief review of how money was historically used will be next provided, and a comparison will be made of how money was utilized by societies prior to the introduction of the central bank with its fiat money printing presses, which produce bank notes out of thin air which are then loaned to the government at interest. In other words, money is created, the supply of money is increased, and the value of money is decreased every time more of it is printed. The main purpose of exploring the role of fiat money in the contemporary monetary system is to show why printing or adding to the supply of money devalues the currency and only leads to higher inflation, thus essentially defeating the purpose of basic income in the first place ((Van Lerven, 2016).

Aside from the generating the money for basic income out of thin air, which is not feasible as it only increases the prices of everything else, the other two methods of generating the money for basic income is through taxation or the sale of debt (Haitsma, Unalmis & de Haan, 2016). Neither is feasible either in the current economy, and the paper will progress to examining why these options do not work for allowing basic income to be practical. Since the concept of basic income is to stimulate the economy, the paper will discuss why taxing the public more or selling debt to finance basic income are both opposed to the idea of stimulating the economy at root and thus serve to undermine again the very aim of basic income (Schiller, 2017).

The paper will first explain why taxing the public more money is not an appropriate solution, as people already try to avoid paying taxes or do not want to pay more taxes at least. The tax rate is already high and if more taxes are required then that will just mean that people have less to spend anyway, which will not help to stimulate the economy: the loss of money paid taxes will cancel out that obtain through basic income. Thus, taxes will have to be shifted—i.e., programs canceled that benefitted the public in other ways so that money can be given in the basic income program, though this is no different from robbing Peter to pay Paul. This point will be made over the course of the paper as well and shown why it will not work to support basic income through taxation or shifting of tax funds from one program to another.

Then it will explain why adding to the nation’s debt pile will not work either. It should be shown that debt all over the world is at historic highs and that this does not bode well for the future or for economic stability (Curran, 2018). To increase the debt means that in all likelihood yields will increase as investors back away from purchasing the debt until a more attractive return is offered. However, if yields are forced upwards, the nation using the debt to service the basic income program will be required to pay a higher rate of interest on the debt. Servicing the debt will become difficult enough and will be a further drain on the nation’s economy and its coffers. For this reason, it will be emphasized that using the sale of debt to support or fund the basic income plan will not work either.
Conclusion
The paper will conclude by summarizing these main points—going over again what money is and how it works, then discussing the current type of monetary system in place today, and showing how the three options for obtaining money to support the basic income program will only serve to undermine the aim of the program. The main problem of basic income will be explained again, which is that the central banks have devalued the currency already, and further decrease will only result in higher prices, meaning that the currency has less purchasing power. Unless an alternate method of funding basic income is invented (not likely) the program simply will not work considering the issues already faced by the global economy.

References

Curran, E. (2018). Global debt hits record $233 trillion. Retrieved from https://www.bloomberg.com/news/articles/2018-01-05/global-debt-hits-record-233-trillion-but-debt-to-gdp-is-falling

Haitsma, R., Unalmis, D., & de Haan, J. (2016). The impact of the ECB's conventional and unconventional monetary policies on stock markets. Journal of Macroeconomics, 48, 101-116.

Schiller, B. (2017). A universal basic income would do wonders for the U.S. economy. Retrieved from https://www.fastcompany.com/40463533/a-universal-basic-income-would-do-wonders-for-the-u-s-economy

Van Lerven, F. (2016). Quantitative easing in the Eurozone: A one-year assessment. Intereconomics, 51(4), 237-242.