A Look at the Freedom Dividend

Examining Andrew Yang’s Signature Policy

(Note: I do not support UBI, I am arguing whether Yang’s policies can be afforded)

Universal Basic Income is becoming increasingly popular, especially among young people, who recently polled majority support for the futuristic program. The concept is decades old, and was first popularized in 1972, when George McGovern, then Democrat-candidate for the presidency publically touted a $1,000 a year basic income.

Up until very recently, I was a strong opponent of presidential candidate Andrew Yang’s universal basic income proposal. Early on, well before he became a well-known contender, I had done the math and found that his signature policy would double or triple the federal budget deficit, depending on how you interpreted his unclear policy proposals. As time went on, he clarified his policies and answered a lot of questions which had been lingering around for all of the fiscal nerds out there.

It became time for me to look back and reanalyze Yang’s proposed budget situation. What I found left me astonished. In fact, I was totally dumbfounded that policies I had seen as hopelessly unaffordable and uneconomical not only weren’t going to double or triple the deficit, but were in fact slated to dramatically cut it.

I’m going to walk through exactly how Yang’s policies can slash our deficit.

Andrew Yang at a campaign rally in Washington, DC. (Andrew Yang photo)

The $12,000 a year UBI would be provided to everyone 18 to 64. All beneficiaries of entitlements or public assistance would have a choice between accepting $1,000 a month, or their current benefits; whichever’s worth more. In 2022, there are projected to be roughly 200 million Americans in the age bracket to be eligible for the Freedom Dividend, meaning the UBI could cost at least $2.4 trillion annually.

Yang calls for a series of reforms and taxes implemented in order to bridge this cost, starting with a 10% Value-Added Tax, which he says is “at half the European level.” According to the Congressional Budget Office, a broad base VAT of 5% raises $320 billion in fiscal year 2022. Double this an we get $640 billion. There’s one-quarter of the necessary revenue.

Since virtually nobody receives $1,000 a month in public assistance, we’d be effectively eliminating expenditures on a variety of programs including but not limited to the following: Earned Income Tax Credit, Child Tax Credit, Food Stamps, Housing Assistance, Supplemental Security Income, Pell Grants, Temporary Assistance for Needy Families, Head Start, WIC, Child Care block grants, Medicaid block grants, LIHEAP, and Lifeline.

Yang holding a campaign rally in San Francisco. Santiago Mejia/The Chronicle

These cuts to public assistance give us roughly $1.5 trillion, or nearly an additional two-thirds of our cost covered. Note that I counted state and local public assistance expenditures, since we would be consolidating public assistance into one universally available, federally-administered program.

The Tax Cuts and Jobs Act of 2017 expires in 2024, but it could be partially repealed or reformed to bring tax rates back to their 2016 levels. We want to be transferring credit that isn’t being utilized by high-income people to poorer and middle class households which will increase their consumption and drive economic expansion.

That’s it folks.

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