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Thursday, May 2, 2019

Why the Freedom Dividend Won’t Work, as Explained by Andrew Yang Himself

The reason this proposal would end in an accumulation of demands through public pressure is best explained by Yang himself.

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Democratic 2020 candidate Andrew Yang is running on a platform that includes the creation of a universal basic income (UBI) of $1,000 per month for every American citizen. The reason this proposal would end in an accumulation of demands through public pressure is best explained by Yang himself.

The Likable Candidate

I’ll make a glaring admission that might be thrown back at me in the future: I like Andrew Yang. It’s probably for the same reason many people have started to appreciate the 2020 Democratic candidate. Yang is a witty and likable entrepreneur who is refreshingly calm, thoughtful, and non-adversarial. In a political climate of accusations and constant “bombshells” and “breaking news” over creepy Biden hugs and Senator Amy Klobuchar throwing binders at her staff, it’s nice to see a candidate who is capable of having a reasoned discussion about his political priorities.

A conversation between Yang and Kmele Foster on the podcast The Fifth Column is among my favorites on the question of UBI. They discuss the pros and cons of replacing the current welfare system with a so-called “Freedom Dividend.” Foster called out Yang for using the worst-case scenario of job losses to artificial intelligence to stress the urgency for the introduction of UBI.

How Programs Explode

I’m probably not the best person to crunch the numbers on universal basic income and its financial feasibility; others will surely calculate that as the campaign progresses (Yang is polling at around 1.5 percent at the moment). What I do know, however, is how transfer programs explode after they are introduced.

In Europe, most countries practice government-run health care, set minimum wages, and control pension systems, and some even have wage indexation (including my home country of Luxembourg). Unions and politicians are happy to subject these programs to debate and renegotiation during election season, resulting in unaffordable pension benefit adjustments, increased health care expenses, or regular minimum wage increases that exceed inflation rates.

Even public transport demonstrates how vulnerable a system becomes under public pressure for better coverage.

Luxembourg has doubled the national minimum wage since the year 2000. The United Kingdom’s National Health Service (NHS) increases funding by four percent above inflation every year, and government spending as a percentage of GDP has doubled since the 1950s. The UK now spends more than twice as much of its total budget on health care as it did 60 years ago, all while services decline in quality.

Countries such as France and Belgium are plagued by regular strikes over welfare benefit adjustments or social security contributions. Politicians attempt to outbid one another on who is willing to spend more without regard to who will be picking up the tab. General government expenditures on social protection in the EU reached €2,890 billion ($3,247 billion), or 18.8 percent of GDP, in 2017.

It doesn’t even have to be programs as convoluted as social security. Even public transport demonstrates how vulnerable a system becomes under public pressure for better coverage: you move from privately-run public transport to price-controlled public transport to government-run public transport with tickets to government-run public transport with cheap tickets to government-run public transport with free tickets on certain days to government-run public transport that is free of charge (as is now being discussed in Germany).

Yang Knows This

The most enlightening of Yang’s interviews on this topic was his appearance on The Breakfast Club radio show. After being asked how African-Americans having difficulties getting loans would be helped by his presidency, Yang said the Freedom Dividend would help alleviate that pressure and give these communities enough money to spend and consume. After this consumerist proposal, Yang added this seemingly inoffensive but telling remark:

“And if that does not help, we will do more.”

The conversation continues as follows (starting at 42:30):

INTERVIEWER: “That’s why I think we should do $2,000.” [double the monthly amount proposed by Yang]

YANG: “We’re gonna start with $1000, and then maybe in my second term when everyone is loving that first dividend, we’ll be like hey man…”

INTERVIEWER: “Don’t you think that black people deserve a little bit more? Because of slavery, because of segregation.”

Yang then dove into the subject of reparations, indicating that the Freedom Dividend is just somewhere to start before taking other factors into account.

The efficiency of UBI, if there is any, is that the transfer payment jungle of the current welfare state could be alleviated and replaced by one single universal payment structure. Yang himself points this out every time he’s asked about why Bill Gates and Mark Zuckerberg should receive UBI, explaining that accounting for changes in income would make the system more complicated and costly. But when pressed about this program, he quickly acquiesces by dropping, “And if that does not help, we will do more.”

Programs don’t go away after they’re instated and, much like all the other benefits that already exist, unions and politicians will fight tooth and nail to keep and expand rather than reform or eliminate them. If UBI were actually to become part of the Democratic Party platform, then Elizabeth Warren would suggest a $2,500 monthly dividend, with Bernie Sanders finally topping the field through any outrageous amount that would ensure his election.

After its introduction, even if it were to replace the welfare state as we know it, UBI would witness a steady increase paired with the reinstitution of the old welfare transfers. And that is why UBI would be a failure.

  • Bill Wirtz is a Young Voices Advocate and a FEE Eugene S. Thorpe Fellow. His work has been featured in several outlets, including Newsweek, Rare, RealClear, CityAM, Le Monde and Le Figaro. He also works as a Policy Analyst for the Consumer Choice Center.

    Learn more about him at his website