Increasing the federal deficit would fuel inflation by producing money at a higher rate than the economy can produce
Hughes, 1/27 --- Hueghes is the founder of Bull Oak Capital, an investment advisory firm. He started the firm after graduating from the UCLA Anderson School of Business. While at UCLA, He completed an in-depth independent graduate research project where he wrote an original whitepaper on Risk-Contribution Analysis and Value Investing as a basis for portfolio management. (Ryan A. Hughes, "Universal Basic Income is a Bad Idea", 1-27-2023, Bull Oak Capital, https://bulloakcapital.com/blog/universal-basic-income-is-a-bad-idea/)//EG
PESKY INFLATION If UBI were to be financed by increasing the federal deficit, it would most undoubtedly fuel inflation. As a reminder, by a more rapid increase in the quantity of money than the quantity of goods or services produced during the same time period. In other words, if the nation’s printing press produces money at a greater rate than its economy can produce, the result will be higher inflation levels. Printing an extra $3.8T yearly will surely cause inflation to roar. If our irresponsible fiscal spending habits during 2020 and 2021 taught us anything, it is that handing out money to anybody and everybody does not contribute to low inflation levels. CONCLUSION The idea behind Universal Basic Income comes from the heart. It is a human-centric policy that aims to help those who could use it. However, the policy does not make logical sense. As with anything related to finance, emotions should not rule the decision-making process. Data should be relied upon, and in this case, the data says that we should avoid UBI. While UBI helps people feel happier (who wouldn’t want free money?), it does not boost the job market, nor does it show that it would encourage those at the lower ranks of society to seek self-reliance (which is the populace UBI seeks to help out). The old adage, “if it seems too good to be true, it probably is” applies here. The laws of the universe apply no matter who or where you are. There is a price for everything. Society cannot receive something if nothing is given in return, no matter the intent behind it. If we really want to help out those at the lower ranks of society, training our young people to succeed in today’s world will be far more effective in the long run than simply throwing money at the problem. Yes, we need a social safety net, but paying every citizen $1,000+ per month is not a social safety net. It would cause extreme inflation and destroy our society’s very fabric. Best to move on from this idea.