Tax funded UBI fails to address major dysfunctions that threaten economic sustainability – MMT funding solves

Many opponents of UBI say an adequate amount which is covering all basic human needs is not feasible because of its costs. These critics just multiply the amount of UBI with the number of recipients in a country to calculate the gross cost which is a huge amount of money. They ignore the proposed changes to the tax and benefit system to finance UBI which would lead to much lower net cost. Geoff takes a different approach. He argues that states can create their own money and fund UBI in this way. This was done during the recent financial crisis using ‘Quantitative Easing’ (QE). The beneficiaries of QE were the large banks and the wealth holders in our societies. The share and property prices have boomed due to QE. Theories of money are relevant to the financing question of Basic Income. Therefore UBI supporters need to better understand these theories in order to consider all financing options of UBI. GC claims that UBI is a necessary remedy for the major causes of our recurrent economic crises. The stability of our economic and financial system increasingly relies on the recurrent injection of ‘unearned’ income. According to the former Conservative Prime Minister Theresa May in the United Kingdom (UK) there was no magic money tree. She used this argument to justify the austerity measures of her government. Similarly many politicians and economists want us to believe that a state economy is similar to a household economy. GC challenges this comparison as misleading. Instead he states ‘Money has no inherent value, but only the value it derives by being socially accepted to purchase goods, services, assets, and raw materials. The reality is that as a society, we can consume what we can produce, and money is only an intermediary in this process, like oil in a machine.’ He further explains ‘Higher productivity using technological automation will require more money to be created to represent the value of that production.’ Sovereign Money means that governments, through their central banks, simply issue money without that money being added to the national debt. This is in line with Modern Monetary Theory (MMT), which argues that a sovereign state can create its own currency. GC argues that the creation of money to service the economy should never be defined as national debt. A good example is the UK creation of £394 billion of money during the COVID pandemic. This money was initially created as government debt and then bought back by the Bank of England. The Bank of England is part of the state. Therefore there is no net national debt, because the state owns its own debts. It is a good example of debt-free sovereign money. As a consequence of his theory GC rephrases the typical argument against further government borrowing ‘How much national debt can the government afford?’ into 'The real constraint on any economy is the level of real production output which the economy can achieve. Governments can afford to spend according to what the economy can produce, not according to the Treasury’s financial balance.’ Most UBI proposals choose revenue-neutral or budget-balancing approaches with a change of the tax-benefit system. They propose increases of income taxes for top earners or unearned income, the introduction of carbon, land value and wealth taxes and the removal of certain social benefits which become redundant with a UBI. According to GC these approaches do not address the major dysfunctions in our current economies. We need to get more income to people and get debt out of our economic system. Therefore his proposal is bolder, addresses the technology challenge of increasing production without a similar increase in the total amount of earned income and the increasing debts of households and states.