Why would we want a budget-neutral UBI? The UBI makes sense precisely because it increases total spending by tapping into the low marginal cost productive capacity of our economy. The UBI isn’t funded by money; it is funded by the things automation makes available with no diversion of resources from other use.

A budget neutral UBI assumes that we must deny a zillionaire a yacht so that a poor man can have a roof over his head. But the resources that would make the roof are not committed instead to making yachts. Because of automation, we can make yachts and roofs. All we need is for the poor to be able to pay for the roof. We can pretty much just print the money. It’s a dividend, a distribution of the economic surplus that is masquerading as excess capacity. Dividends are not revenue neutral.

The UBI would, of course, generate some revenue. There’s no reason not to subject it to a progressive income tax like all income. So a third or more of what’s paid to prosperous Americans would come right back. And all that new spending by everyone else will be taxable income to someone: a vendor, a vendor’s supplier, a vendor’s employee, a vendor’s lawyer, etc. If we just leave the tax laws as they are, much of the UBI money will come home to mama no matter what we do. But the rest can stay out there absorbing all that new capacity represented by all those new robots.

I know Andrew Yang has proposals for taxes to “pay for” the UBI, but I think he’s wrong even to try. The neutrality to seek is ratio-neutrality: the ratio of public debt to GDP should be maintained, and I would think any good economist with the right crystal ball can foresee the debt/GDP ratio staying within tolerable limits when the math takes into account the savings from benefit reductions, the fiscal multiplier on high-consumption dollars, the taxes on the UBI and its multiplier, and the lack of inflation resulting from the absorption of excess capacity (which lack would make it unnecessary for the Fed to raise interest rates).

In short, UBI works because MMT is right. Otherwise, it doesn’t happen.