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United States: What are the economic implications of Andrew Yang’s Freedom Dividend?

Image of Andrew Yang

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.

The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

8 comments

  • It’s going to be ending of mine day, except before finish I am
    reading this great paragraph to improve my know-how.

  • Quantitative Easing (QE) is the answer that will not create a deficit to the United States. At present this New Money is being channeled to the top 500 Companies on the stock exchange thus the rich get even richer and the poor poorer.

    .Using the Quantitative Easing principle a Government Institution will create NEW MONEY which will be channeled into the lower end of the economy in 3 ways:-

    To pay out a CITIZEN’S INCOME.

    To finance essential services such as EDUCATION and HEALTH.

    To finance infrastructure development.

    http://positivemoney.org/

  • gespil

    I am willing to bet that the positive effects of Yang’s version of UBI will not last longer than one manufacturing cycle after implementation.

    Yang’s version of UBI is a consumption-based corporatist-approved UBI which does not affect extreme poverty in a meaningful way, because it is based on the belief that, ‘The rich always spend a lot … and it would be sufficient to trickle-down to the rest of us as UBI as long as we tax their consumption.’

    Yang’s freedom dividend just transfers funds from the companies that get taxed by him to the owners of businesses which provide the most essential goods and services to the humans …
    The people will remain poor after a very short period of positive effect.

    UBI must be raised from taxing ownership and control of Wealth, not from the Wealth transactions (aka consumption).

    If you do not believe me then go on Yang’s page and look at how he will fund his UBI (Freedom Dividend) … it is from consumption (VAT, carbon tax), the current welfare system and the “hope” LOL that the economy will grow .

    • “UBI must be raised from taxing ownership and control of Wealth, not from the Wealth transactions (aka consumption).”

      The Vat Tax is actually the party facilitating the transaction. That transaction is also limited to certain transactions and not on general goods and services. How does that VAT take place.

      Forget the orgasm over Amazon and lets look at something like a Facebook. How does facebook make money? Advertisement. The ad revenue is being taxed. That means a 10% VAT that Facebook has to pay. Who is facebook going to pass the cost down to? They are going to now charge for FB? lol you know what would happen? Other social networks would pop up. It simply is not that linear

      Yang’s UBI is a great start. It does however need him to be elected. #YANGGANG.

    • gespil

      omar mathews,
      ,
      Clearly VAT is always paid by the end-consumer , therefore it is incorrect to say , ” … lets look at something like a Facebook. How does facebook make money? Advertisement. The ad revenue is being taxed. That means a 10% VAT that Facebook has to pay…”

      The seller is Facebook, the product is a spot on an advertising platform, the consumer is those who advertise. Why do they advertise and pay the VAT … because they hope to sell their product to someone else …. and so on and so forth until the end-consumer is reached.

      VAT is a cost burden, All cost burdens of the seller are always paid by the end-consumer as well as the Profit for the seller.

      There is taxing Income, there is taxing consumption and there is taxing wealth.
      We can tax you when you earn a dollar , when you spend a dollar and when you keep a dollar. Those are three different things.
      The real UBI taxes the dollar you keep.
      Yang’s fake UBI taxes the dollar you spend.

      Yang’s UBI is fake because somebody somewhere must perpetually spend 10k first so that somebody somewhere can have 1k later.

    • Nope all wrong it transfers nothing but equality by expanding spending. You think even the homeless want to be homeless?
      Get real 554,000 homeless will spend to live a better life 90% will want that.
      Then middle class will spend to get out of debt the lies and cheats rigged into the system. 100% middle class will get out of debt.
      That’s like an economy on steroids.
      The loser is the rich guy but even they are not the loser their business is guaranteed to have sales.
      End that on KISS methodology not try to debunk unrealistic behavior!!

  • Amber

    Change is always for a better, i can’t see anything wrong with this. http://www.greenfieldnaturals.com/

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