Universal Job Guarantee Program


#141

I gave numbers, they just aren’t static. You go through all that talk about inflation and then trot out numbers for a UBI that put people in poverty TODAY and only get worse in the future. If that’s the target it’s not even worth pursuing.

Oh god you looked up tax-as-percent-of-GDP, when we’re actually talking about percentage-of-GDP-used-in-redistribution-payouts… with normal taxation going to normal programs we expect all of that money to be gone in operating costs. UBI on the other hand pays out to everyone, including those who pay far more in taxation than they receive in UBI and the operating costs would probably be lower than any government program in existence… so the % of GDP for redistribution would only be the target of the payout, not the cost.

What’s more, that stupid tax-as-percent-of-GDP number you’re using is useless to policy discussion, it’s using just the tax-to-gdp so it doesn’t include government spending, so you have no idea from that number if the government is spending that tax or not or spending even more than what they’re taxing (most common occurrence) which is what you would want to know for actual budgetary purposes and it’s ambiguous as to what it even really means, is the percentage high because the amount of taxation is unduly high? or is it because the GDP is too low? and what actually can be considered too high taxation when the tax is progressive? Tax-as-percent-of-GDP isn’t useful for gauging tax burden in a country with progressive taxation.

That’s a very lean estimate you’ve give that… is that based on the unproven claim of it’s “counter cyclical” nature where it will magically never runs beyond necessity despite being framed as a guarantee? or is that because the program will be using it’s monopoly powers to fix the prices of labor?

PPAU doesn’t have a 100% renewable energy target? Why not?


(Jesse Hermans) #142

Here are some more numbers for you, far more realistic numbers from more sophisticated modelling than either of us have produced from our own back-of-envelop calculations:

To deliver all this, a UBI would need to be provided to every Australian adult, at least at the rate of the age pension, currently $814 a fortnight. That equates to over $400 billion a year.

Our current welfare budget is around $160 billion a year. Not all of this could be saved – a significant chunk is spent on administration. But even with significant savings, a recent report by the Centre for Independent Studies found that the cost to the federal budget would be an additional $230.9 billion a year. Current total Commonwealth tax revenue, ex GST, is around $300 billion – so we’re talking about an increase in tax revenue of more than 75 per cent.

So… not far off my initial estimate of requiring double the amount of taxation. And this is to match levels of the existing pension, let alone the levels you are proposing. This would push Australia’s total tax burden past Scandinavian levels without the benefits their massive social democratic states provide - instead providing a mere cash payment in place of it. A cash payment that landowners will no doubt gobble up in higher rents and land prices.

As if GDP were some variable governments can change on a whim of policy making…
Saying that the ratio of tax/GDP is too high because GDP is too low is like saying the employment to population ratio (participation rate) is falling because the population is growing - it’s nonsensical because the denominator is not the driving influence on the ratio, it is a far more independent variable.

I disagree, especially when one considers the potential effects on productive private investment and savings.

Do you know how many taxpayers are on very high incomes? Not many, and despite them having higher incomes if you look at the ATO data (which is in our BI calculator https://1drv.ms/x/s!AgzvjL7wTryQrRZNATlTnFg64FD7), the bulk of tax revenue does not come from the top marginal rate, despite the system already being very progressive. Raising top marginal rates does not squeeze much more revenue given the number of tax payers and quantity of income which qualifies for that bracket (<10% of taxpayers). The deficit levy of 2% on the top marginal rate raised roughly $1bn p.a. So even if you set the top rate to 80% (a generous optimal Laffer curve estimate), you’d only raise at most $40bn p.a. Not to mention a whole host of other problems associated with very high marginal income tax rates.

What tax rates are you proposing? Are you willing to model these tax rates and then present them to PPAU?
It is not good enough to advocate for a doubling of the tax burden and then just wave your hands in the air saying

when asked as to how this will be achieved. I’d be more than willing to double the tax take if it all came out of broad based land value taxes, but I do not see you proposing or advocating for this.

