Yang Vs Bernie short,medium,long term speculation on economy

This will be If all policies from both candidates are magically implemented without opposition from congress. And I will use best case scenarios for both candidates. Since there is no specifics regarding the federal jobs guarantee, I will assume that these unionized positions will provide training and living expenses. I will assume 100% of people can be trained and will perform up to expectations in these jobs.

I will outline issues and also present a possible course of events extrapolating on economic impacts during the course of 10+ years.

Yang:

Short Term (1-4 years):
Outline of the economic issues:

I. Scenario 1 (recession) If we have 2 quarters of decline in GDP we're officially entering an economic recession as far as non-economists are concerned. This is not necessarily bad because it follows the standard sinusoidal peak and trough cycle. A depression is when the trough is very low. Basically if the recession is severe then it's called a depression.

The first thing that happens during a recession is actually just caused by the news that we're officially in a recession. The stock markets tank hard. Just the news that we're "officially" in a recession will cause markets to tank as investors become bearish (meaning they believe stocks will fall). The stock market has a self fulfilling psychological element to it. If investors think something falls and acts accordingly then it will fall due to the actions of the group.

This doesn't only hurt investors. Everyone with a 401k is hit a similar amount. If we have a small recession like the housing market crash, then everyone only loses 60% of their life savings. It doesn't stop there. That's not even the big impact.

Corporations are heavily over-leveraged, meaning they have a crazy amount of debt because they were very bullish (thinking they would keep growing). The estimated amount is around $5 trillion (student loan debt total is around $1 trillion for comparison) with a total of corporate debt being over $15 trillion, but estimated to be much higher. They took on so much debt that they can only stay solvent (able to pay off their debt) by continually growing or they collapse. During a recession it becomes nearly impossible to grow.  In order to keep afloat they will need to lay off a ton of people, however they've already laid off a ton of people in the last recession and haven't filled those positions again.  So now their choice pool narrows to either collapsing, laying off essential personnel  or hastily automating jobs and hoping for the best.

So now there is massive unemployment. Because there is so much unemployment, discretionary spending (spending on non-essentials) falls.  This means revenue for corporations falls, which means more layoffs. We're now in a depression.

We were able to recover from the last depression in 1929 by being the only country not destroyed in WW2.  We were able to industrialize and expand rapidly while other countries were rebuilding. We had a monopoly on everything.

This time all the other countries haven't been destroyed. There is actual competition. If America falls behind, it will stay behind from then on barring huge disruptive forces (AGI, interstellar travel, brain implants). This depression becomes a collapse. Everybody loses. Everyone is homeless and starving. The very rich flee to another country and continue being rich.

I believe we will see a recession very soon thanks to Trump’s heavy handed and ill-timed trade policies.

Scenario II No recession If there is no recession then corporations continue on as normal but the cost of automation keeps decreasing.  It costs between 1.25x to 1.4x an employees base salary to pay for employment taxes and benefits.   A full time employee making minimum wage (7.25) earns $15,080 before taxes. This means they cost the employer between $18,850 and $21,112

The cost of a single self checkout kiosk is $25,000 for an IBM machine, and $37,500 for a Fujitsu machine.  At the moment the cost to get rid of a cashier and replace them with a machine is a longer term investment (over 1 year before making a return on investment). For smaller markets they need to take out loans for this. For supermarkets they can afford the upfront cost but they're transitioning slowly.  It makes sense to automate if you can afford it. For the cost of an employee working for 2 years, you get an employee that works forever with maintenance.

It's basically the same story with all jobs that are easily automated at the moment. This disproportionately affects the poor. Retail workers, cooks, truck drivers etc and slightly further down the road affects the middle class (accountants etc) and upper middle (radiologists, various types of doctors).  This isn't tomorrow’s technology, this is where we're at.

Our economy basically relies on the discretionary spending of the middle and working classes. By automating away these jobs, you create unemployment. Unemployment leads to no discretionary spending.  Leads to lower corporate revenue, leads to recession, leads to layoffs, leads to even lower corporate revenue, leads to depression, leads to being noncompetitive with the rest of the world, leads to collapse.

Basically the situation is that either scenario leads to economic collapse if there is no massive government intervention.

Yangs policies:  IF UBI is implemented before scenario 1 or 2 happen.
The effects will be felt differently depending on current financial standing and I will break each down.

