This week we discuss the controversial issue of Universal Basic Income. Watch now!
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I have made a lot of different videos on YouTube about accounting and corporate finance. But my most hated video was on Universal Basic Income or UBI. I posted that video almost exactly one year ago. And since it has received so many negative comments, I wanted to do a follow up video. This is UBI Revisited.
It’s that time when all the new presidential candidates are issuing their announcements to run for office. So people are in this mood to talk about political topics. One of those topics that people keep talking about is Universal Basic Income. Those of you who watch my channel know, I never talk about politics, mostly because I am not a political expert. Universal Basic Income is the only political issue I will talk about, because it has to deal with money.
So a year ago, I made a video on the problems with Universal Basic Income, and I was pretty surprised at the number of people who got upset. I am a pretty open-minded person. So I thought to myself, “Let me research this more.” I went back and read the research and listened to speakers. And after a year of thinking about this, I still come to the same conclusion: UBI is a bad idea. I want to talk about four reasons why it is problematic.
Please realize, this is just my opinion. There are many other well-known people who are in favor of UBI. In fact, I feel like I am the only person speaking out against this. So do not just take my word for it. You should definitely hear other perspectives before you make up your mind.
Let us start with the practical reason UBI does not work. There is no money for this program. Every year, the Federal Government releases a budget. It is a thick document, and if you sit down and read through it, you will realize, the Federal Government does not have extra money lying around. There is not enough money to fund the programs we have in place. With UBI, we are talking about starting a brand new massive government welfare program, when there is not enough money to begin with. Our schools are underfunded, social security is underfunded, health care is underfunded, NASA is underfunded. I am not against government spending. But I think we should fully fund our schools, and give our teachers a raise before we start talking about UBI. So before you can consider UBI, a couple of things need to happen. We have to fully fund our current government. Then we would need to raise taxes on rich people. And only then could we decide whether or not to start a UBI program. That is a lot of what ifs, that I think are pretty unlikely. So from a very practical reason that we do not have any money, UBI does not work.
The next point is monetary. If you put UBI in place, our monetary system would break down from massive inflation. UBI is based on the concept that everyone receives a check from the government to cover their living expenses. So wherever you live, imagine if everyone in your town received a check for $1,000.00. If that happens, everyone’s cost of living will increase by $1,000.00 because of the forces of supply and demand. That is how inflation works. So you might be holding in your hand a check for $1,000.00, but it is worthless, because your rent went up and the cost of food went up. The only person that UBI actually benefits is rich people, because they can just raise prices. The poor person does not get anything out of it. The people who are the worst off are elderly retired people on a fixed income. Under massive inflation, their retirement savings they worked for their whole life becomes worthless.
I do not think a lot of people realize how important it is to have a stable currency. Any government who has experienced massive inflation has undergone a political uprising. We need to guard our monetary system so carefully, and UBI presents so many potential disasters.
Next I want to talk about unemployment, because this is one of the most popular arguments supporting UBI. The argument is that computers are getting so smart, that soon there will not be any jobs for humans left to do. Everything will be automated. The most common example is self-driving cars. Self-driving cars are soon going to be a reality on the road. This technological innovation will put all the drivers out of a job. Since all those people will be unemployed, UBI will essentially provide them an income.
First of all, why are we talking solving an unemployment problem when unemployment is at 4%? Even if we assume there will somehow be an unemployment problem in the future, I feel that examples like this are misleading. When you start examining what happens with self-driving cars, the argument does not hold up. Who are these people who are losing their jobs? Let us use the example of delivery truck drivers. Even if the delivery truck drives itself, you still need someone there to unload the cargo, and have the paperwork signed. Even if you assumed, you outsource the work to the receiving businesses that work still needs to be done. The businesses will just have to hire more people. The self-driving truck is just a better tool to perform the same job more effectively. I actually do not think we will lose that many jobs.
I do not want to overstate this argument, because of course new technology disrupts industries, and people get laid off. But we have been through this cycle of innovation for the last 500 years. We have seen this before. Technology acts as an enabler for businesses to create more work, not lay everyone off. Think about when the personal computer became widely used. It did not eliminate everyone’s job, it created more jobs. And here we are today sitting at 4% unemployment.
This brings me to my final point about business. This exact situation is why business people are here. Technological disruption creates uncertainty and chaos. But business is the best method to deal with that disruption, not UBI. Business takes resources that are no longer being effective and reallocates them where they are more valuable. So these people who lose their jobs… who is to say they will not find better more fulfilling jobs. The invisible hand of economics will move people to where they are needed.
I think what is really happening here is people are scared. The future is uncertain, and so people hear things like we are getting self-driving cars, and they think that the computers are going to fire all the truck drivers. And they gasp in fear. But rather than succumb to fear, there is another option. What if this is an opportunity? What if we could use this new technology to create whole new levels of productivity, and new kinds of jobs?
So when we talk about UBI, we are really talking about a choice. The choice to forage ahead into a new adventure in humanity’s development, or to sit back and accept our fate with UBI.
Instead of being scared, have a little faith in business, that the forces of supply and demand will re-assign people to do bigger and better things. Business enables us to get over the hurdle of fear and unlock humanity’s greatness. I know this is true, because business has worked for the last five centuries.
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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.