Does deficit spending cause inflation? Let’s pair them up to see if it acts similar.



Denmark has among the lowest deficit spending, but between 0% to 1%+ of inflation.

Netherlands has about 150% of deficit to GDP ratio of Denmark, but has similar inflation.

Germany has 61% deficit to GDP ratio, but between 0.4% to 1.75%+ of inflation.

Ireland also has 65% deficit to GDP ratio, but between -0.2% to 0.7%+ of inflation.

Greece has the most deficit to GDP ratio at 181.1%, but inflation ranges between -1.3% to 1%+ of inflation.

Italy has 131% of deficit to GDP, but inflation is -0.1% to 1.25%+ inflation.



Spain has 97% deficit to GDP ratio, but inflation is between -0.6% to 2% of inflation.

France has nearly the same as Spain deficit to GDP ratio, but inflation is above 0.1%, all the way to over 2%.

So again, we find that despite recent similar inflation, it has not been the same for all of the countries before 2016 (some in deflation, some in inflation), and government deficit spending has almost no relationship to the level of inflation.

So we can dismiss the monetary argument between money supply, deficit spending, and inflation nearly completely. This is the theory that Yang uses to explain that there will be no inflation, but this theory just doesn’t hold water across the West. It possibly has some relationship, but it’s not the hard and fast relationship that Neo-classical economists and monetarists like to tell people, and it’s why Andrew Yang continues to be attacked; if he cannot explain it clearly, or get an economist to explain it clearly, he will continue to face opposition regarding the funding of his UBI.

Question 4: The three areas that hurt people the most are housing, education, and healthcare, but not everyday consumption.

I agree; I’ve written about this for the Chinese population before, but I’ll outline it again.

Logically, a society that cannot provide at least the everyday consumption is a society that will literally cease to function; people model their behaviour based on how much they can consume, and if you abide by legal rules, you cannot consume more than you’re able to buy or are given by society.

This is based on an foundational economist, David Ricardo (18th-19th Century), who wrote about the ‘Law of Rent’; that generally speaking, the worker in society will be paid as little as possible without dipping below subsistence level (as if it is below subsistence, they’ll die or move away). This has been the case for most of history, with a brief movement away from this in the mid-20th Century, and then it could be argued that we are returning to it.

So it is agreed that everyday consumption does not hurt people; so why does housing, education, and healthcare do so?

Firstly, these areas are seen as very inelastic; meaning that an increase in price does not lead to a similar decrease in consumption, and there is a lack of a substitute; meaning that the consumer cannot simply go elsewhere to find an alternative.

Are housing costs inelastic? Yes, if you’d like somewhere to sleep. Is there a substitute? Outside, your car, or moving away altogether.

Is education inelastic? With the perception today that education is vital, and with (in the U.S. and U.K.) government loans allowing you the income to go, with the long-term promise of long-term income success, we find that the majority of young people still go. Is there a substitute? People are working on it, there are the trades, there is the military, but people want that degree.

Is healthcare inelastic? Yes, because you don’t want to die. Substitutes? In the U.S., people flee to Mexico or Canada to try and get cheaper healthcare, but not everyone can, or wants to risk, doing that.

Finally, as they are both inelastic and lack substitutes, we find that the people who supply this can raise the price as high as they’d like with no worries; there will always be a buyer, and you may not always have a choice. This is why there are good public policy arguments for governments to control and subsidise these industries across the West for the public good.

What about food and transport? They’re inelastic! Yes, but if the price of beef goes up, you buy pork. If the price of oil goes up, you can drive less on trips, take public transport, or carpool. Not only that, but the U.S. takes great strides in making sure oil supply is plentiful in the U.S., and the U.S. is one of the most food productive countries in the world. The government has effectively stepped in to keep these industries in control already.

Question 5: Couldn’t an individual with UBI simply find a new place to live where it is cheaper?

Yes!*

*In a perfectly competitive housing market.



In markets with perfect competition, it is the consumers (and the producers to an extent) who benefit the most (ala consumer surplus), as they have the most choice and the power to find a competitor offering a similar product at a similar price. They have options; they can walk away, as this question presumes.

However, in the United States today, there is a housing shortage. A New York Times article reports by the California Housing Partnership found that in California alone, there are 1.4 million new houses that need to be built (Tsui, 2019).

As California has 11.5 million total households, that is a shortage of nearly 10% (U.S. Census Bureau, 2019). When there is a shortage, the power shifts to the supplier of the good, in this case, the landlords.

How to resolve this? There are, as usual, two simple ways (and an awful lot of complicated ways); increase supply, reduce demand.

Increasing supply basically means building more housing, but existing homeowners do not like this because it drives down the cost of their own homes, and is electorally unpopular. California only gives out 113,000 building permits in 2018; less than 10% of the needed housing (U.S. Census Bureau, 2019). So housing is not being built fast enough, leading to solutions like people potentially living in garages (Tsui, 2019).

Decreasing demand can be done in several ways; 27% of Californians are foreign born, and reducing that would ease issues (U.S. Census Bureau, 2019), but that would be electoral suicide. Another method may be stopping foreigners such as the Chinese (currently the largest buying group) from buying homes instead of locals (Olick, 2019).

But that fact is, as things stand, people cannot simply get up and leave; beyond economic reasons, people don’t want to leave their lives, families, friends, and communities. There is a hint of the ‘Homo Economus’ logic to it, where people are robots who always perform the best rational action, instead of the social animals we actually are.