The Best Reasons for the Freedom Dividend
Andrew Yang sought the Democratic nomination in the 2020 Presidential Election. His flagship campaign position was the Freedom Dividend, a form of Universal Basic Income (UBI). UBI is income, essentially, that one gets for existing. Financed by a Value-Added Tax (VAT), Yang’s goal was to provide payouts of $1,000 per month to individual Americans. Because he was an outsider, he did not win, but his idea caught fire and is now a major topic for future elections. Let us know review why the Dividend is still a good idea for the future, as we look to 2022 and 2024.
1. It Doesn’t Discriminate
A lot of political programs can have the misfortune of taking from someone else and giving to another. The Freedom Dividend would make every American eligible for a payment, thereby eliminating that potential controversy. In an era of heightened political divisions and the seeming breakdown in race relations, additional wedges are not only inconvenient; they are risky. The future success of what has been a successful Republic is better assured when we can all share in its prosperity.
2. It Ties the Problem to the Solution
Yang’s main reason for pushing the Dividend is his observations regarding new technology. It provides wonderful benefits, cheap goods, and even saves lives that might otherwise be doomed. At the same time, it has been erasing jobs faster than new ones can be created, depriving households of the kind of incomes that would allow them to reap the benefit of these new goods and services. Many other social woes, like increased rates of depression and drug addictions, follow.
By placing a tax on transactions in the tech economy, the negative externality (massive job loss) is internalized. The vehicle by which jobs are lost therefore is also the vehicle that will finance the new economy in which the jobless find themselves, discouraging a potential “tech bubble” that could burst after too many households have been disrupted.
3. It’s Actually Progressive
Some people have criticized the VAT mechanism, which would fund the Dividend, as technically being “regressive.” This is only a serious criticism, though, if one misunderstands the subtleties of terms like “progressive” or “regressive.” While they often describe political positions, it’s also true that these are terms used by mathematicians, and a tax system is, properly, a mathematical system.
When one talks about a progressive income tax, for example, this isn’t because of the political coalition that codified it. It’s because it’s a system where, as income gets progressively larger, so too does a tax. It’s progressive, numerically. It is just a coincidence that there was an era of history where people called progressives changed the law to make a progressive income tax.
Now, mathematically, it is true that a VAT is regressive in that it will draw more heavily on the lower wealth tiers of the country, which is just generally true of taxes on transactions compared to income. It’s worth noting, though, that this tax is not in isolation. The profit a seller makes on tech transactions is, in part, a tax for research and development on newer technology that will take more jobs. Thus, the VAT that produces the Dividend is a counter-weight to a much more regressive tax (or cost, more appropriately) in the American economy. In this sense, it’s progressive, at least in the political sense, because America is recuperating some of what is otherwise lost on the tech economy.
4. It Promotes Healthy Capitalism
People often have singular notions of things like capitalism or communism. The truth is that these ideas are as good or as bad as you make them out to be. A great thing about the Freedom Dividend is that it allows for an economy of scale by being funded on a nationwide VAT and then similarly paid out to Americans nationwide. Since the central planning goes no further than that, it allows individuals to operate as market actors in their purchases with it. People can buy more consumable goods and develop those sectors. Others can save and invest their check, and multiply it into more dollars. It’s a spending program that has the potential to chase actual value in a market.
Since it’s providing a guarantee of income, it also means that when people fall on hard times or are between jobs, they will be able to meet their basic needs in the interim, but they aren’t deterred from working either. Unlucky people are no longer demeaned to being useless cogs that are inserted and removed against their will. Humanity is added to the equation.
5. It’s Fair to the Common American
Free trade from the 80s and 90s is an example of a change in the economy that technically made the pie bigger, while also causing millions of Americans to get smaller pieces of that pie. It’s a completely counterintuitive (and frankly embarrassing) result for what should have been a win for all Americans. Automation is showing a similar effect on our economy. The bottom line is that all Americans chip in to the success of the Republic. If the norms, rules, regulations, security, and guarantees afforded by the Republic lead to such prosperity, everyone getting a Dividend from that, if only to ensure that it’s a win for all, isn’t out of line.
People obsess too much about whether a social role belongs to private actors in a market or public actors in a government. The reality is that borders are and have always been blurry, and we’ll never have it any other way. A hardline, ideological position simply isn’t a statement on what actually works, what actually meets social goals, and what actually optimizes human well-being. The Dividend allows America to draw on the best in both private and public institutions and promote the General Welfare. This, therefore, shouldn’t be controversial to anyone who wants that. It’s common sense to help the Common American.