The unemployed poor and the working poor will receive a net gain in money received monthly in comparison to if they receive SNAP (avg $126 per month) + TANF (avg UP TO $300 per month) + medicare ( avg equivalent to about $440 a month in private single person health insurance) =  $866 in benefits on the high end of average.

You need to make below $8.04 per hour to qualify for the above welfare programs. So working minimum wage + receiving all of the above mentioned welfare programs in those full amounts = ~ $25,470 “equivalent” to $13.27  wage.

With UBI: $1000 per month + Medicare for all ($440) = $1440 per month. $1440per month + $15,080($7.25 fed minimum wage) = $42,750.

$15/hour minimum wage ($28,800) + Medicare for all ($440per month x 12 months = $5280) =  $34,080.

This is gross income for a single person. For net income over the 5 year plan that Bernie proposes for implementation of $15 minimum wage refer to this chart:

https://i.redd.it/y5wa0pbbvqj31.png

UBI + medicare for all + minimum wage job = middle class with discretionary spending. These people can buy essentials + discretionary spending.  The middle class is expanded without further incentivising automation, this will hold back automation for a couple years.  If you expand discretionary spending then you stimulate the economy, this is why $15 minimum wage will work in the short term as well.  Yang also is going to work to relax zoning laws which prevent affordable housing from being built. By increasing the amount of affordable housing by a lot and having a new market of buyers (the new middle class mentioned above) HUD renting can be replaced with actual ownership while economically acting as rent control.

For the lower middle to upper middle classes - The UBI is completely discretionary spending. This enables risky plays like starting side businesses or even quitting a job to start a business knowing that you have a cushion if it fails. These small startups can be riskier as well. You can open something super risky such as a restaurant vs a b2b business like a print shop. The reason for this is because so many people have discretionary spending that their spending habits can be riskier too. They can afford to waste $20 on your new startup restaurant. This new risky restaurant can in turn hire people, creating a ton of local jobs. This creates a feedback loop of starting local businesses > more demand > more jobs.

This also lets people demand more from workplaces. If there are a ton of local startups that need people, then it becomes an employees market vs an employers market. You can be choosy which forces employers to give better working conditions.

The lower middle would benefit much more from this than upper middle due to the percentage of net increase in discretionary money.

For the upper class, UBI would most likely be a net loss. Due to the VAT tax on luxury goods (advertising, internet ads, high end electronics, luxury vehicles etc) + capital gains tax + transaction tax + carried interest tax + closing tax loopholes. They will see a substantial net loss every year vs keeping the system the same. However due to the trickle up effects of UBI and rising corporate revenue, they may be able to offset the effects of the various taxes only see a minor loss or even net gain as well depending on what companies they are invested in.

New federal jobs will be created to support manufacturing and installing renewable systems and constructing new nuclear power plants. Carbon capture chemistry and material design will be done by discovery focused AI.

All non-violent drug offenders are immediately pardoned and freed from prison and given UBI and health care. Due to the economic uptick they should be able to find at least low wage jobs that combined with ubi will give them discretionary income.

The restoration of net neutrality will allow for startups, especially software and media startups to be competitive on a global stage, which is essential in the coming years as I will detail.

All of this will keep the economy going for the next couple years.

Random other benefits: Better mental health in general. Student debt forgiveness programs increase discretionary spending.

Medium Term (4-10 years):

Other countries will automate jobs and become even more competitive, forcing the hand of American companies whether or not the price is right.  This era will be about which country can automate the best along with which has the most processing power in order to power automated AI based scientific discovery (things like chemical compounds)  and AI based generative design (things like processor design, vehicle chassis design). Anything result based that can be quantified will be assaulted with various AIs.

Automation will have taken at least 30% of modern jobs at this point. All minimum  and low wage jobs at large corporations will be gone. Meaning retail cashiers, food service staff, truck drivers, call center, taxi/uber drivers, online assistants. A lot of lower middle to middle class jobs will also disappear. Meaning accountants, tax prep,  middle managers,  financial news writers (this has already happened but it’ll be even more widespread), internet copy writers, some cooks, some paralegals, some low level mechanical and electrical engineers. Some upper middle class jobs will also be hit. Meaning: electrical engineers who specialize in design of circuits (china has this right now, but i think it will take until this period to take off) x-ray technicians, anaesthesiologists, radiologists (this is happening now with a mass migration out of radiology, but it will be very widespread at this point), psychiatrists, certain types of lawyers, general practioner doctors (unless they manage to block it via lobbying), airline pilots.