Not my estimate. That’s the modelling of what economists have come up with, the number I mentioned being pulled from the Sanders Institute video. I have heard similar numbers for the average long run size of the program, not the size of the program at a given point in time e.g during a downturn or during a boom. Obviously the size of the program at a given point in time depends on the state of the economy, which is a key feature. You want the program to prevent the economy and GDP from shrinking due to a collapse in private spending despite constant output.

We are talking about a program which requires less than a tenth of the amount of real resources redistributed compared to what you are proposing - that’s assuming that JG workers create 0 public value or real resources of their own, which is ludicrously conservative.

One could quite easily propose the absurd levels of BI you demand, cut that amount by less than 10% (from $27.8k to $25k), and still run a Job Guarantee - ending all involuntary unemployment and underemployment in Australia, including all precarious work. Subsequently having both policies operating without additional taxation, but a mere insubstantial reduction in the level of BI you propose.

This is not only theoretical, but has been observed within the limited scope of the Plan Jefes program. Bottom-up recovery occurred with employment lead growth, rather than trickle top-down growth lead employment.

Additionally the program is by definition counter-cyclical in a fiscal sense, like the existing unemployment safety net payments must expand when more participants enter due to a lack of private sector jobs, and payments shrink when they leave the payments for private sector jobs.
A UBI by definition is not, because it is a fixed universal payment not contingent on economic conditions. This leaves the tax side of fiscal policy entirely responsible for defending economic counter-cyclical stabilisation - quite dangerous when one considers this was the situation prior to the Great Depression.

I don’t know, feel free to start your own policy thread and debate it.
I am not responsible for the creation and advancement of all policy. The membership is primarily empowered to put forward and work on policy through working groups. This particular policy just so happens to be something I am putting forth as a member.


(Jesse Hermans) #143

Even regressive tax concessions amount to a mere $135bn p.a. including the CGT exemption on the family home:
https://www.macrobusiness.com.au/2018/03/anglicare-per-capita-slam-wealthy-tax-concessions/
This does not however account for revenue forgone =/= revenue potentially raised due to changes in behaviour.
If these concessions were closed, it would make raising the top marginal rate more effective given more taxable income. However I still cannot begin to fathom how high these top marginal rates would have to go to collect a whopping $230.9bn. The effective tax increases we are talking are astronomical, and no doubt lower income earners will still face high marginal rates (despite on average lower net taxes) of at least up to 40%, and it is the marginal rates themselves which are the problem for tax influenced behaviour.


(Jesse Hermans) #144

The thing really missing in all of this from the MMT lense is taxing higher incomes does not solve the real resource problem in providing for a UBI of this magnitude. Not all taxes are created equal, and a $ of tax does not necessarily offset or more than offset a $ of Govt spending - it depends on propensity to consume of taxpayers and effects on investment.
Savings is the absence of consuming real resources, and higher incomes have a higher propensity to save rather than consume. So despite all of this progressive taxation increase supposedly closing the gap to provide for UBI real resource costs, a lot of that additional taxation is not going towards reducing the consumption demand for real resources.

A lot of that progressive tax confiscates money which is not contributing to effective demand via consumption, yet the spending the BI directs towards lower incomes with a higher propensity to consume is effectively a demand stimulus. As a result, the demand stimulus on real resources reduces the effectiveness of that progressive taxation at reducing the inflationary impacts of BI, especially if coupled with increasing the deficit (money creation). Taxing money which is otherwise to be hoarded and never spent is utterly useless in terms of reducing inflation, but it may be useful for equity purposes.


#145

Love these dumb wonks who think we somehow can’t “”“afford”"" redistribution. If it’s there to be redistributed it can be redistributed. Debating the absolute numbers before the underlying restructuring premise has been agreed to is debating on behalf of greedy asset holders who want the whole thing torpedoed to maintain the status quo.


(Jesse Hermans) #146

The feasibility for redistribution is how much you can redistribute without (significantly) shrinking the pie (GDP). There are means for achieving this, although they are not significant mainstream features of our current tax system for obvious political or historical reasons. Nor have you come out with what measures you desire to use to achieve these ends.

