I start where Andrew Yang starts: the UBI is a dividend, not a welfare payment. It is not intended to replace anything, although it may replace some of the income of the very rich if taxes are imposed to compensate for any inflationary effects. The “baseline” UBI is a redistribution from the poor to to everyone. That can’t be right.

AOC is not my favorite politician, but she is hitting one of my favorite notes: too much of our policy thinking is done with a “scarcity mindset.” We have allowed GDP to be a proxy for what we can afford, on the unstated assumption that we cannot increase supply significantly beyond current consumption. That, I believe, is an increasingly incorrect and stultifying assumption.

How about we simply redefine “balanced budget” for the modern world as the point at which the marginal cost of the spending a sovereign generates equals the tax revenues collected. Both sides of the calculation would reflect the economic multiplier, the re-spending of what is spent and the taxing of profits on that re-spending. To my mind, the only problem with this test is that we don’t know how to measure it, for pretty much the same reason we can’t measure the output gap. But that does not mean it is not conceptually the optimal mindset to bring to the problem and that estimating a meaningful marginal costs is a better strategy than measuring meaningless retail costs.

At the end of the day, the UBI is all about filling the output gap. Think back to Richard Nixon’s “full-employment” budget, (FEB) essentially a proto-MMT that no one understood as such. (I don’t know if that link to a NY Times editorial works for non-subscribers, but if it works, please read it.) The FEB essentially targeted the output gap. It operated on two assumptions, one always valid, one contingently valid. The always-valid assumption was that deficit spending is not inflationary to the extent that what is bought is not being produced at full capacity. The second assumption, which is only contingently valid, and I would argue is no longer valid, is that the unemployment rate is a good proxy for the output gap, that when everyone’s working, output and, therefore, activity, cannot increase.

The only operational difference between MMT and Nixon’s FEB is that MMT does not depend on full employment as a proxy. We live in a period of extra-domestic abundance, a period that began, oddly enough, just as Nixon was introducing his FEB. MMT looks directly at inflation as its bogey. If sovereign spending does not cause undue inflation, for whatever reason, then sovereign spending is a good idea. What the money is spent on is relevant because good spending creates or maintains capital, human and otherwise, that is inherently disinflationary.

Today, global capacity, not domestic capacity, determines the supply curve for a significant portion of US economic activity. We have access to foreign production because we are strong, stable, and wealthy. (Which is why Trump’s withdrawal from bold hegemony to fetal position is so dangerous.) The willingness of other countries to sell us stuff for our money is, to my mind, the source of national “profits” that a “Freedom Dividend” rightly distributes by printing money that will absorb the foreign outputs.

The monetary object of the UBI should be to assure that our inflation level stays at 2%-3%, the optimal level for discouraging hoarding and promoting investment, and the appropriate tax on foreigners who hoard our money thinking they will spring it on us later. In this regard, though, the biggest obstacle to the UBI is the sorry state of our infrastructure. We really must determine to what extent spending a few trillion on the common quality of life trumps spending it on personal quality of life. In other words, how much UBI we can afford to do depends on how much infrastructure we can afford to do, and not to do.

I’ve gone on too long, and the rabbit hole only gets deeper, because the hip bone’s connected to the thigh bone. My point is that we should begin with the assumption that the UBI, if we pay it, will be a dividend payable to adult citizens who have “earned” it by “investing” in America by being law-abiding citizens. It should be payable without regard to need, but it should be taxed as ordinary income, you know, like royalties are taxed, maybe without the Obamacare tax (but that, surely is for another day).