In the 2020 Democratic primaries, an unlikely and unique candidate arose: Andrew Yang. Yang, a former businessman and entrepreneur, ran to highlight the important issue of automation and the subsequent job loss associated with it. His cornerstone policy plan was to guarantee a universal basic income to all citizens over 18 in the United States — he proposed $1000 a month to all eligible recipients. My reservations lie in how the poorest of Americans, whom proponents of this plan claim to support, would actually be worse off due to this program.
While Yang brings a lot of progressive thinking to the issues of automation, his ideas about UBI can best be described as libertarian in nature, since they would diminish government safety nets for individualized ones. The hallmark of libertarian ideology is that the role of the government is to enable individuals to make their own choices, which a UBI does effectively. Yang advocates for creating a value-added tax and critically “consolidating some welfare programs” then using that funding for the UBI.
A VAT is described by Yang himself as a tax taken at each point the product switches hands through the supply chain. These VATs exist in numerous countries already, but not currently in the U.S. This in and of itself is an incredibly progressive and intuitive proposal that could work to generate large amounts of revenue for the U.S.
The problem lies in the specifics. Yang himself claims that this policy would generate about $800 billion for the Freedom Dividend, his policy name for UBI. In reality, the Committee for a Responsible Federal Budget found that it would only yield about $600 billion, which is merely one-fifth of the yearly cost of the program he proposes: $3 trillion.
Additionally, even Jim Pugh, a strong proponent of a UBI and co-director of the Universal Income Project, admits that “because the Freedom Dividend is funded through a regressive Value Added Tax, costs will rise for low-income Americans, leaving some of the most vulnerable Americans worse off than before.” It is clear that a VAT alone would disproportionately hurt poorer Americans, especially if they do not reap the majority of subsequent benefits. Between this issue and concern over Yang’s claims about the plan’s financing, there is ample reason for concern.
Every study of UBI, and even Yang himself, admits that to have a UBI, there would need to be some marginal tradeoff with welfare programs. The problem with this is that welfare programs usually directly target poorer Americans and, in general, have been found to provide monetary benefits upwards of the $12,000 a year that Yang has proposed.
On net impact, this would leave the poorest and most vulnerable Americans in a worse position. Economists Hilary Hoynes and Jesse Rothstein studied a hypothetical UBI in the U.S. and agreed — finding that a UBI in the U.S. would disproportionately advantage “childless, non-elderly, non-disabled households” when compared to existing welfare programs, and would direct more money to middle-income households, rather than low-income ones that need it most.
This is because a majority of means-tested programs currently target the most disadvantaged populations, whereas a UBI would replace that with a program that distributes relatively equal sums to all, therefore failing to account for already-existing differences.
Melissa Kearney and Magne Mostead of The Aspen Institute agree again by defining a few important findings. First, they agree that existing safety net programs provide more money to poor Americans than Yang’s UBI-style welfare plan would. Second, they found that the only way to fully fund this proposal would be to completely eliminate several major welfare programs, including Social Security, Medicare and Medicaid.
Dwyer Gunn, a contributor to the Pacific Standard, finds that elderly individuals annually receive about $17,400 from Social Security and $12,900 in Medicaid and Medicare benefits. Cutting those to zero and replacing it with $12,000 a year would put these individuals at a major disadvantage. Additionally, she finds that this program will put poorer kids further behind their wealthier counterparts in schooling and career-areas. Removing or decreasing funding for programs like the Supplemental Nutrition Assistance Program or the Earned Income Tax Credit would disadvantage poorer children, especially since early childhood nutrition and education are essential for later success.
Children in the U.S. are already a low priority for the government, and putting them further behind is not what we need as a society. While Yang does not support these harsh cuts to welfare, he does support welfare cuts to some extent, including a potential substantial cut to food stamps. Regardless, it is important to understand what the experts have found to be feasible, rather than taking Yang’s theoretical policy positions at face value.
It is important to recognize that we, at some point, must yield to the vulnerable communities in our country and do what is in their best interest, rather than our own. Cutting welfare programs that low-income individuals rely on for survival and replacing them with inferior alternatives is not the right way to go about dealing with the very serious problems of automation and technological job displacement that Yang brings up. Instead, we must look to solutions that work for all of America, or at the very least those most impacted by these problems.
While Yang and his campaign seem to be coming from a well-intentioned background of helping everyone equally, after analyzing the totality of the evidence, it is clear that middle-income and rich Americans would be better off, whereas poorer Americans would be hurt by a UBI.
Instead, we could use the money that Yang proposes garnering from a VAT and reinvest it into the communities and individuals who need it most, thus getting closer to the end goal of equity and equal opportunity for all.
Shubhum Giroti can be reached at email@example.com.
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