Basic Income/Negative Income Tax

Do Milton Friedman, MLK, and Andrew Yang Really Agree on the Universal Basic Income?

Spoiler alert: No.

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Much of the Democratic debate on Wednesday featured a fractured flock of candidates fighting over progressive credentials and declaring who they'd put in prison or fine to prove their bona fides. But Andrew Yang, the plucky venture capitalist, made the case that his policies really are for everyone.

"I'm building a coalition of disaffected Trump voters, independents, libertarians, and conservatives, as well as Democrats and progressives," Yang explained. He believes he can unite all these folks with a Universal Basic Income (UBI), which Yang says is "a deeply American idea" that connects "Thomas Paine to Martin Luther King to today." Yang's version of the UBI would see every American citizen 18 and older receive $1,000 a month—no exceptions.

But does his plan actually resonate across centuries and ideologies? The short answer is no. While a simple form of UBI has indeed been tossed around for many years, its implementation and cost look very different depending on whose version you read.

Do we start with St. Thomas More, who, in 1516, said that "provid[ing] everyone with some means of livelihood" would cut down on crime? Or do we take a cue from Yang and commence with Thomas Paine's late 18th century musings on the subject?

As Reason's Jesse Walker points out, better to begin with the latter, whose 1797 pamphlet Agrarian Justice advocated for a policy most closely related to today's UBI talk. Paine wrote that "the earth, in its natural, uncultivated state was…the common property of the human race." Although cultivation of that land was "one of the greatest natural improvements ever made," it also displaced people, robbing them of "their natural inheritance" and creating "a species of poverty and wretchedness that did not exist before." To rectify that disinheritance, Paine argued everyone was owed a yearly sum: 15 pounds for those between the ages of 21 and 49, and 10 pounds for those aged 50 and older.

Yang's UBI is essentially a modern-day, technologized version of Paine's proposal. Instead of agricultural practices dispossessing American citizens, Yang blames big tech companies, which he says are automating jobs into oblivion. You don't have to be a member of the Yang Gang to see other similarities between the two proposals. Paine called his payout the "Citizens Dividend," while Yang nicknamed his stipend the "Freedom Dividend."

But would they cost the same? Decidedly not. Adjusted for inflation, 15 pounds of sterling in 1797 comes out to about $1,960 in today's dollars—a far cry from Yang's proposed $12,000 redistribution.

How about Martin Luther King, Jr., the well-known civil rights activist and little-known UBI supporter? King placed the plight of the poor at the center of his platform. But his vision for a basic income was perhaps more conditional than universal. He wrote in his last book, Where Do We Go From Here: Chaos or Community?:

We must create full employment or we must create incomes. People must be made consumers by one method or the other. Once they are placed in this position, we need to be concerned that the potential of the individual is not wasted. New forms of work that enhance the social good will have to be devised for those for whom traditional jobs are not available.

A government-sponsored jobs program was central to King's proposal, and thus better reflected in Rep. Alexandria Ocasio-Cortez's (D–N.Y.) Green New Deal than in Yang's no-strings-attached UBI.

Then there's the libertarian cohort of UBI fan boys, spearheaded by Milton Friedman and Charles Murray. The crowd at Yang's Washington, D.C., rally on April 15 burst into applause at the mention of Friedman. But the famous free-market economist's idea of UBI doesn't square up with Yang's. Friedman advocated for a negative income tax, which replaces levies on low-income individuals with supplemental funds from the government. Friedman's plan consequently ensures that everyone in society receives a guaranteed minimum income, but it doesn't redistribute money to people who don't need it.

And then there's Murray, the conservatarian economist who actually does favor a UBI that resembles Yang's. He shares the candidate's worries about automating the American job out of existence and has proposed giving everyone in America aged 21 and older $13,000—even more than Yang! However, it's worth noting that Murray would require $3,000 of that payout go toward health insurance. The two thinkers also differ on one other point, and it's a doozy: Murray's UBI would replace the entire welfare system, whereas Yang's would exist alongside a welfare system.

"You don't want to take away benefits that hundreds of thousands of Americans are literally relying upon for their very survival," Yang told me back in April"The goal is to create more positive incentives."

So how would the presidential hopeful finance his "tech check"? For starters, Yang says that, while the welfare state would remain intact, spending would fall by $500 to $600 billion. He would also implement a 10 percent Value Added Tax (VAT), which he says would raise $800 billion in new revenue. He further forecasts the U.S. would save between $100 to $200 billion "as people would take better care of themselves," saving funds from visits to the emergency room and jail cells. The economy would grow by $800-900 billion, he posits, with consumers more empowered to spend as they please. A tax on top earners and carbon would also add to the freedom fund, although by how much he doesn't say.

But apart from his VAT tax, Yang's financial justification is chock full of uncertainty, as it relies heavily on the notion that the economy will expand by almost a trillion dollars—a big if, to say the least. Consider for a moment if all went to plan: On paper, his UBI costs about $2.8 trillion, but, even in a perfect world, his current concrete projections fall $600 billion short of that. It's unlikely that a tax on the wealthy and carbon would raise those funds, and there's always the chance that capital creators would choose to move their businesses and the money they create to safe havens.

Yang has stuck to his guns despite these questions. He said in April that his UBI would put "more people in a position where they can actually participate in a free market," fostering a "much more dynamic economy." When we spoke, he had just removed a hat that spelled "MATH" in bold, capital letters, which the presidential hopeful wore as a badge of honor during his rally. It's become somewhat of a one-word campaign slogan, gracing signs and swag alike. When it comes to Yang's UBI, though, the math just doesn't add up.