Recent analysis of US proposals for a $1,000 a month basic income show it would have a dramatic effect on poverty and inequality, while also substantially increasing the US budget deficit.

Max Ghenis, a researcher at The UBI Center, explores the financial implications of Andrew Yang’s plans to give all US citizens a Freedom Dividend. Ghenis’ investigation shows that it would cost $2.8tn a year. Tax revenue and related changes to welfare costs would pay for around half of this, leaving a deficit of $1.4tn to make up the difference. This is considerably more than the current US deficit (just over $800bn in 2018).

Despite the lower economic growth caused by a larger deficit, Ghenis calculates significant benefits for nearly all citizens. Only those the wealthiest 10% (in terms of yearly disposable income) would suffer financial loss, and there would be marked increases in disposable income for the poorest 10%. Even median earners would receive over 20% extra disposable income.

Ghenis also discusses the potential economic benefits of Yang’s Freedom Dividend, comparing it with earlier studies on basic income in the US (such as the Penn-Wharton model and Roosevelt Institute study). He is sceptical of Yang’s claims that the Freedom Dividend would stimulate government by up to $900bn – with the implication that alternative strategies would need to be considered. In a related article, Ghenis proposes a deficit-free basic income of $471 a month that would not add to the US budget deficit.

Picture: Photo of Andrew Yang. Attribution: Collision Conf from New Orleans, Louisiana, USA [CC BY 2.0]

About Alastair Dunning

Alastair Dunning has written 3 articles.