If the economy can continue to grow during this phase, then UBI must increase as well.

This transition will happen over years. At this point the feedback loops caused by UBI described in the short term section should be in full swing. Many of the displaced working class workers may be able to find work at the local startups and maintain the same income they had before.

Many of the displaced will also be working on work related to renewables and nuclear or carbon capture, but a large portion of these jobs are short term. The country needs a lot of manpower to build the infrastructure but to maintain it takes much less. So a large portion of these workers will need to either retrain or find work pertaining to newer industries.

The old middle class own many of the local startups that employ the displaced working class workers. Or they continue working their jobs that are difficult to automate. Things with not easily quantifiable results will be the only things that are lucrative for these small startups. Such things have value BECAUSE a human made them. Things like art, film, video games, artisanal crafts and foods, small run goods, local restaurants, and various new industries stemming from these types of businesses.

One of these new industries should be the birth of multiple new virtual economies that will be colossal in size. Many of the new businesses being born will service these virtual economies, dealing with virtual asset creation, real estate, and advertising. This industry will balloon over the next several years and be impossible without the tech infrastructure of the massive tech corporations. Whoever owns these become the mega corporations of the future. At this point though (4-10 years) these will just have the economies of large video games.  This will happen based on current growth trends and adoption trends that mimic 1:1 technologies such as cell phones, and internet. It will take around 10 years from now (2019) to become prolific, and somewhere over 10 years to become as big of an economic impact as cell phones and the internet.

The upper middle class will feel these effects more than anybody else in the sense that they will see the largest decrease in quality of life. They will either be forced to start their own businesses or take jobs at local startups, but most likely seeing a net loss during this period.

During this time other countries will also be forced to automate their workforce in order to stay competitive while increasing their middle class in order to keep their economies stable. Most countries don’t have enough economic advantages to accomplish this and will collapse as a result. Any country that collapses at this stage will never be able to become competitive again, unless they make game changing breakthroughs (AGI, Fully realized virtual worlds with self sustaining economies, affordable space travel) but likely will not be able to accomplish this without the tech infrastructure.  This may be the final “war” between nations. It won’t be a conventional war. It will be last one standing an a test of ability to endure automation in a global capitalist system not designed with automation in mind. This may result in a hot war as other countries realize their predicament but most likely they will just collapse and be forced to sell their countries assets to whoever wins this war.

If other countries are to stay alive in a world that will be dominated by either China or America during this era of AI discovery, AI Design, and automation (AI and non AI), they will need to adapt and become more focused on media creation (books, film, games, VR assets, AR assets) or will need to exploit their natural resources or become tourist focused.

One of the main factors to keep our economy stable during this time will be psychological. Yang wants to change the measurements for economics to take into account the human condition. This is good, but it’s true benefit is that it creates psychological distance between GDP measurement and the economy.  By taking focus off of falling GDP at this point, we may be able to keep markets stable. Transaction tax (bernie will also implement this) will also help to stop rapid fluctuations in the stock market.

At this point all student debt that currently exists will have been repaid or forgiven. Due to making interest rates 0%,  being able to remove student debt via bankruptcy, and forgiveness.

The first thorium based nuclear power plants should be completed or nearing completion at this point as well as various other new traditional nuclear power plants. These plants will be built due to the push by yang’s policy to build new nuclear power plants. This combined with all the renewables he’s also pushing and carbon capture tech will not stop climate change, but are good first steps. This will take a global effort and exponential improvements in carbon capture tech. This modernizing of our energy grid and creation of systems to combat climate change will create jobs, but the jobs will not be multi-generational jobs, but will be moderate term, possibly single generation jobs. Which will also stimulate the economy due to increased discretionary spending of those workers.

Long Term (10+ years):
If no AGI has been created, then we will still be in the ai based cold world war. Countries unable to automate while growing their middle class will have to rely on raw material export, and media exports to stay relevant on a global stage. The disparity between a first world country and third world will be even further exaggerated than it is now.

