At this year’s Democratic National Convention, the Democratic Party will write a Party Platform (here’s the 2016 one) in addition to selecting a nominee. Any policy on the platform comes with an endorsement from the party elite and a clear push into the mainstream. I campaigned for and supported Andrew Yang in the Democratic primary, a candidate whose ideas were often considered to be outside of the mainstream: most notably universal basic income. What many don’t know is that he also had 154 other policies. I was not a fan of all of his policies (his policy to expand selective schools is a poor one in my opinion), but some of them would be really good for this country, and deserve the full endorsement of the Democratic Party, regardless of who the nominee is. For the purposes of this article, I’m just going to cover two great Yang policies: Democracy Dollars and Universal Basic Income (UBI). Neither of these policies were ever endorsed by a Democratic frontrunner, including the presumptive nominee, Joe Biden.
America’s campaign finance laws allow for the rich and powerful to have a very large and highly disproportionate impact on our election. One study found that in the 2010 election, 80% of national party money came from roughly 30,000 donors. Both former vice president Joe Biden and senator Bernie Sanders (who has since dropped out and endorsed Joe Biden) have vowed to overturn Citizens United via constitutional amendment, but this will not happen in the remotely foreseeable future. Constitutional amendments require two-thirds of the Senate and House or a constitutional convention called for by two-thirds of state legislatures (this option has never occurred) and neither is at all likely to occur to overturn Citizens United.
Yang proposed Democracy Dollars to help deal with campaign finance in a way that does not require a constitutional amendment. Democracy Dollars are $100 vouchers given out to American adults to donate to politicians they support. This would amount to over $23 billion every nationwide election cycle, outweighing the $1.6 billion in outside money (“outside” meaning not directly collected by a candidate’s committee) given to federal races in 2016 by a massive factor of 14 to 1. The amount of private fundraisers like the infamous Buttigieg wine cave may be decreased as well, since a candidate speaking to a crowd of 150 middle-class and poor people would now offer the prize of up to $15,000, which helps to incentivize more public events and less private ones. Lastly, Democracy Dollars may decrease the role of lobbyists in the American democracy, given that congressmen can now spend their fundraising time raising money from their constituents, not from lobbyists.
Universal Basic Income (UBI) Funded Through Value Added Tax (VAT)
As most people know, Yang proposed a universal basic income in America of $1,000 a month to every American over the age of 18. There are many reasons to enact a universal basic income in America and I’m going to list my favorite reasons.
First are some “honorable mention” reasons that couldn’t quite crack my top four: it would give people (mostly women) in abusive yet financially inescapable relationships a safety net to help escape their abusive relationships; UBI could help get people through rough times (like the coronavirus); the universality of UBI removes the stigma of receiving government aid, which is a big reason many don’t choose to receive aid; and UBI would grow the economy dramatically, without causing inflation, since government spending really never affects inflation.
Now, for the top reasons!
1. Welfare is conditional and broken. UBI could help change that.
One of the most common attacks against Yang’s version of universal basic income was that it didn’t stack with other welfare benefits (you had to choose welfare OR UBI) and was therefore regressive. To be clear, the benefits that you had to opt out of by opting in to UBI were Temporary Assistance for Needy Families (TANF, which is cash aid), Supplemental Nutrition Assistance (SNAP, which is food stamps), Women, Infants, and Children (WIC) and Supplemental Security Income (SSI). Yang’s UBI did stack with Social Security, Disability Insurance, Unemployment Insurance, housing assistance, VA disability and Medicare/Medicaid. Now that I’ve named all the acronyms, let’s do some analysis.
Because welfare programs like TANF and SNAP are conditional on being poor, these benefits are often lost when you get a job. That creates a disincentive to work. Furthermore, if you are being paid a low wage, and you still receive these benefits, they can go away if you get a promotion and a wage increase. If the wage increase is less than the amount you were getting in welfare, then you are actually disincentivized from moving up. As one mother painfully described to the House Committee on Oversight and Reform, there are people who resign from promotions so that they can still receive SNAP benefits. Welfare should not stick people in jobs they were literally promoted above. Any welfare program that is conditional on being poor will stick people in poverty, disincentivizing them from working, and preventing them from moving up at their work. Welfare conditional on being poor is counterproductive, so Yang is right in proposing a UBI that doesn’t stack with welfare benefits. Everyone would choose universal basic income, and welfare that sticks people at the bottom would be gone.
Furthermore, welfare as it is isn’t easy to obtain. Many people who should get welfare don’t. Roughly 13 million poor Americans don’t get any form of welfare. That is over 25% of the total poor in America. 76% of those who qualify for housing aid don’t get any. 22% of poor families receive TANF (welfare cash aid). 78% don’t.
If a program being conditional on being poor actually means millions of poor people receive no benefits, it isn’t worth it to make it conditional. Let’s just make it unconditional.
2. Contrary to some belief, UBI is not wasteful almost at all.
In the words of the USA Today Editorial Board, “it would be hard to justify making anyone pay higher taxes so the federal government could send $12,000 a year to Jeff Bezos, Warren Buffett and other billionaires.” This is a view that I have heard repeated very often about UBI in my personal life: that it is wasteful. After all, why should we send the rich money? Why not only send the money to the poor? Would that not save us money?
