2020 Presidential hopeful Andrew Yang has distinguished himself in the crowded field of Democratic candidates by making a universal basic income (UBI) the center of his campaign. Dubbing it the “Freedom Dividend,” Yang has proposed an unconditional $1000 monthly cash payment to all Americans over the age of 18. Citing poverty, automation and giving workers more leverage against their employers as reasons for why a UBI is needed, Yang further claims his program could eliminate poverty and “move our economy into its next stage of development-human capitalism-with a focus on improving everyone’s quality of living.” He cites a report that projects a UBI could grow our economy by more than two trillion dollars and increase participation in the labor force by millions. Yang’s plan for funding this ambitious project is simple: a value added tax (VAT), financial transactions tax, carbon tax, changes to social security, the taxing of capital gains and the option for all current welfare recipients to forego certain programs and switch to the UBI would generate enough revenue to cover the cost.
Fueled by discourse around a number of economic and social issues and stories of successful basic income experiments (one that was carried out in the 1970’s in Dauphin, Manitoba garnered renewed interest after a local researcher found the largely positive results of the program had gone unreported), the idea of a guaranteed basic income has recently received a great deal of attention from policymakers, the media and the general public alike. Numerous ways of implementing the concept have been proposed over the years, but almost all share the same central feature: a recurring stipend with no work requirement that serves as an income, either for the poverty stricken or for everyone, thus establishing an economic threshold below which none can fall. A bit of research into the subject reveals a plethora of variations on the basic income guarantee, from small cash payments like Stockton, California’s SEED pilot program, to negative income taxes (NIT), to Yang-style universal basic incomes that provide full, unconditional living wages to all citizens, regardless of their work status or income.
This isn’t the first time a basic income program has been promoted as a solution to society’s ills. From the mid-to-late 20th century, neoliberal economist (and harsh opponent of the welfare state) Milton Friedman suggested that America’s government assistance programs be replaced with an NIT (which consists of monthly payments to all persons, unemployed or working, that decrease in accordance with the recipient’s income and finally phase out at the poverty threshold.) Friedman extolled the virtues of the concept, explaining how it could decrease bureaucracy and provide the poor with the freedom to spend their money how they saw fit. Freidman’s solution, like Yang’s, does not sound particularly bad at first blush. When taking into account Friedman’s small-government and free market economic philosophy, however, it is apparent that his motives were anything but benevolent. Friedman, who had argued against the idea that corporations have any social responsibility to the public, saw the NIT as a means of demolishing the welfare state and leaving the poor to deal with their financial problems on their own. When all the faux-egalitarian allure of Yang’s UBI is swept away, one sees the numerous problems inherent in Yang’s approach.
Yang’s UBI plan sets the stage for a scaling back of welfare programs, albeit less dramatically than the prior proposal. Although recipients of Veteran’s Disability benefits and Social Security retirement and disability benefits would not be affected, anyone receiving SNAP, TANF, SSI or WIC would have to choose between the former and the Freedom Dividend. This graphic from a site not officially affiliated with Yang claims that unemployment insurance would be compatible with his UBI. There is no official confirmation of this on Yang’s website and it contradicts his own statement that “cash-like” programs are what must be given up in order to receive the Freedom Dividend. In 2012, over 20% of the US population participated in government assistance programs, but Yang believes it is simply a given that “[most current welfare recipients] would prefer cash with no restriction….” If, as Yang hopes, the majority of those on welfare migrated to his UBI, it is unlikely the assistance programs they previously relied on would remain and not simply be eliminated, their funding redirected to the Freedom Dividend. Additionally, like Friedman’s NIT, Yang’s UBI would leave its poorest recipients mostly to their own devices in dealing with their financial issues beyond a stipend that would barely cover the living expenses of most Americans. Yang touts both the lack of a work requirement for his UBI and its being “barely enough to live on” as positives, the latter supposedly serving as an incentive to work. This attitude assumes rational and simplistic patterns of behavior on the part of UBI recipients, which is not a given.
Most importantly, however, Yang’s funding proposal for his UBI is likely inadequate. An analysis by the Tax Foundation concluded that Yang’s VAT, financial transactions tax and other measures would potentially generate $1.3 trillion annually, less than half of the UBI’s $2.8 trillion total gross annual cost. With Yang having made a point of not wanting to raise income taxes or significantly decrease the US’s astronomical military spending, it is unclear how he would deal with such funding shortfalls. Even if Yang could secure the funding needed, however, his program would still be ill equipped to deal with poverty and inequality. Yang’s UBI is not a left-wing, egalitarian approach to redistribution, which (similar to the policy proposals of Bernie Sanders, Alexandria Ocasio-Cortez and others) would enshrine access to basic needs like healthcare, housing and public higher education as rights. Yang’s UBI is an economically liberal program, which enshrines access to limited financial means as a right, but that in itself does not guarantee attainment of adequate medical care or housing. Yang’s plan for universal healthcare is vague at best, while his approach to affordable housing is little more than changing zoning laws. Liberals like Yang seem content with equality of opportunity and hostile towards substantive equality of outcome.
None of this is to say that the concept of a basic income guarantee is itself invalid, but Yang’s UBI is a Trojan horse. The goals of redistributionist policy in the modern US should be using tax revenue (made possible in part by returning upper income tax rates to where they were pre-Reagan era) to fund the creation of a universal health care system, a robust public housing program and the subsidization of public college and university tuition, to name a few. This social democratic approach is the proper way to combat inequality. Giving people a check and expecting them to figure out the rest is not.
Note: this piece was updated on 9/23/20 to clarify which programs welfare recipients could no longer receive in order to qualify for the Freedom Dividend.