the government funds government programs through tax revenues (and if it can't balance its books, debt), similar to corporations and individuals
BUT, since the government can print money, one can look at it from a different lens:
the government funds government programs by printing money
the government has taxes to:
destroy money, to control inflation
force utility of the currency
control inequality
monitor the economy
influence certain behaviours (ex. carbon tax, soda tax; retirement saving via home ownership)
keep productive people working longer
the main form of money printing is:
spending on government programs
issuing bonds
allowing banks to make loans at a multiple of their reserve
MMT has "2 parts"
the perspective shift, of money-printing and money-destruction (vs. money-collection and money-spending) (as above), which is orthodox
the policy ramifications, such as:
government should spend more to reach full-employment and worry less about debt
that government spending ("fiscal policy") is often a better alternative to controlling inflation than central bank interest rate adjustments ("monetary policy")
by doing less itself, but letting banks print more (by lowering interest rates), the government is delegating the decision of "what should we spend money on" to the banks
and, thus, delegating the decision to those with money
ie. let's let money decide what we should spend money on
vs. let's let people decide what we should spend money on
(making it less democratic)
"outlandish" concepts like UBI don't need to be funded by taxes
but, if they're not, they may cause general inflation (everything gets more expensive), or specific inflation (some things get more expensive)
"may", because...
modern macroeconomic theory posits:
increase in money supply ==> general inflation ("capital I inflation")
but there are counter-examples (ex. Japan in the last 10 years, where growing government spending and debt does not result in inflation)
it's a retro-active, macro- measure of a phenomenon that occurs through micro- activities
analogy: heating water in a kettle
macro- view:
when you turn on a kettle, you introduce net energy into the kettle, and the water temperature rises
temperature is a macro- measure of the average energy of the water particles
micro- view:
electrons, electricity, resistance, increased vibration of molecules in the heating coil, conductive heat transfer, increased vibration of some nearby molecules in the water, conductive and convective heat transfer in the water
notably: the water is not "equally warm", the molecules don't all have equivalent energy (the variance may decrease, but, due to the chaos of billion-of-particles-bouncing-around, even in steady state, some particles have orders-of-magnitude more energy than others)
in micro-economic theory, inflation happens through an intricate dance of economic actors
ex. grocery stores experiment with higher prices (because of supply shortages), realize they can get away with it, and attempt to hold prices high even if their costs decrease
but, in a properly competitive market, these should be temporary fluctuations
if stores raise prices without supply side cost increases, new entrants should be able to compete on price, and bring prices back lower
if they can't, the problem is likely monopoly-formation
(unbridled "free" markets tend toward monopoly formation, which benefits the owners of that capital, at the expense of consumers - ie. everyone else)
"letting the market decide" is long-term regressive and undemocratic
a state is needed to maintain truly free markets
ex. banks make it easier to get loans for housing (but not other things), people are willing to "pay more" dollars for housing (because what they really care about is the "amount of years I need to work for this house")
related concept: cost-disease
ex. in US, why have house prices, medical care, and higher education costs become increasingly expensive (some answers: market-failures, implicit-scarcity (prestige), bad incentives)
even if UBI caused inflation, the question to ask is "what do we value as a society?" and "can our 'real economy' handle it?"
ie. for UBI, it's not a question of "can our taxes pay for it?", but a question of: "does the industry as is have the capability to (a) feed everyone to a healthy standard and (b) house everyone to a basic standard?", and "is this what people want?", and "will this increase or decrease economic capacity?"
in developed nations like US and Canada the "do we have the resources, technology and industry" question is a strong yes
re: (a) food, we have some of the best developed food infrastructure, resulting in the cheapest staple foods anywhere in the world; we're even running into an abundance of food problem (obesity crisis)
re: (b) housing, we have the land and know how to build houses more efficiently than ever
in areas with strong government investment in housing, the housing markets aren't insane
the "housing price" crises are caused by policy failures:
incentivizing home ownership as "retirement investment"
with preferred taxation on real estate
preferred loan availability for real estate
low interest rates
(in other words, by controlling inflation primarily through interest rates, governments delegated to the banks, and the banks primarily focused on home loans, resulting in particular inflation of house prices)
say, again for UBI, that the US or Canada where to fund it without any new taxes
let say it was purely a cash payment, based on some baseline cost-of-rent and cost-of-food
on a "economics 101"-level, there is a fear of a runaway inflation loop for food and housing:
basic-income-pegged-to-food-and-rent-costs =>
rise-in-demand-for-food-and-rent =>
rise-in-prices-for-food-and-rent =>
(back to the top)
which "seems" like a potential infinite rising cost of government expenditure
but again, government has infinite money printing capacity
if (and as we explore below, it is a big if) such rising costs where to happen, it would be a re-balancing of values in the economy (which is what we we're after, to some degree)
in practise though, it wouldn't be an infinite loop, the markets would find some new steady state
and again, it really about whether the "real economy" can support such demand on housing and food (very likely yes), and whether the "real economies" capacity to produce goods can sustain the changes in incentives
ie. will UBI result in people working less? being less productive? do we need everyone to be working?
