Freedom Dividend

Adapted from Andrew Yang’s famous Universal Basic Income platform policy, I’m taking a post-COVID-19 approach updated for a country that experienced ten years of change in ten months.

 

What is a Universal Basic Income?

A Universal Basic Income is one of several different terms referring to a program to get cash into the hands of regular people to cover their basic needs. Most commonly, this comes in the form of a check for a set amount of money sent out monthly to every resident unconditionally.

 

Unconditionally?

One of the main problems with our current social welfare programs is that they are conditional. For those Americans who are dependent on these programs, the threat of losing that support is more rightly considered the threat of death. In this country, we all need money to survive (unfortunately). Rent always comes due and thousands of homeless Americans die on the streets every year. Any life change that could lead to losing financial support is not an option. This could include positive changes like becoming abled, becoming healthy, getting a job that pays a wage, switching to a job that pays a higher wage, or even getting a promotion or raise. These are things that we all want Americans to do (whether they are ourselves or someone else), but many don’t because the conditions of their livelihood incentivize them to stay stuck in place. Conditions are synonymous with incentives, and when the alternative is death, those incentives are rather strong and cause people to behave strangely. A simplification and streamlining of welfare structures into a single, unconditional basic income erases those incentives and frees Americans to improve their lives without fearing for their lives.

 

Wait, so you want to get rid of our current welfare systems?

No. Those systems will still exist. The Freedom Dividend will be an opt-in program. In order to receive your Freedom Dividend, you must give up all of your other federal government support (Veteran’s Disability, Housing Assistance, Medicaid, state benefits, and Social Security Retirement Benefits, Survivor’s Benefits, and Disability Insurance are exceptions that “stack” with the Freedom Dividend). If you’re currently receiving more than the Freedom Dividend in federal benefits, it might make sense for you to continue with your current support programs, though you may still decide to switch simply for the stability of an unconditional program over juggling the many different complexities of our current federal assistance programs.

 

Okay so how much money am I getting?

I will be fighting for $2000 per month for each adult American.

 

That sounds like a lot.

Yes, it does. I don’t pretend that this fight will be easy or expect that we will get everything we ask for. We have to start the negotiations ready for that reality.

 

I meant it sounds like a lot as in it sounds expensive.

Yes, it is expensive. If you’re thinking “Well, we had those stimulus checks and huge corporate bailouts during the COVID-19 pandemic and it didn’t seem to hurt anything. That means the money is there.”, let me slow down your thought process and explain why paying for a few stimulus checks during a respiratory pandemic is not the same as sustainably paying for the Freedom Dividend.

During the beginning of the pandemic, we entered a deflation spiral, which is kind of like the opposite of hyperinflation. Instead of everyone having too much money, nobody had any. Prices started plummeting as suppliers couldn’t sell their products because no one was working for wages or buying anything. Some argue this isn’t true because grocery prices only fluctuated minimally throughout most of the country, but grocery stores were some of the only businesses that remained open and operating. Sure, inflation is often tied to the prices of staple goods, but the concept of inflation and deflation can apply unevenly throughout the economy. (Interestingly, a period of uneven deflation was followed by a period of uneven inflation about a year into the pandemic. Because corporations were bailed out instead of the people (in addition to some supply chain madness), there was a major imbalance in who did and who did not have money to spend, contributing to some strange inflationary patterns that affected some, but not all, markets.)

 

Get on with it.

Normally, inventing trillions of dollars out of thin air and injecting it all into the economy at once would cause hyperinflation, but during a deflation spiral, it actually helps to keep the economy afloat and balanced. In fact, we could still use (and need) trillions more in direct cash relief (not corporate bailouts) right now and we still wouldn’t see material inflation.

All of this changes once the economy is back to normal*. For a perpetual program this large, a proper funding mechanism needs to be crafted.

 

So then how do we pay for it?

It starts with a Value-Added Tax (VAT). Over 150 nations have implemented a VAT. And it works.

