In 2017 some countries have adopted the Universal Basic Income as an alternative to Welfare Payments, my question is, is it economically feasible by governments?
closed as unclear what you're asking by EnergyNumbers, Giskard, Adam Bailey, Herr K., emeryville Apr 14 '18 at 22:05
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In my view, this is not a well defined question since it isn't very clear what you mean by 'feasible':
If you mean 'are developed countries in principle able to pay for a UBI?', then the answer is trivially yes.
Perhaps you mean 'politically feasible'? Obviously, that depends on the political constraints on redistribution, attitudes towards 'handouts', etc. - though I'm not sure this is the appropriate forum to discuss such issues.
Perhaps you mean 'A Good Thing'? Well, that's not really what feasible means...
Yes. It’s economically feasible because we have to consider where money comes from. The central bank can essentially create money out of thin air and buy back bonds. Or, banks can create more loans and increase bank deposits which can control the money supply. The government can then raise revenue from taxes, or borrowing. In theory the government can issue a basic income from the taxes it collects, based on the money supply that the federal reserve and central bank can manipulate.
Y = GDP, I = Investment, C = Consumption, G = Government spending
If GDP is Y = (C + I + G) Now, disposable income is Y - T (taxes). And public savings is T - G. And private savings is Disposible income - Consumotion. As you can see, if savings are sufficient, the government can issue transfer payments (in this case a basic income) to its citizens.
You may ask “what if a country doesn’t have enough savings for the basic income?”. That’s where borrowing money comes in. If savings are insufficient, the government can borrow more money, increase the deficit, and still issue a transfer payment to each citizen for a basic income. The effects of either policy may or may not be bad. That is more of a normative statement. I’m simply illustrating through this model that it is “feasible”.