What Happens When You Marry UBI with #MintTheCoin?
Meet the "Automatic Boost for Communities Act," Part of the 95-member Congressional Progressive Caucus Economic Agenda.
The odds are that you’ve never heard about the “Automatic Boost to Communities” Act, HR 1030. It’s a bill sponsored by anti-Semitic “Squad” member Rep. Rashida Tlaib (D-MI) and co-sponsored by seven other congressional economic giants, including noted Boston University Econ major Alexandria Ocasio Cortez (D-NY). It is pending before the House Ways and Means Committee.
If you want to understand the socialist or “progressive” (the same) “economic” plan for America, this is an excellent place to start (and end, while screaming into the sunset). While ignorance may be bliss, to be forewarned is to be forearmed. I’m here for the latter.
The bill marries the concept of universal basic income (UBI) by “paying” for it by minting not one but two $1 Trillion Platinum coins, deposited with the Federal Reserve. UBI, under this bill, sends an unconditional monthly check to citizens and non-citizen residents alike - totaling $2,000 per person up to $8,000 per household, per month, until the President declares the end of the COVID emergency. It then devolves into $1,000 per person, per month payments for a year afterward. How fiscally responsible!
Except that new “Forward Party” leader Andrew Yang wants to make the $1,000 per month UBI payments permanent (but only for citizens, supposedly). For everyone. Remember, there is nothing more permanent than a temporary federal program, especially one involving an entitlement. At least until the money runs out.
Wait, the COVID emergency ends, when, exactly? When the President decides. Which means when it’s politically convenient.
You really should try to read the bill. Or Rep. Tlaib’s summary of the legislation, which she first introduced in the prior 116th Congress. Treat or treat, indeed. Happy Halloween. It’s less “When Harry Met Sally” than “Bride of Frankenstein,” or its 1994 sequel, “Mary Shelly’s Frankenstein.” Have a stiff drink at hand.
The “Mint the Coin” crowd is still at it and no doubt will be back when the new debt limit expires in early December. You know their schtick. They are misusing and misinterpreting an obscure provision of the law that allows the Treasury Secretary to mint coins. Except, in this case, the coin is mythically valued at $1 Trillion and deposited with the Federal Reserve to cover the additional debts incurred by Congress.
It’s a gimmick that even the Biden Administration rejects. And it is likely illegal. Let’s consult Florida Atlantic University economics professor William J. Luther and his valuable Twitter thread:
Minting the coin looks a lot like replacing $1 T in Treasuries at the Fed with a coin and then issuing $1 T in new Treasuries to the public. But since the total amount of Treasuries outstanding is unchanged, the debt ceiling is not breached. Pretty clever, right?
There's just one problem. The scheme, as articulated by proponents, is unlawful. The Treasury is authorized to mint platinum bullion and proof coins. It is *not* authorized to mint a platinum *token* coin. And that, it turns out, is an important distinction.
For the coin scheme to work as intended, the Treasury would need to procure a tiny amount of platinum worth, say, $0.01, and mint a coin with a face value of $1 T. Ignoring other minting costs, this would enable $999,999,999,999.99 in new expenditures. Let's round up to $1 T.
Note that the more the Treasury pays to mint the $1 T coin, the less room it has to make new expenditures. If it were to procure $1 T in platinum to mint a $1 T coin, for example, it would not be able to make any new expenditures at all!
In other words, the scheme requires the Treasury mint a platinum *token* coin––that is, a platinum coin with a face value that *exceeds* the value of its metallic content. Unfortunately, the Treasury is not authorized to mint a platinum token coin. Let's take a look at the law.
42 U.S.C. § 5112(k) grants the Secretary of the Treasury permission to mint and issue platinum bullion and proof coins in any denomination. A bullion coin is worth its weight in precious metal; proof coins result when the metal is highly polished and struck more than once.
To produce a $1 T platinum bullion coin, the Treasury would first have to procure $1 T worth of platinum. Minting a $1 T platinum bullion coin, therefore,
would not provide a way around the debt ceiling.Producing a $1 T platinum proof coin would be even less effective at getting around the debt ceiling. As with the bullion coin, the Treasury would first have to procure $1 T worth of platinum. It would then incur even more costs to polish and strike the metal more than once.
Conclusion: minting a $1 T platinum coin will not help. We must cut spending, increase taxes, or raise the debt ceiling. We don't need a clever workaround. We need to face the problem head-on.
So not only would we be paying people not to work amidst the worst labor, supply, shipping, and logistics disruptions in modern history - driven substantially by a lack of labor - it would be massively inflationary. The value of your paycheck, nest egg, retirement savings, and pension benefits would all drop, even dramatically, even if you could spend it to buy things that may not be available.
It does not take an economics degree (and I do not have one) to realize what an unmitigated disaster this bill would unleash on all aspects of America’s economy. Workers are leaving the workforce in droves with the labor force participation rate far below pre-pandemic levels. Imagine flooding the economy with free cash that inspires many people not to work—illegal gimmicks to drive the debt beyond its current $28 trillion levels. And with no workers and massive inflation - driven by hosing the economy with cash couple with declining production - salaries and pensions would be devalued daily, forcing people into lower living standards. You can imagine the spiral.
Please don’t take my word for it. Let’s consult Marco Annunziata, General Electric’s former chief economist, writing for Forbes:
More thoughtful proponents will tell you: “we need UBI so everyone can pursue their passion. If you are guaranteed enough to live with dignity, you can take a risk, become an entrepreneur or an artist.”
This sounds almost reasonable, but it clashes with two unpleasant truths:
First: since we need human work to improve our lot, the priority is to make sure everyone contributes to the best of their abilities;
Second: these abilities are very unequally distributed. Not everyone has a passion, and not everyone is equally talented. This is a simple fact of life.
Not everyone can be an entrepreneur or an artist. Our economies need construction workers, welders, plumbers, electricians, nurses, firemen, policemen, janitors, waiters. Some people go into some of these jobs with passion, others because it pays the bills—and these jobs need to be done.
We already have a shortage of skills in a number of industries. In oil and gas, mining, shipping and a host of other sectors sizable cohorts of experienced workers are about to retire with no pipeline of younger workers to take their place. This is hardly the time to send young people the message that they should follow their (as yet unidentified) passion and not worry about job prospects.
UBI would send exactly that wrong-headed message, reducing people’s incentive to work. And it would get worse. Our concept of a dignified life is relative. Getting by on my guaranteed basic income, I will look at my richer, working peers and feel that my lifestyle is not quite dignified. So I will lobby politicians for an increase in UBI. As UBI rises, even fewer people will work; those who still work will have to be taxed more, and so even fewer people will work, and…
If you doubt these arguments, consider that advanced economies are already littered with young people with college degrees no employer considers useful—while ancient Greek literature may be a passion, it does not guarantee a job and a living wage.
This bill is going nowhere for now. But remember, almost all of the 95-member Congressional Progressive Caucus would likely vote for this. It hasn’t made its way into the $3.5 trillion budget reconciliation bill thus far and probably won’t. But do you know how close they are to making it happen? A couple of votes in the US Senate prevent eliminating the filibuster and rejecting much of the awful reconciliation bill.
You may think supporting recalcitrant Democrats Kyrsten Sinema and Joe Manchin is like embracing the “Bride of Frankenstein,” but without them, you’ll get something much, much worse.