The VAT I’m proposing is a transactional tax on nearly all consumption at the point of sale, much like the sales tax found in most US states. But here’s something you might not have realized: most business-to-business transactions are not subject to sales tax. So the central warehouse that buys cases of burger patties from the meat processing plant doesn’t pay a sales tax. The corporate chain restaurant that buys those patties from the warehouse doesn’t pay a sales tax. But when you get the bill at the end of your meal when you’re done eating your burger, what do you see tacked onto the bottom? A sales tax. Why do everyday consumers like you and me have to pay all these extra taxes while trillion-dollar tech companies like Amazon pay zero dollars and zero cents?

 

Yeah, there’s something wrong with Amazon not paying taxes.

And that’s where the money is, by the way. The combined market cap of the 2 largest American corporations is more than the combined net worth of all 724 American billionaires. I have nothing against wealth taxes, but in practice, wealth taxes do not work. VATs do.

 

How much is this VAT?

So if we take a look at our European brethren, they run, on average, a VAT of around 20%. Now I know that feels high, but remember, you’re bringing in an extra $2000 dollars per month. And we can graduate this VAT. We’ll exempt staple goods like groceries, diapers, and second-hand clothing completely. And then we’ll crank it up on luxury goods. If you buy something that costs over $100,000, or $1,000,000, the VAT percentage will increase to 40% or even 60%.

The magic of a VAT is that large corporations can’t wriggle their way out of paying them. So when Facebook and Google sell ad space on your phone screen, or when Amazon tricks you into buying more crap you don’t need, or when the semi-trucks start driving themselves, all of those transactions will be unavoidably taxed at the point of sale and you will get that money back in the form of your Freedom Dividend.

This VAT will generate well over $1,500,000,000,000 in new revenue every year that goes directly to regular Americans like you. And then what are you gonna do with that money? You’ll probably spend it! Sure, some of it will go back to Amazon, but most of it will stay in your communities. More of your neighbors will start small businesses. You’ll be able to afford the membership fee for that sport your kid wants to try. Maybe you’ll leverage it to spend more time pursuing your artistic interests. Or maybe you just want to spend more time at home with your family. Whatever you personally decide to do with your Freedom Dividend, though, the studies are clear: basic incomes increase economic activity, which just cycles more money into the Freedom Dividend program. We’re talking another $1,500,000,000,000 in revenue from increased economic activity every year cycling from your hands into your community and then ultimately right back to you.

 

Is that enough?

Almost. We’ll save well over $500,000,000,000 from the streamlining of welfare systems as discussed earlier. Over $200,000,000,000 will be saved from decreases in spending on healthcare, incarceration, homelessness services, and much more as a result of having a healthier, wealthier populace. Additional funding would be secured through eliminating the Social Security taxable earnings cap, implementing a securities transactions tax**, eliminating subsidies for the fossil fuel industry, ending the favorable tax treatment for carried gains/capital interest**, fully funding the IRS, and eliminating waste in the Department of Defense, primarily by cutting out unnecessary military contractors.

 

Okay so why are we doing this again?

Because we live in the Information Age. The way we view the relationship between work and survival is fundamentally flawed for a wealthy country in the 21st century. We have enough abundance to guarantee the basic needs of every American without having to force everyone to perform labor in a narrowly-defined sub-category of work. I’m not sure that argument could have been made in 1968 (although Dr. Martin Luther King, Jr. did, and I’m inclined to believe him). The automation, robots, and artificial intelligence that are threatening to “steal” your job (if they haven’t already) are supposed to make our lives better, not worse. The Freedom Dividend is the first step toward changing our economic system so that our technological advances improve our lives instead of increasing disparity.

It’s time for us to change the way we think about work. Work should include a much broader range of what we choose to do with our time that adds to society. Raising children, caring for sick or elderly family, volunteering, freelance work, and artistry are just some of the things we do that we don’t call “work” because we don’t pay for it. The Freedom Dividend will help us begin a necessary cultural shift toward valuing all the work we do.