Also the amount available for redistribution is fundamentally limited by the economic surplus. You cannot redistribute beyond the surplus necessary to sustain productive capital investment and workers engaged in production - lest you start shrinking GDP and making your UBI problem worse. From the a recent report we’ve been working on at Prosper, the estimates of that surplus (sustainable levels of taxation) wouldn’t be much greater than 50% of GDP - perhaps up to (a generous) 65% assuming we managed to managed to capture all of our rents and eliminate all taxes with dead-weight loss. Once you then take into account the size of all existing Aus government tax needs being ~33% of GDP (welfare being ~10% of that), you’ve got roughly 35% of GDP to realistically work with. This is assuming you’ve implemented the most radical tax regime in human history, within a modern capitalist market based system.

For arguments sake we could assume that somehow all of this redistribution you are demanding is achievable both politically and economically (let alone desirable). However even if you managed to achieve these kind of levels of taxation, who is to say that redirecting them into a UBI is the optimal use of those real resources?
No consideration has been made of public preference or the benefits for universal public goods i.e. the Nordic model. With the kind of levels of taxation you are suggesting, we could copy the entire Nordic welfare state model and then some. Yet no argument has been made as to the superiority of handing direct cash payments (UBI) in lieu of this alternative, even if only partial.

One has to consider for a proper cost/benefit analysis (in the context of reaching those levels of taxation), whether Nordic citizens would be better or worse off if the service provision of their governments were shrunken, and the resources directed into UBI. I highly doubt this would be the case and have yet to see evidence to support such.


#147

Mind actually explaining your reasoning for redistribution leading to GDP shrinking?


(Andrew Downing) #148

Doesn’t it feel weird expressing this like “Aus government tax needs”, when you know it’s the other way around?

A UBI is a scheme for pushing out money supply at a grass roots level in the population that will naturally drive a matching level of taxation as it’s spent primarily on basic necessities, the infrastructure for which is already geared to return the money supply as tax.
The limit is if you increase the UBI past the grass roots basic necessities level as people start saving and buying imported goods and services, and the money supply turns into a balance of trade issue instead of returning as tax.


(Mofosyne) #149

On the argument of rent increase. Have the model taken into account that people freed from having to chase higher paying jobs or any jobs just to survive… Would instead spread out to cheaper location?

Also the end of jobs doesn’t mean the end of work. There is plenty of things we can do that is intangible in it’s economic benefit. Such as volunteering or socialising, or participating in public discourse.

E.g. I would love to see open source projects start to thrive more when contributors don’t have to worry about having a roof over their head just for donating their time for the common good. Like the gpg creator who was desperately low in money maintaining a critical privacy infrastructure.


I would also add that the basic income is not a cure all. People spreading out would mean more need for investment in infrastructures to make basic services cheaper and accessible for rural people as well.

Plus it will need to account for edge case like people with disability and mental illness.


btw here is a rundown


#150

IMO, the real change that should be made is setting the UBI’s threshold at the average income, that would turn it into a mechanism that encourages job seeking when the economy is slowing and choice when the economy is doing well.

And would make it feel like everyone is a shareholder in our total economy.

MMT is just work-for-the-dole with more bells and whistles, and that program has proven to actually discourage job seeking.


(Andrew Downing) #151

MMT (Modern Monetary Theory) is a descriptive economic theory. There may be MMT proponents that also advocate work-for-the-dole though I can’t imagine why, but either way, let’s not conflate the two things.


(Jesse Hermans) #152

Deadweight loss of the existing tax system, which currently costs $66bn+ in lost output every year. That grows exponentially as you increase tax rates, since distortions become more significant at higher rates.

