The High Costs of UBI are Not Financial: They are Real
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When considering the viability of universal basic income (UBI) and other large-scale federal programs, we would do well to look at the real, rather than financial costs. This shift in perspective is useful because, as the Federal Reserve has reminded us time and again, taxes are not a funding operation for the federal government.
In an important piece titled “Taxes for Revenue are Obsolete,” NY Federal Reserve Chairman Beardsley Ruml (1946) stressed that the crucial consideration when imposing taxes is their social and economic consequences, not their funding capacity. While tax revenue ensures the solvency of state and local governments, this is not true for the federal government, whose spending is operationally unconstrained due to the elimination of currency convertibility and advances in Central Bank management (ibid.). Other Federal Reserve papers and statements corroborate this analysis (e.g., Bernanke 2002, 2009; Fawley and Juvenal 2011). The realimpact of taxes on the...
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