Andrew Yang’s Basic Income is Stealth Welfare Reform

by Benjamin Studebaker

When I first heard Andrew Yang was running on a UBI platform, I thought he was running to popularise universal basic income as a policy option for the future. It has become increasingly clear, however, that Yang thinks he is a real presidential candidate and that his UBI is for now, not later. The thing is, UBI is traditionally marketed as a post-work policy. The point of UBI has always been to give every citizen a large enough basic income to give them a real choice about whether or not they take a job. This levels the playing field between employers and employees, forcing employers to offer people more substantial inducements to get them to work. But it’s increasingly clear that this is not what his UBI is for. Its purpose is more sinister–it is a vehicle for legitimating benefits cuts for the poorest and most vulnerable people in our society.

How much per year do you need to really have a choice about whether or not you go to work? A functional UBI would need to pay out something roughly equivalent to a living wage. Lately, many Democrats are arguing that $15 per hour constitutes a “living wage”. If we give everyone $15 per hour for an 8 hour day with a 5 day work-week, this works out to somewhere between $29k and $31k per year, depending on whether assume a 48-week year or a 52-week year with some hours of paid leave. There are 247.8 million adults in America, so that works out to a total cost of somewhere between $7.2 and $7.7 trillion. That’s between 37% and 40% of GDP. The cost goes up considerably if we were to extend the UBI to children–it could soar above $10 trillion.

Now, clearly we aren’t yet at a stage where we can afford that. Our level of output simply isn’t high enough, without major economic restructuring. If Yang were proposing the kind of restructuring that would permit this kind of UBI, that would be genuinely transformational, and he would be an interesting person.

That’s not the policy. To make this work, Yang first reduces the UBI to just $1,000 per month. This means that instead of paying out $30k, the UBI pays out just $12k annually to each recipient. Yang excludes children, so this reduces the cost to about $3 trillion. At this payout rate, the UBI is now paying a wage that is far below what many Democrats are now deeming the “living wage”. Yang’s UBI pays less than $6 per hour with a 52-week year. This is lower than the already inadequate federal minimum wage. It cannot realistically liberate significant numbers of people from work, or achieve the objective of dramatically increasing the bargaining power of workers vis-a-vis their employers. This is no longer a post-work policy.

But Yang doesn’t stop there. He not only waters down the total payout, he then proposes to use the UBI to replace extant welfare spending. When you got to Yang’s website, it actually says this:

Andrew proposes funding UBI by consolidating some welfare programs and implementing a Value-Added Tax (VAT) of 10%. Current welfare and social program beneficiaries would be given a choice between their current benefits or $1,000 cash unconditionally – most would prefer cash with no restriction.

Yang is essentially pledging to offer welfare recipients lower lump sums in exchange for surrendering their claim on more lucrative benefit packages. He makes this so obvious:

The means to pay for a Universal Basic Income will come from 4 sources:

1.  Current spending.  We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like.  This reduces the cost of Universal Basic Income because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.

Yang is openly promising not to increase the amount which low income Americans receive, which means these people would not receive any relief from the pressure to seek employment at all. Beyond this, he is pledging to pay for the remaining cost with a VAT–this is a regressive sales tax, which hits poor and low income people disproportionately hard.  That means that low income Americans won’t receive a benefits increase but will be subject to a 10% VAT. Because low income Americans consume virtually all of their income, this proposal renders them net losers. So not only does Yang hope to cut benefits for poor people, he also wants to make them pay for the program with regressive taxes. Combined, these features increase the pressure on poor people to work.

What’s left-wing about manipulating poor people into taking a benefit cut and then subjecting them to new regressive taxes? Yang isn’t proposing any additional progressive taxes which might on any level offset this. It’s just austerity for the poor mixed with regressive taxes. National sales tax is a proposal Gary Johnson and Herman Cain campaigned on. Yang sounds like he belongs in the Republican primary, not the Democratic.

Yang’s UBI is not large enough to be post-work, and it pays for itself by grinding the poor ever further into dust. He’s managed to turn UBI–a legitimately interesting policy which could one day help us create a post-work society–into just another tool for eroding the welfare state and kicking the poor in the face. Rarely have I seen such a scummy sleight of hand by a politician, especially from someone calling himself a Democrat. And the thing is, he doesn’t even have the political skills to be coy about it. It’s right there on his website, for anyone who is curious enough to look for it.

Don’t support him. Tell your friends.