MMT proposed deficit spending is sufficient to fund the UBI+

Having now lived through the novel coronavirus pandemic, and having witnessed with my own eyes the politics of what was made possible in response, and what was still not considered possible even at the height of Great Depression levels of mass unemployment, I have come to the following conclusion: UBI in the form of a fully universal payment to all Americans is unlikely to ever happen without MMT logic gaining sufficient influence among policymakers. Why do I say this? Because even in a time of national emergency, and even when the most money was ever spent, there remained an insistence on targeting. Full universality was still unattainable because of a belief that only those “in need” should get a stimulus check, even when we knew that definitions of need were utilizing old tax returns that were no longer relevant in 2020. People just couldn’t wrap their heads around the fact that targeting could be achieved on the back end via taxes. Pay people first. Tax them last. Taxation achieves the desired targeting by removing money ex post instead of ex ante. But we didn't do that because there was still a concern about the price tag of the legislation and keeping it as small as possible on the front end. MMT is a pivotal mindset shift by looking at taxation differently. With MMT, taxation goes from being the source of funding to being the tool to accomplish certain goals like inflation management, inequality reduction, and incentive shifting. It means going from an additive mindset to a subtractive one. It’s like the difference between filling a hole with one shovel full of dirt at a time, or dumping a pile of dirt into that same hole followed by bulldozing away the excess. Taxation is about avoiding the excess of dirt after the hole is full, not about figuring out just the right amount of dirt to put into the hole in the first place. Understanding UBI is helped by using this same subtractive mindset. Everyone gets money, and then money is deleted for some more than others via taxes. Because taxes aren’t about funding, and are instead about shaping the outcome of the policy, the focus shifts from how to pay for UBI to how to best shape the UBI. The type and amount of taxes used in combination with the level of UBI determines who is and isn’t a net recipient of UBI after taxes. Instead of deciding who should and shouldn’t get income using an inefficient and error-prone means-test, the combination of UBI and taxes makes those with lower incomes into net recipients who receive more in UBI than they pay in total taxes, while making those with higher incomes pay more in total taxes than they receive in UBI. Targeting does nothing but create unnecessary bureaucracy, holes for people in need to fall through, damaging stigma and distrust, and excessive marginal tax rates. Pay 'em all and let taxes sort 'em out. Utilizing taxation as a tool of targeting through subtraction opens up all kinds of new additional benefits. Carbon taxes go from “paying for” UBI to reducing inflation plus also reducing greenhouse gas emissions. Value-added taxes and automated universal transaction taxes go from “paying for” UBI to reducing inflation plus also clawing back the UBI from those doing the most consuming plus also incentivizing savings and investment over consumption. Land-value taxes go from “paying for” UBI to reducing inflation and wealth inequality plus also incentivizing housing development and disincentivizing idle land speculation. Intellectual property fees go from “paying for” UBI to reducing inflation plus also disincentivizing patent trolling and incentivizing a larger public domain. Etc. As soon as we start thinking about taxes as a tool of erasing money and disincentivizing specific choices, a lot of tax options make a lot more sense, while other tax options like taxing income make a lot less sense. With MMT, the question changes from “How do we pay for it?” to “We’ve decided this is important and we have the resources to do it, so we’re doing it, but what’s the best mix of ways to make the best most efficient use of our resources to achieve the best outcomes doing it?” We have to stop thinking about what something costs at the federal level. If it’s important and we can do it, then we should do it, and then manage the economy around that, around us, because that’s the entire point of the economy, to work for us. We are at the center, so it should serve us, not the other way around. The limits of what we can actually do are determined by our actual physical capacity to do it, not by some construct we call money. To me, this kind of mindset shift opens the door to a new kind of economy, a human-centered economy, a resource-based economy, where we start asking deeper questions about what the point of all of this is in the first place. What’s the point of money? Why did we develop all of this technology in the first place? Shouldn’t the economy we create together work for all of us, and shouldn’t it be engineered in a way that maximizes human wellbeing and minimizes our negative impacts on the ecosystem that makes all human life possible? And shouldn't all of it be built on a foundation of human rights that secures freedom and dignity for all? In conclusion, I propose we need MMT and UBI, and also MMT and UBI need each other. MMT needs UBI to achieve the best use of available resources with the most optimal outcomes, and UBI needs MMT in order to achieve full universality, and in order to move from questions about affordability to questions of optimal tax design. Without UBI, MMT’s reliance on FJG alone will reduce total potential productivity by suboptimal allocation of resources and inferior amounts of demand and intrinsic motivation. Without MMT, UBI seems less likely to be viewed as a stigma-free right and more likely to be limited to implementations like the stimulus checks that include means-testing and thus all the problems that go along with non-universality. Going forward, I am far less interested in conveying UBI as having “pay-fors” as I am in conveying how to best go about UBI. What’s the highest amount of UBI we can achieve with our total economic capacity fully utilized? What’s the best way or mix of ways, including but not limited to taxes, to best manage inflation to avoid exceeding our total economic capacity? Can we use inflation itself as a signaling tool to help us determine which specific supply-side investments we need to make while protecting people with low and fixed incomes from the regressive effects of inflation? As we design an optimal UBI implementation, can we also reduce or even eliminate income taxes as part of that approach by instead leaning on a mix of other taxes that tax stuff we want less of? Can we change the way people look at money, taxes, and government itself to something more visionary and less divisive? I think we can, and if you don’t agree yet, please next go read The Deficit Myth by Stephanie Kelton, and also more of my own writings about UBI to dive deeper into its importance as the foundation upon which to build a higher functioning society and a better, more prosperous future. We can do a lot better, and I think it begins with MMT and UBI.