No, because unless you propose massively slashing other government expenditure - which I have not seen anywhere in the PPAU platform - you will need to maintain a similar level of taxation to maintain the existing provision of government. The amount of free fiscal space I’ve mentioned would be at most 5% of GDP. Sure BI will replace part of existing welfare expenditure, but even the total of that only comes up to 10% of GDP. Yet we are not replacing all of it given the top-ups involved in our policy.
If you start cutting back on other spending (assuming BI will fill the gap) to increase your BI as a means of reducing poverty, you are likely to end up with a regressive outcome given a lot of funding goes into universal service provision which disproportionally benefits those on low incomes. Again I make the point of the cost/benefit of providing a Scandinavian welfare state vs the provision of BI we are talking about. There’s a lot you can buy for $200bn every year, so I think it’s a bit presumptuous that the best use is distributing all of it as a per capita UBI.

That is not how fiscal space works. Fiscal space is defined by the amount of idle resources in the economy, and these can quickly be exhausted before even basic needs are met by a UBI depending on the circumstances. Additionally basic necessities usually incorporate import spending unless you are directly facilitating import substitution through some sort of government intervention.

It doesn’t do that, because by its nature it is not a counter-cyclical program but rather a cyclically neutral program. It does not pump in more money when it is needed the most (collapse in private spending), or withdraw it when it needs to be withdrawn. Instead relying entirely on passive collapses in employment and tax revenues to supply net spending injections i.e. what existed prior to the Great Depression. As well as requiring inflationary booms and labour shortages before tax revenue starts increasing, in order to reduce govt net spending.

Additionally there is an insidious implication here that we are prioritising the cutting of (or refusal to spend on) public universal service provision (which disproportionally benefits low income people), to distributing UBI as a means of providing access to basic services and necessities supplied by the private sector. It is highly inefficient and ineffective imo to manage a transfer system in this manner. The same amount of money put into that higher amount of UBI could have instead been directed into universal service provision.

No one here is considering the cost/benefit of how much extra real resources into public health, education, housing, childcare, public transport, infrastructure, the environment, energy policy etc. Or even direct job creation would yield in returns for the public and individual good. This strikes me as somewhat irrational and ideological.
There is no doubt in my mind to the benefits of harmonising and reducing the EMTRs of welfare and income transfers such as the FTBs, pensions, childcare subsidies etc. and rolling these into more streamlined payments, reducing bureaucracy and the appalling punitive nature of the current income support system. I also acknowledge the benefits of providing some sort of minimum safety net such as BI.
However to go these extremes of what amounts to socialising significant amounts of production (which I am not inherently opposed to if done efficiently and equitably through socialisation of economic rents) through what appears to me to be an onerous expansion of the existing oppressive and cumbersome tax system, at the expense of all other possible uses of these resources
Ideological dogmatism.


(Jesse Hermans) #153

While this could facilitate decentralisation, it will not remove the rent premiums placed on desirable areas, but will rather increase them. People will either use their BI to bid up the rent/prices in desirable areas, or move to less desirable areas and bid up the rent there. It really depends on the location, but I do not see the policy as improving land affordability issues in the metro areas directly. Though it may improve decentralisation and occupation of areas with currently high vacancies and no jobs - depending on whether people want to live in jobless communities.
I don’t see this as some sort of assurance for communities that are devastated from technological change i.e. La Trobe valley now the coal power plant has been shutdown. Go ask those people whether they want just a cheque in the mail, or jobs. Especially the working class people. Go ask those remote indigenous communities. A cheque in the mail is not justice, no more than receiving a payout in court is justice for domestic violence.

What I am proposing potentially turns those activities into paid jobs. The end of market jobs does not necessitate the end of jobs. Such is the potential to transition from market jobs, to non-market jobs, to post-employment.

I don’t see why the funding of these type of projects cannot be turned into paid jobs.

Firstly I assume you mean the effective tax free threshold. This is arbitrary, and I am not opposed to this depending on the marginal rate and effective cost in real resources.

That is definition of terrible economic management. You want more workers when the economy is experiencing a labour shortage and fewer in a downturn. I will assume you are referring to this.