If you’re optimistic than we will have figured out an exponentially better carbon capture solution via the chemical/Material discovery AIs. We may have a fighting chance at averting the worst of the coming climate catastrophe. This work must happen worldwide. If this work is successful then we continue down the path I describe, otherwise the world will need to work on climate emergencies. During these climate emergencies carbon capture tech research will go into overdrive and controversial geo-engineering plans (aerosols in the atmosphere sprayed once a year) may be put into place as a stop-gap. As suggested by Yang and various geo-engineers throughout the last couple decades.

If you take an optimistic view on the climate change battle (carbon capture works great, we have reforested the ocean) then nothing will impede further economic growth and virtual economies should be at the point of rivaling cities in income. Those that control these virtual economies will collect a portion of each financial transaction. It’s easiest to think of this as Apples AppStore or Valve’s Steam, where they take 30% of each transaction. But this will be at a much larger scale and will be essentially collecting a tax on a city. The majority of new jobs will be focused on these virtual economies. Marketers, advertisers, asset creation, small ai, private servers, real estate. And other businesses supporting the infrastructure and continual growth of these virtual economies.

The shock to the economy of automation should be mostly over at this point. UBI will need to be increased again. At this point there should be a slow down in automation as most of the easy to automate jobs have been automated. A second wave of automation will happen once algorithms have advanced to the point where they can work with context. A 3rd wave will happen if battery technology advances to a point where work that requires a ton of movement can be done by advanced robotics.

UBI must keep up with inflation and during each wave of automation must be increased significantly, this will only be made possible by the creation of new virtual economies and booming middle classes worldwide. The middle classes around the world will mostly be reliant on the mega corporations that run the virtual economies. The population size of the human race becomes a limiting factor now and must be addressed.

It’s impossible to predict what may happen even further on.




Bernie:

Short Term (1-4 years:

This will be assuming we are in a no-recession scenario:
https://i.redd.it/y5wa0pbbvqj31.png

In accordance with Bernie’s plan, we will achieve $13.50 an hour minimum wage at the end of the first 4 years.

This means the lowest income earners will recivee $25,920 a year gross income. Including payroll taxes this will cost the employer between $31,104 - $36,288.  This is easily achievable by medium and large sized businesses. But at this price the $25,000 IBM self checkout machine is much easier to justify financing for.

Order taking kiosks such as those found in mcdonalds cost $1500 - $4500 each installed, depending on existing infrastructure. This is a fixed cost rather than a variable cost.  From a business perspective fixed costs are usually preferable to variable cost and generally lead to greater profit. For the cost of 1 full time employee at mcdonalds in 2019 with a $7.25 minimum wage ($13,920) a year you can install and pay for a maintenance contract for 2 kiosks. This is why McDonalds has been automating so quickly. They get a return on investment within months rather than 1+ years.

This trend will grow, however the rate of growth varies among companies. Some will be more aggressive and some more conservative.  Although not meant to counteract automation the Green New Deal’s federal job’s guarantee may work to counteract this in the short term based on implementation. Those that keep their jobs will have more discretionary spending and we will see an economic stimulus effect. Jobs lost to small local businesses being unable to afford the wage increases should not be significant.

As of July 2019 the generally accepted unemployment rate is 3.7% which is 6,063,000  people. The proposed federal jobs guarantee is supposed to generate 20 million new jobs. If implementation works well and there is infrastructure created to train all the unemployed then unemployment will see a significant drop and jobs and the federal jobs guarantee jobs should be able to absorb jobs lost due to automation in this time period.

The working class will see a significant growth in discretionary spending and will benefit the most.

The eliminating of student loan debt at this point will allow for social mobility at an earlier age. This will materialize in the form of greater discretionary spending for the newly graduated starting at an earlier age than before.

The lower middle and upper middle will not see growth in discretionary spending but will receive medicare and benefit due to general economic growth. The displaced can receive a federally guaranteed job and may be able to retain their socioeconomic standing. A significant portion may return to school which will now be free using various grants mixed with savings for living expenses. This will allow them to retrain for jobs that are difficult to automate.

The upper class will be taxed heavily and see a net loss, but be able to retain their socio-economic standing as incredibly wealthy, just less so.

