After entering the democratic presidential primary as a political unknown, Yang’s rise to national prominence was as swift as it was unlikely.

His core campaign message — that Universal Basic Income (UBI) is the only solution to tech-driven automation — struck a chord with voters, elevating him to national political relevance. His viral campaign merchandise, blue baseball caps emblazoned with the word MATH (for “Make America Think Harder,”) are both a nod to the MAGA hats and a metaphor for Yang’s pitch to American voters, urging them to favor his clear-headed, data-driven approach over Trump’s cartoonish impulsivity.

Yang’s flagship policy, the “Freedom Dividend,” is a UBI true to its name. It would entitle every American adult to an unconditional monthly payment of $1000, costing the federal government about $3.4 trillion per year — roughly 3/4 of its current annual budget. However, Yang insists he has “done the math” and that paying for it “would be easier than you might think.”

After reviewing the primary source Yang cites to support his proposal — a UBI study by the Roosevelt Institute — it’s clear that, if Andrew Yang really has “done the math,” he isn’t very good at it.

Let me explain.

Evaluating the Freedom Dividend

Yang’s campaign website includes a detailed plan to fund the Freedom Dividend. His plan relies on three revenue streams:

New taxes, including a 10% VAT, a carbon tax, a financial transactions tax, taxes on high income-earners, and less favorable treatment of capital gains; Higher tax revenues from UBI-induced GDP growth; Cuts to spending, including on welfare and from cost savings on incarceration, homelessness and emergency rooms as a result of poverty-alleviation.

Having assessed this plan alongside the evidence Yang cites to support it, I conclude that Yang either set out to deliberately mislead the public or is not nearly as skilled at math as he claims.

First, Yang wildly overestimates the new tax revenues his VAT would generate. Second, he gravely mischaracterizes the Roosevelt Institute study he cites to back up his projections; this study contains nothing to support Yang’s proposal, let alone to suggest it would generate the astronomical benefits he claims. Finally, his statements about the impact of UBI on the labor supply are, and I mean this, hilarious.

1. New Taxes

Yang’s principal funding stream is new taxes, the largest being a 10% VAT, which would exclude “staples, such as groceries and clothing”.

Yang asserts that VATs will become increasingly important as technology improves, “because you cannot collect income tax from robots or software.” This is an odd statement, since income from capital investments like robots and software is already taxed, albeit at a lower rate than income derived from labor. We could easily increase that rate while avoiding the regressive effects of a VAT. I’ll get back to this later.

Yang predicts a 10% VAT would generate $800 billion per year, funding roughly ⅓ of his Freedom Dividend. He provides no source or rationale for this number, but US government estimates suggest it is drastically overestimated.

In 2016, the Congressional Budget Office (CBO) evaluated a proposal to institute a 5% VAT. With a “broad base” (applying to most goods and services), the CBO estimated it would raise $267 billion annually. With a “narrow base” (excluding goods and services “considered necessary for subsistence,” which in line with Yang’s proposal) that figure fell to $177 billion.

Doubling the VAT level to 10% would in neither scenario double the revenue it generates: a higher VAT would depress household consumption, leaving less revenue to be taxed at its higher rate. I’ll get back to these VAT mechanics in a bit.

2. UBI-Induced Economic Growth

Yang’s second pillar is his least credible. Under the heading, “What impact would the Freedom Dividend have on the US economy?” Yang states:

“The Roosevelt Institute found that adopting an annual $12,000 basic income for every adult U.S. citizen over the age of 18 would permanently grow the economy by […] about $2.5 trillion by 2025 — and it would increase the labor force by 4.5 to 4.7 million people. […] generat[ing] approximately $800–900 billion in new revenue from economic growth.”

If Andrew Yang actually is good at math, this is dishonest.

This study contains nothing to suggest the Freedom Dividend would produce anywhere near $800–900 billion in additional tax revenues. The $2.5 trillion figure that Yang cites refers to the top two lines in the graph below, scenarios 3 and 9. These forecast growth resulting from a fully deficit-funded UBI, which would inject $3-trillion in new money into the American economy while raising no new taxes.

