An Analysis of Andrew Yang’s Universal Basic Income
Previous Democratic Candidate Andrew Yang revolutionized political economics with his universal basic income — but what did it mean?
Imagine a world where every citizen over 18 in the United States of America handed a check for $1000, every month, regardless of income or employment status. This is the plan called universal basic income, also known as the Freedom Dividend, proposed by previous Democratic candidate Andrew Yang. Yang promises many benefits from the implementation of this plan, such as the encouragement to find work, the reduction of bureaucracy, and an increase of entrepreneurship, along with just a solid, consistent economic foundation for all. Simply put, this is an investment specifically for the American people. However, many citizens question this seemingly “ideal” plan. Where would this dividend come from? Yang proposes it would come from four different sources, the first of which would be a value-added tax (VAT), which is a tax on the production of goods or services a business produces. Opponents to his plan ask “Wouldn’t this tax just get passed onto consumers, effectively cancelling out the universal basic income?” According to Yang, no. The basics, such as groceries and clothing, would be exempt from this tax, and one would have to buy $120,000 worth of non-exempt items in order to cancel out the value of the universal basic income. In addition, a value-added tax makes it much harder for large corporations to avoid paying their fair share. The demand for most consumer goods is elastic, so producers will have to find more efficient ways to produce goods and adjust prices to maximize profitability, hence picking up a lot of the slack from the VAT. The second source feeding the universal basic income would be one that already exists. America currently spends between $500 and $600 billion a year on welfare programs, food stamps, disability, and other programs, not to mention over 1 trillion dollars on health care, incarceration, and homelessness services. People already receiving benefits would have a choice between keeping their current benefits and the $1,000, but not both. The third source would be new taxes on top-earners and polluters, through a carbon fee and ending the favorable tax treatment. And the final source would be the new revenue created by the universal basic income. The Roosevelt Institute has projected that the economy will grow by ~$2.5 trillion and create 4.6 million new jobs. The American economy is already at $19 trillion; a VAT at 10% alone would generate $800 billion worth in profit. This predicted economic growth proves that Yang’s universal income is the basis of all fiscal ventures; an investment.
However, while Yang came to debates armed with defenses and explanations for his signature policy, many people still found problems with his economic analysis and his high-stakes plans. Yang had bipartisan support, but that was where most of his opposition lay, as he could not please both sides. Those on the left disliked Yang’s reduction of welfare, and those on the right disliked that Yang would not eliminate all other government income transfers, such as his backing of Medicare for All. In addition, the sheer cost of Yang’s plan caused many to be unsupportive of his plans; to pay every single American adult $12,000 a year would total $3 trillion, which is more than two-thirds of the yearly federal budget. Even Yang’s proposed sources don’t quite cover this cost, leading to some shaky and unconvincing math on his part. For example, many economists have argued that Yang’s savings from forcing poorer people to forego some welfare benefits would only be a fraction of the $500 billion he proposed, which would force the VAT to be set as high as 30%. Yang’s plan’s too-good-to-be-true facade veiled a confusing and shaky infrastructure; to succeed, a universal basic income must be more polarized and better thought out before he has a chance to implement it.
For more than two years, Andrew Yang traveled the country as a presidential candidate campaigning for his universal basic income. The Yang 2020 campaign was suspended in February, but Yang’s ideas live on; his novel economic stance has garnered widespread attention and new debates about a nation’s financial responsibility to its people.
