Photo by Stephen McCarthy / Collision via Sportsfile

The first thing you ought to realize about universal basic income — the plan championed by 2020 presidential candidate Andrew Yang to distribute an unconditional monthly sum to every adult citizen— is that it’s not actually as impossible as it seems.

The second thing you ought to realize is just how instantly it would fundamentally alter the standard of living in the U.S.

It’s not hard to imagine. What would you do with an extra grand each month?

In an eleven-minute video published to YouTube, Seattle resident Xack Fischer asks a variety of people exactly this. The answers range from paying for rent and utilities, to simply finding a place to live. At times, it seems the respondents become emotional at the mere thought of the lifted financial burden — perhaps an indication of UBI’s mammoth potential.

“You know I think there are people that a thousand dollars would change a whole lot for because you know, you might be able to rent a place for five, six-hundred bucks a month. You know, and if you’re homeless that might make the difference between you sleeping on the streets — you know you see people sleeping in the doorways — it might make the difference between sleeping in a doorway and sleeping at least under a roof somewhere with a blanket and maybe a mattress or something.”

The Freedom Dividend (a name which polled better in Yang’s focus groups than, simply, ‘universal basic income’) would cost an estimated total of $2.4 trillion, annually.

According to the World Bank, the current GDP of the United States is 19.39 trillion. For reference, Trump’s proposed budget for 2019 was 4.407 trillion. So, the question then becomes, “just how viable is implementing a government program such as the Freedom Dividend, which amounts to ~50% of the current U.S. budget and ~12% of the current GDP?”

The answer: surprisingly viable.

On his website, Yang outlines several important considerations to help you stop languishing over the cost of UBI:

(i) One, $800 billion in additional revenue would be generated by a Value-Added Tax, or VAT, of 10%. The VAT is a tax on the production of goods and services, taken at every step in the supply chain. For this reason, one advantage of a VAT, as opposed to an income tax, is that large corporations have a much harder time evading it through loopholes in the tax system. Just as responsible companies pay regular dividends to their shareholders, so too should the most financially prosperous country in the world to its citizens.

(ii) Two, welfare currently amounts to $600–700 billion of the total budget. Since a single person can’t receive both the freedom dividend and a number of the means-tested welfare benefits simultaneously, the cost of the Freedom Dividend would be reduced significantly due to all the welfare and food stamp opt-outs. Furthermore, if they do choose to opt-in to UBI, the government ends up spending less on traditional social programs. (Note, though, that the Freedom Dividend would stack on top of entitlement programs that are unconditional, such as social security. The idea is to replace the poorly designed means-tested welfare programs, which disincentivize upward mobility by stipulating their benefits with strict income conditions.)

Yang stresses the regularity of Value-Added Taxes — more than three-quarters of the countries in the world implement one, or something like it. Every European country, for example, has a VAT of 20%, twice Yang’s proposed level.

(iii) Three, the Roosevelt Institute projects there would be a $500–600 million increase in revenue resulting from the additional spending money thrust into consumers’ hands.

(iv) And finally, four, there would be an estimated $100-200 billion decrease in federal spending related to healthcare and incarceration. The argument goes, if families have adequate money-in-hand to spend on issues such as healthcare and childcare, it lessens the need for fixing complications arising from not having addressed them earlier.

“Universal Basic Income would pay for itself by helping people avoid our institutions, which is when our costs shoot up.” Yang’s policy page states.

The factors listed above, even if applied conservatively, still make it more than possible to fund a guaranteed income of $12,000 per year. And that’s before you factor in the estimated 4.6 million new jobs, and 2.5 trillion dollars in economic growth the Freedom Dividend is projected to create.

“We are the richest society in the history of the world — $20 trillion GDP up $5 trillion in the last 12 years alone. We can easily afford a dividend of $1k/month per adult if that’s what we want to do. Anyone who says we don’t have the money isn’t looking at the right numbers.” Yang recently Tweeted.