If there is a recession:
Massive layoffs combined with decimated asset portfolios. The taxes on the rich are no longer able to provide the revenue needed to fund the green new deal due to the decimated asset portfolios. Money that could have been used for the FJG will need to be used to bail out overleveraged corporations or face total economic collapse. The heads of those companies can be put in jail, but the companies themselves will still need to be bailed out. We have a repeat of 2008-9 but far worse. Depending on the timing of this recession, it can be disastrous and we will see a depression and depending on how far ahead China can get in AI and automation during this time, unrecoverable collapse.


Medium Term (4-10 years):

In year 5, minimum wage has increased to $15 as per Bernie’s plan.
253 million will qualify for UBI. 253m - 40m(below poverty line) = 213m who definitely have discretionary spending given $1000 a month in discretionary spending.  = 3.036 trillion in extra discretionary spending each year.  I did not include the 40m below the poverty line even though they will also have discretionary spending.

According to the poverty center at UC Davis 1.3 million US workers earn the minimum wage. A total of 25,528,900 people earn below $15 an hour.  Even if all those jobs are automated and every one retrained for a new FJG job. If I consider 50% of their income discretionary spending (this is an exaggeration) they will add $367.616 billion in extra discretionary spending each year after the 5th year.

This will come into account later during the long term (10+ years).

China will have automated away a large portion of manufacturing and design jobs and become highly competitive with america in design and manufacturing.  This will force the hands of all large corporations to automate.

30% of jobs will disappear due to automation: All minimum and low wage jobs at large corporations will be gone. Meaning retail cashiers, food service staff, truck drivers, call center, taxi/uber drivers, online assistants. A lot of lower middle to middle class jobs will also disappear. Meaning accountants, tax prep,  middle managers,  financial news writers (this has already happened but it’ll be even more widespread), internet copy writers, some cooks, some paralegals, some low level mechanical and electrical engineers. Some upper middle class jobs will also be hit. Meaning: electrical engineers who specialize in design of circuits (china has this right now, but i think it will take until this period to take off), x-ray technicians, anaesthesiologists, radiologists (this is happening now with a mass migration out of radiology, but it will be very widespread at this point), psychiatrists, certain types of lawyers, general practioner doctors (unless they manage to block it via lobbying), airline pilots.

30% of jobs is in excess of 60 million jobs lost.  The federal jobs guarantee will need to expand the amount of jobs created significantly. This may or may not be possible and is dependent on large corporations growing significantly (200%) during this time and paying taxes.

Displaced upper middle class individuals may have the savings to start businesses servicing those with a FJG job or b2b businesses servicing businesses that service those with FJG. While middle class and below will need to work for these businesses. These businesses will need to be in industries that are difficult to automate. Things like media creation, artisanal goods, and local restaurants.

The heavy taxation of the upper class will cause the richest to leave the country, but among them will also be angel investors. New graduates from university free of school loans will help existing companies innovate and may be able to gain funding from the angel investors still remaining to create a more limited amount of startups. Startups will need to be safe, tested, and over 2 years old in order to receive loans from a bank, this means less innovation.

GDP will take a large hit due to a more inward facing economy, same with Yang. But since Bernie did not propose to replace GDP as the main measurement of economic health, we will go into a “recession”.  This can be mitigated by implementing a non-gdp measurement for economic health during the early stages of the presidency.

The heavy taxes on wallstreet meant to fund the federal jobs guarantee will have diminishing returns as the upper class leave the country and their wealth is slowly drying up. This combined with the increasing number of federally guaranteed jobs, will cause instability in the federal jobs guarantee unless new taxes on the middle class are also introduced. Something like a VAT tax.

Virtual economies will see their rise during this time but growth will be slower depending on how well the FGJ pay.

During this time inflation will continue at 3% (assuming no economic catastrophe) requiring the FJG jobs to keep up with inflation.  At the end of this 10 year period minimum wage will need to be increased to $18.14 and FJG jobs will need to increase to the same amount.

We will have an economic war with the rest of the world, with the variables being automation, the middle class, AI discovery, and AI design. Countries unable to compete will collapse or be forced to depend on the economies of those that can.

Long Term (10+ years):

Due to lack of increase in discretionary spending across the entire society to a tune of greater than 26.6839T (3.036T * 10 years) - (367.616B * 10 years) we are not able to grow our new industries and tech at the rate that China is able to and become non-competitive. China wins the AI and automation war if Chinese society can survive automation during the last 10 years.  If China cannot survive either then we have a global depression and it becomes impossible to predict afterwards.