(if UBI meant that: everyone had shelter and food, but, supply/demand/economics meant vastly more expensive Gucci bags, or golf courts, or no more billion-dollar-blockbuster-movie-budgets – that may be worth the trade-off)
re: food
most people are already getting their food needs met
some are enduring a lot for it - crazy working hours, commutes
the demand for these kinds of work would decrease
(IMO, less "exploitation" of workers is a good thing)
likely to cause an increase in costs for "low skill but shit jobs" and their related industries (ex. fast food, retail, shipment centres)
perhaps to the chagrin of consumers of those products ("arghh, why is my Big Mac more expensive?") and potentially making some business models no longer viable
but this kind of rebalancing is to be expected and is desirable; the whole point of UBI is to shift priorities, from "the status quo" to "all people deserve to live with shelter- and food- security" (even if it costs us our on-demand hamburgers – which it might even not!)
some people are under-caloried and under-properly-fed (proper balance of macro- and micro- nutrients)
they would introduce new demand (and thus, increased demand) on basic food staples
which would likely be increased prices in the short-term (supply-demand 101), but, not in the long-term, because supply-demand curves are non-linear and ever-changing
increased and more stable demand can result in greater economies-of-scale, industry efficiencies, more viable investment towards improving industry efficiencies
case in point: global food demand over the last 100 years have quadrupled (4x population), but hours-of-labor-per-calorie have decreased
better nutrition is highly likely to have net-positive gains for the economy (ie. the productivity improvements of better nutrition are likely to result in more tax dollars than their cost)
better nutrition has a huge impact on education
better nutrition has impact on motivation, intelligence, etc.
notably: the Flynn effect ("continuous increase in IQ across generations") is believed to be largely due to better nutrition
better nutrition results in lower health-care costs
although, it is likely that UBI would magnify the obesity-crisis, which is seen as a "wealth-disease"
but, this should be addressed through other means, and not "let's keep people poor, so they can't afford to get fat"
there would likely be a cascading effect on non-staple foods / "luxury foods"
a healthy diet in Canada is possible on less than $4 / day / person, but, most people who can pay more (for convenience, flavour, idiosyncratic food-preferences, etc.), up to a point
if one could afford to, one would probably eat-out/order-in for all meals
but, again, an increase in cost of non-staple foods is, IMO, a perfectly fine societal price to pay
re: housing
housing markets as they exist in a lot of countries could be argued to have "failed the people" already
why? it's complicated (see Henry George, globalization, etc.)
so, just giving more money to people, many of whom are under-housed, is likely to increase housing costs
alternatively, government could (and probably should) more aggressively enter the housing game
there is a lot of risk in the pure free housing market, a lot of developer-consolidation (uncompetiveness), that could be done more efficiently (gasp) by government
most notably, strong government housing program have been shown to work to keep the private sector sane (in areas w/ cities or government with strong housing programs, ex. Vienna, Finland, Singapore)
a better housed society has economic benefits too
currently homeless have sufficient stability to better integrate into society (ex. Finland)
currently under-housed would be able to spend more time on education (rather than commuting to a shitty job)
also, not to mention the various other economic benefits of "not having to work to have food an shelter"
notably: the freedom for long-term investments by individuals
education, entrepreneurship, relocation
(ie. an increased capacity to take risks and make investments, which, currently, is almost exclusively reserved for the wealthy)
reduced "fear of the future" / need for hoarding assets
on an individual level, this may be negative (ie. "I don't need to work so long/hard to save for my retirement")
which is negative to the productive capacity of the economy, because we're not extracting maximal theoretical value out of a person
but, this "productivity/efficiency" angle is a terribly bleak picture of society - is this the world we want to live in?
investor-capitalists like to argue that capital does more for the economy than labor anyway
IMO, we're heading towards full automation, and that's a good thing - we could live in a world of robots growing our food and building/maintaining our homes
in practice, it's new technology that makes the greatest leaps in economic-life-support-capacity (ex. Haber-Bosch fertilizer process)
on an societal level, this may be positive (ie. "we don't need pension funds")
pension funds are another example of the government delegating investment priorities to private sector and "the market", in a Rube-Goldbergian effort to:
account for who deserves how much (of the fraction of a state pension plan)
motivate smart individuals to allocate investments efficiently (within the realms of the market, but without government tactical/strategic aims)
ie. until recently pressured, pension funds were happily investing in tobacco companies, polluting companies, co2-emitting companies
this partly changed due to government and societal pressure
but, likely, moreso, with culture change amongst funds to realize that, for a long-term fund, thinks like climate-change ARE existential risks to the fund being able to meet its goals
from the perspective of someone who is pro-market-as-efficient-allocator, but also taking the MMT perspective, any taxes are the government meddling with market forces, vs. allowing the market to decide how inflation should be allocated (which goods should increase more than others)
the USA having a "debt ceiling" (and other countries), from an MMT perspective, is an inflation-control mechanism (in addition to the central bank's interest rate controls)
overall...
from the perspective of MMT, the lack of action of the US and Canadian governments on issues like poverty, climate-change and housing, shows how spineless, ineffective, pathetic, passive and cowardly our politicians are (and/or, captured by corporate, 1%-er interests, and financial-industry)
given that a central bank can act independently, the government not increasing its spending when necessary (ex. after 2008), just meant delegating to the central bank (which lowered interest rates)
which is a huge opportunity cost of strategic government spending (ex. to tackle poverty, climate-change or housing)