The Roosevelt Institute study projections Yang references to support his claims

But the Freedom Dividend involves little or no new money; by Yang’s own account, it involves “minimal changes in the supply of money because it is funded by a Value-Added Tax.”

When the study does simulate the impact of a tax-funded UBI, its conclusions are dramatically less enticing. The original model, which didn’t account for the distributional effects of unearned cash-transfers, predicted (in scenario 6) that a tax-funded UBI would produce basically no economic growth. After the researchers revised the model to incorporate the “marginal propensities to consume” (MPC) of different socioeconomic groups — since poorer households generally consume larger proportions of new income than wealthier ones — they predicted 2.62% GDP growth, or $520 billion (scenario 12.)

This is a far cry from the $2.5 trillion figure Yang references — and yet, based on this very study, it’s still more growth than we should expect from Yang’s proposal.

The study assumed progressive taxation, with no increase to the effective tax burden of the bottom two quintiles. Most of the growth in scenario 12 is attributed to higher consumption by poorer households, which have the highest MPCs, and would be receiving cash transfers while bearing no additional tax burden. But the Freedom Dividend is principally funded by a VAT, a regressive tax, which would depress the consumption of those poorer households and drive down growth.

Yang’s program is funded by a mix of taxes and spending cuts, which this study does not explicitly consider. What is clear, however, is that nothing in the Roosevelt Institute study suggests the Freedom Dividend would net the government anywhere near $800 billion in additional tax revenue.

Yang’s suggestion otherwise is incompetence at best, malevolence at worst.

3. Impact on Labor Supply

In addition to its astronomical cost, a common critique of UBI is that it disincentivizes work, thereby decreasing labor supply and output.

However, Yang maintains that UBI would not decrease labor supply. The evidence he cites to support this position makes it clear that this is a view few economists share.

For example, he references the prediction by the Roosevelt Institute study that certain models of UBI would increase labor force participation. This raises serious doubts as to whether he has actually read this study, which assumes (ergo does not prove) that “unconditional cash transfers do not reduce household labor supply.”

Yang later asserts:

Decades of research […] have found that the only people who work fewer hours when given direct cash transfers are new mothers and kids in school. […] Quoting a Harvard and MIT study, “we find no effects of [cash] transfers on work behavior.”

The “Harvard and MIT” study he’s referring to assessed small pilot programs in developing countries providing conditional cash transfers to low-income families. These are hardly relevant to the extremely rich, extremely developed US economy.

Hilariously, this study goes on to acknowledge that unearned cash transfers in developed countries “have indeed been shown to have […] statistically significant effects on work.”

Even more glaring is the contradiction between his claims that 1) UBI does not affect the labour supply; and 2) UBI will radically transform the way Americans choose to live and work.

His quixotic predictions about the latter include that UBI will force employers to “pay more to people who take undesirable jobs because workers won’t be forced to take jobs for financial reasons,” while allowing workers to “take jobs that they naturally want to do — like being a […] coach or artist.” He even describes UBI as “supplementary income for those interested in labour that isn’t supported by the market,” like “art production, non-profit work and caring for loved ones.”

Laudable though these goals may be, a policy that helps people substitute away from labor “supported by the market” is also one that leads them to earn less income and pay less taxes.

Conclusion

Maybe Yang knows that a UBI that is universal and sufficient would not be affordable, and that an affordable UBI would not be universal.

Maybe he set out to run a useful campaign about an impossible policy, to spark a national conversation about a dysfunctional, underfunded welfare system that is ill-equipped to address the challenges that tech and automation will abet. He has, in the process, made a compelling case for unearned cash transfers as part of the solution. This may lead to changes, short of true UBI, that held mend America’s frayed social safety net. If it does, Yang will deserve credit for shifting the Overton Window, for having “Made America Think Harder” about its broken welfare state. Maybe this article is evidence that he already has.

But if he really does stand by the numbers in his Freedom Dividend proposal, he isn’t particularly good at math after all.