The answer is twofold: 1) making welfare conditional actually excludes more poor Americans than the rich people it includes and 2) there are really not that many people in America who are rich enough for UBI to be wasted on them.
There are about 600 billionaires in America. There are around 11 million millionaires in America. Let’s say we exclude these people from UBI. To make UBI conditional such that we can exclude these people, like any other law, we would need complicated government bureaucracy. Though I am not against all aspects of our bureaucracy, we must remember that in the case of benefit programs like TANF and SNAP, complicated government bureaucracy is one of the things that led to 13 million Americans being left out of the social safety net. For example, because so much of TANF’s execution is left up to the states (UBI checks would be given regardless of states, like stimulus checks), there are massive inequalities between the life of a poor person in California, where 65.5% of poor families receive TANF (still vastly below what it should be), and in Louisiana, where 4.2% of poor families receive TANF.
The process of vetting that would allow us to exclude 11 million rich people (which you could theoretically argue is necessary) from UBI would require a complex and large bureaucracy—the same one that caused us to exclude 13 million really poor people from welfare as it is. We cannot exclude that many rich people without excluding just as many, if not more, poor people. I am willing to send some money to people that don’t need it if it means sending money to people that really do.
Furthermore, why exclude the 11 million rich people anyway? I’ll concede that it is likely true that an extra $12,000 sent to Bezos probably doesn’t get circulated around the economy, and it is therefore “wasted” taxpayer money. But let’s look at the millionaires. Millionaires are roughly 3% of America (based on the 11 million figure from before). The income of the top 3% of America starts at around $200,000 a year. A person who makes that much in Los Angeles, my hometown, takes home about $128,000 after taxes. If we gave that person 10% more income through universal basic income, is the expectation really that they’ll throw it in a vault and not circulate it? I would think not. I would think such a person would be happy to spend more — it isn’t as if such a person is living a life of such tremendous luxury they can’t imagine spending $12k more.
So, excluding millionaires from UBI is, on balance, unnecessary. And, the bureaucracy enforcing their exclusion would keep more poor people out than rich people it supposedly wastefully includes.
3. Yang’s proposed VAT is actually a good way of funding it
The method proposed by Yang to fund UBI was through a Value Added Tax (VAT), which is a tax at every stage of a product’s creation and sale. The great advantage of a VAT is that it’s extremely difficult to evade from a company’s point of view. The only concern is that the company may simply increase prices by the exact amount they are charged in taxes.
If companies do so, two problems then emerge. The first is that there is a worry VAT effectively becomes a tax on consumer spending (like the sales tax that is applied when you buy some groceries in a state with sales tax). If VAT becomes a consumption tax, it becomes regressive, punishing the poor more, since the poor put a higher percentage of their income towards consumption goods. Yang’s proposal resolves this issue by having different VAT rates depending on the type of goods being produced and sold. Goods that the poor need like toilet paper or cheap food can have a lower rate, or be exempted completely. Goods that aren’t necessities can have higher VAT rates. This type of tiered VAT is used in other countries, like Sweden, where the VAT rate is 25% for most items, 12% for beverages, shoes and hotels (among other things), 6% for books, theater, domestic passenger transport (among other things) and 0% for medicine and international passenger transport (among other things).
The second problem that emerges with a VAT that is passed along to consumers is the worry that the increase in prices will “cancel” out the UBI the consumers would receive. Some simple math shows us this won’t be the case. Yang proposed a 10% VAT (half of the UK’s). If this was passed entirely onto the consumers, that would be a 10% increase in prices. For that 10% price increase to equal the $12,000 UBI, you’d have to be spending $120,000 in expenditures every year. Not even the Americans from the 94th to 97th percentile of earnings (who make from $150,000 to $200,000 a year) spend that much on average. So a UBI funded by VAT means at least 94% of Americans have a net gain in money, and that’s assuming a lack of luxury-necessity rate difference, which Yang had proposed including anyway.
4. UBI compensates work that isn’t otherwise compensated
UBI also means that a person can be compensated even if the market doesn’t already compensate them properly. There are many writers, artists and musicians who could benefit from an extra source of income so that they’re able to better or more prolifically practice their craft, and I think our society would benefit from that. Though I’m not proposing that some giant swath of starving artists could live off of $12,000 a year, UBI would offer them a cushion such that if they cannot please the market with their skills as much from one month to the next, they don’t have to go hungry. Another group that would be hugely benefited by UBI: homemakers. Being a homemaker is an extremely difficult, thankless and uncompensated job, and an extra $12,000 a year per person would allow many more people who want to be a homemaker the ability to do so by filling in the gap between what they provide to the market and how many goods they are able to buy. Does anyone really think one’s economic productivity is always the exact same as their value to the world?
Between homemakers and struggling artists, UBI would send a clear message: there is a difference between human value and market value.
But, since human value can’t be traded in for groceries, it is good to have some extra money that can be.