There is a problem you are failing to account for - labour market hysteresis. You can’t expect workers who have been out of employment for significant periods (long term unemployment) to somehow magically enter the labour force with necessary skills and experience, and constitute an effective labour supply in a time of significant labour demand. This stands in contradiction to all empirical evidence on long term unemployment. I have already provided material on this above.

The unemployed and underemployed do not get justice in being excluded from the labour market but sent some sort of compensating cheque. It’s not only empirically wrong (costs of unemployment beyond income loss) but frankly insulting to many of these people.
The only working-class BI proponent I have ever heard of was a single mum who wanted less punitive and more adequate welfare, but even she was willing to (and now does work) in non-market jobs that benefit the community (in this instance NFP advocacy for impoverished single mums). I don’t know her opinion of a JG proposal and I doubt she’s even heard of it.
My observation is child rearing is the only area where BI has significant effects on reducing labour force participation. This is an area where income support (BI or more generally FTBs) is a priority, but does not preclude the creation of jobs.

I presume you mean a job guarantee. This is wrong on so many levels and has been repeatedly debunked throughout the 150+ posts on this thread.

Where is this proof?
In the instances where job guarantees (e.g. Plan Jefes) were provided it only discourages job seeking in jobs which could not provide a better deal - or more importantly job seeking for non-existent jobs. There were insufficient private job vacancies for these unemployed to enter - hence why they were unemployed to begin with.
Additionally employers knew where to go to recruit - greatly reducing recruitment costs. Many participants in the program later moved into private employment after the economy improved.


#154

You’re going to properly explain what you mean by these words… “deadweight loss” refers to what? what is this 66b lost output per year you speak of?

How is UBI not counter-cyclical? It’s just preventative instead of reactive… consumer spending won’t seize up en masse if everyone knows they have stable incomes and so business spending also won’t seize up en masse because they know their consumer base isn’t going anywhere.

Where? No one has said that. I only see issue with this universal work program. And if others have issue with it for the same reason i do, it’s because work is not something deserving of a universal program. Work is not on my hierarchy of needs.


(Jesse Hermans) #155


For those needing initiation into the world of tax and microeconomics, different taxes result in different distortions. These distortions are referred to as “deadweight loss” or “marginal excess burden”. Most taxes result in destroying economic activity, so for every $1 raised the economy loses $1 in tax + x cents in destroyed GDP. The more you collect in taxes, the more GDP you destroy. The exception is if you use taxes on economic rents (which I am all for), however these are not mainstream features of our existing tax system.

It does not maintain aggregate spending via government deficits when private spending collapses. Aggregate spending does not magically become immune to shocks because of the existence of a BI. There is no academic work at all to support such an assertion.

It is implied. If you are willing to raise $200bn+ in additional tax revenue for your desired BI, you are by definition precluding all other possible uses of those real resources directed to the UBI - while not considering the cost/benefit of those other spending opportunities. If you are willing to raise that much tax, why not have free dental and all other healthcare needs? Free education at all levels? A lot more public transport and infrastructure? Free childcare? 100% Renewable energy? More public housing? More environmental funding? Free school lunches?
You can’t talk about policy in a vacuum, there are priorities and trade-offs. For the amount of resources you are talking about, I could replicate Norway’s welfare state and still have money leftover for a small BI.

Additionally AndrewD was making comments which sounded like he was expecting BI to be used to pay for basic necessities, which could include existing public services. Historically Friedman, Hayek etc. used BI as an argument for slashing the state and then expecting individuals to fund all of their essential service needs out of UBI spent on private businesses. I am sure this is not AndrewD’s intention, but from the way he framed his comment it echoed those views.


#156

Most taxes aren’t immediately pushed back out into the economy.

We absolutely should have Universal Healthcare (including dental), Universal Education, Universal Housing… UBI does not preclude funding other social services. Fringe Libertarian hacks aside, most people would agree things like healthcare and education have a societal value that would not do well to be at the whims of the market and profit motivated entities.

UBI is part of a suite of universalizing social investments, the main point of universalizing being that government overseers should be systemically abolished where ever possible because top-down structures are full of biases and inefficiency.