Ending American Poverty

Consider for a moment how a universal basic income, if applied successfully, could transform society overnight. There’s no policy that could possibly address financial stress as directly and efficiently as a universal basic income. It would probably look like one of those before and after commercials for Accutane, except instead of a person’s face, it’d be a country.

Right now, about 80% of American workers are living pay-check to pay-check. Of a one-thousand person survey conducted by Varo Money, 85% indicated they were sometimes stressed out by money-related issues and 30% indicated they were constantly stressed out. According to the U.S. Department of Housing and Urban Development, approximately one in five-hundred Americans are homeless.

It’s a glaring fact — money is the single greatest source of stress in American’s lives.

Under the Freedom Dividend, those employed full-time, but unable to save, would instantly be able to start saving money. Many homeless people would instantly be able to afford housing. A striking number of lives would instantly be improved, all because of a universal basic income.

When people have extra money to spend on comforts, not just necessities, it improves their self-esteem, productivity, and even their IQ (by an entire standard deviation).

Another factor to consider in regard to the Freedom Dividend’s effect on poverty is that, in general, individuals are better at making financial decisions for themselves than the government is. People are the best judge of how to allot their own money.

For example, one of the problems with food-stamps, and similarly modeled government programs, is that they dis-incentivize upward mobility.

The current federal poverty level in the U.S. for a single individual is $12,140. If your income is above a certain percentage of that level, say 130%, then you become ineligible for certain government programs. With food-stamps, for example, making $1,278 in a month, or 30% above the poverty level for a single individual, would disqualify you from the program.

However absurd and self-contradictory, programs like these partly function to keep poor people poor — removing benefits just as soon as they threaten to actually do any good.

Concerns

So, if UBI is possible and so potentially life-changing, why haven’t we started it already?

First, the people must be convinced. And right now there are still some valid concerns — ranging from inflation, to price gouging, to the potential downside of putting spending money in the hands of homeless addicts.

The short answer to the inflation question is that $1,000 of extra spending money wouldn’t be enough to cause significant price increases. Also, since UBI is the redistribution of existing money rather than the creation of new money, it wouldn’t diminish the value of the dollar by making it less scarce. Inflation, if present at all, wouldn’t even come close to offsetting the benefit of extra money in the hands of Americans.

Furthermore, price gouging couldn’t occur to the extent that critics of the Freedom Dividend profess that it would. Rent seeking landlords raising the cost of rent would lose tenants (and money) to the landlords who don’t do the same. Therefore, rent prices would remain relatively stable because of competition between landlords. In other words, $1,000 would not become the new zero dollars.

“Wait, but the value added tax is an inherently regressive tax. Poor people would be affected disproportionately in the increased price of goods, because each purchase represents a greater percentage of their income.”

While it’s true that a portion of the VAT would reach consumers, and would affect lower income households more than higher income households, it likewise holds true that the Freedom Dividend would benefit lower income families disproportionately. That is, if you make 40k a year, the 12k per year increase in income by the FD represents a 30% increase in total income — well worth an extra $10 on the occasional hundred-dollar purchase. If you want to learn more about how the VAT works, here’s a great introduction.

The short answer to the addiction concern is that overall spending on things like drugs, alcohol, or cigarettes doesn’t actually increase, even when the money is put in the hands of addicts. Rather, the money would lead to environments in which drug use would no longer be viewed as a necessary escape. It sounds unbelievable, so don’t take my word for it. Read this well researched article written by Natalie Denning on the subject.

By far the most common criticism of UBI is that it’s unrealistic, when really it’s extremely possible. The numbers all work. We might have to troubleshoot a little bit, at first — just to work out the kinks. But if it really has the potential to instantly improve America, why aren’t we pushing for it more?

To find out more about Andrew Yang, the Freedom Dividend, or any of his 76 stated policies, visit his website: www.yang2020.com