A Quick Guide to Andrew Yang's Freedom Dividend
by Grace Zhang
If you’ve been paying attention to Andrew Yang, you’ve heard about his Freedom Dividend. But what is it and how does it work? Here’s a quick breakdown about everything you need to know about Yang’s Freedom Dividend and universal basic income.
What is it?
The Freedom Dividend is Andrew Yang’s approach to universal basic income, which is a public program for periodic, unconditional payment from the government to individuals. In the case of Yang, he’s promising to pay $1000 a month to all U.S. citizens over the age of 18.
Why does Yang think we need it and what does he hope to accomplish?
According to Yang, most jobs are going to be taken away by technology and new jobs won’t be created fast enough to employ everyone. Basic income would benefit those living below the poverty and cover basic living costs so that Americans can focus their efforts on other things. Without the guarantee of income Americans are stuck in jobs that don’t serve their best interests, are unable to get further education, seek other employment opportunities, or pursue other interests and activities.
What other benefits does he promise?
Yang claims that it would allow everyone to benefit from automation, not just companies and would help grow the economy by 12.56 to 13.10 percent and increase the labor force by 4.5 to 4.7 million people since people are more likely to spend money when they have more of it. He also promises reduced bureaucracy, increased bargaining power for workers, increased entrepreneurship, improved mental and physical health, improved decision making, increased labor market efficiency, increased interest in labor that isn’t supported by the market (art, nonprofit work, etc.), and improved relationships. If you want to read more about these benefits click here.
What about retraining programs?
They don’t work. The Trade Adjustment Assistance program found that only 37% of its program worked in jobs they were retrained for and Michigan’s program for retraining saw that 1/3 of its participants remained unemployed, only 7% less than the statewide unemployment rate of 40%.
Inflation?
Yang is confident it won’t happen. Inflation has been low for a while and Yang those believe there’s a reason we should think otherwise. Competition and globalization will keep prices low. Additionally, when the government printed 4 trillion dollars in the 2008 recession, there was little inflation.
Won’t people stop working or spend their money on things like drugs and alcohol?
Studies from institutions like MIT and Harvard found that when money is given to the poor they decision-making improves and only new mothers and students work less. They tend to use the money to improve their situation and invest in the future. The World Bank also supports these conclusions.
How will it affect current beneficiaries of social or welfare programs?
It depends. Yang promises veteran, disability, and social security retirement benefits will stack with the $1000. However, beneficiaries of other programs such as Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) will have to choose between their current benefits and the $1000. This has solicited a not so positive response from the masses, but Yang claims “The vast majority of the recipients on those programs are getting less than $1,000 [a month]” and “live in fear of losing those benefits at any moment.”
How are we going to pay for it?
Yang estimates the yearly cost of this program is going to be 2.8 trillion dollars and plans to pay for it with new income that would result under his administration from new taxes he plans to levy, specifically a 10% value added tax, increased tax revenue from the growing economy, money saved by decreased crime and poverty, bureaucratic downsizing and current welfare overlap. If you want more specifics click this link.
How possible is this really?
There are many skeptics. According to the Tax Foundation, his plan would only work if the monthly payment was reduced to $750 and the value added tax increased to 22%. This problematic because it means people are going to receive significantly less money and more of it will be paid back to the federal government in the form of taxes, effectively reducing or preventing many of the benefits Yang promises. Additionally, the Tax Foundation thinks “it is very unlikely that [the Freedom Dividend] would be able to produce significant growth on a persistent basis.” Yang estimates that steady economic growth will provide 558.39 billion dollars are year, a significant portion of the estimated cost of the Freedom Dividend, meaning without consistent growth, his plan is not feasible. However, all these statements are merely predictions and Yang’s plan is not completely without merit, in other words it’s not so black and white (make your own judgements � please).
What’s the history of UBI and has it worked before?
The idea is not new, having been around since the First Industrial revolution. Yang lists many successful UBI experiments on his page. However, many sources such Forbes and The Guardian are certain UBI is bad idea.
Where can I learn more?
These are the sources I consulted:
https://www.yang2020.com/policies/the-freedom-dividend/
https://www.yang2020.com/what-is-freedom-dividend-faq/
http://blogs.worldbank.org/impactevaluations/do-poor-waste-transfers-booze-and- cigarettes-no
https://economics.mit.edu/files/12488
https://freedom-dividend.com/
https://taxfoundation.org/andrew-yang-value-added-tax-universal-basic-income/
https://www.cbsnews.com/news/the-freedom-dividend-inside-andrew-yangs-plan-to-give-every-american-1000/
https://quillette.com/2019/03/06/in-defense-of-andrew-yangs-freedom-dividend/
https://www.forbes.com/sites/marcoannunziata/2018/07/27/universal-basic-income-a-universally-bad-idea/#63e444e23269
https://www.theguardian.com/commentisfree/2019/may/06/universal-basic-income-public-realm-poverty-inequality
But I highly recommend you do your own research and form your own opinions!