The Freedom Dividend also directly addresses poverty, which is nothing more than a lack of cash. By directly addressing poverty, we would be nearly eliminating the most devastating effect of poverty: scarcity mentality. Scarcity mentality is a psychological state our minds switch into when survival becomes our primary concern. It’s quite jarring to succumb to this when falling into poverty. This happened to me most recently in July 2019.

I vividly remember it suddenly hitting me while riding the bus because I couldn’t afford an Uber while my car was in the shop. The realization that I was losing hours of my day to save a few bucks made me feel like my time, and by proxy my existence, was hardly worth anything. I struggled to think straight and even imagine or plan my life more than a few days in advance. My brain capacity was capped at a much lower level than what I would consider typical. All I could focus on was making it to the end of the bus ride.

I fully recognize that my small bout of poverty during a temporary financial dip in adulthood is nothing compared to the generational poverty many across this country are born into. While I haven’t experienced generational poverty firsthand, I did closely witness it meeting clients in their homes in the most impoverished parts of Detroit, doing mission work in Appalachia, and housing a friend for a few months when I learned he was homeless.

This mental crippling is crushing our society. The potential of countless talented, intelligent, caring, passionate individuals is being severely stunted by an economic system that is focused more on stock prices than the well-being of those we share our communities with. We can change that. And all it takes is writing a few checks — the one thing our government always seems to be able to do.

 
Does it have to be a check?

No. When you opt-in, as early as your 18th birthday, you’ll be able to choose how you receive your Freedom Dividend. The most common methods will likely be direct deposit and physical checks mailed directly to residents’ homes. However, for those who are particularly concerned about the security of their Freedom Dividend, a new option will be created: the Freedom Account.

The Freedom Account is a third type of personal bank account designed specifically to secure one’s Freedom Dividend that will be required for all banks that hold consumer accounts in the US to support (small banks and credit unions will be able to apply for support in updating their systems and will be granted additional time to implement them). The only way money can be deposited into the account is directly through the Freedom Dividend program (save bank errors/fraud) and the only two ways money can be withdrawn is either as cash or by manual direct transfer to another personal account held by the same person with the same bank. And that’s it. Creditors can’t see it. The courts can’t touch it. It’s legally immune to any and all intervention by others save through manipulating you, which can be detected by what will be required training for all bank tellers once this legislation is enacted. If this doesn’t sound appealing to you, then just pick another delivery method. However, the Freedom Dividend is meant to guarantee Americans their right to life, and for some, these extra protections are the only way that can happen.

By design, switching to receiving one’s Freedom Dividend through a Freedom Account will be easy and quick, while switching off will be difficult and time-consuming. The whole point is to protect your Freedom Dividend. In the case of a survivor of domestic abuse, a required three-month wait before switching off of the Freedom Account could give them the opportunity to escape their situation without losing their lifeline — their Freedom Dividend — to their abuser. A lengthy, human-involved process could allow a bank teller or social worker to detect manipulation before funds are lost. If you genuinely want to switch off of the Freedom Account, it’s because you’ve transitioned to a safe, stable, and secure lifestyle, meaning you have the time, motivation, and wherewithal to go through the process.

As a side note, the Freedom Dividend as a whole, including the Freedom Account, should be seen as a positive for banks across the country. It will lead to an increased customer base and banks will be able to loan against funds sitting in Freedom Accounts.

How will my unhoused neighbor receive their Freedom Dividend?

This comes down to partnerships with both municipalities and private organizations who work with folks who don’t have bank accounts or permanent residences. While I support leveraging Post Offices to create a public citizens bank and the creation of an online citizens portal to streamline people’s interactions with government at all levels, that won’t work for everyone. After the initial systems set up required by the new Dividend Administration (still workshopping the name) including the formation of a blockchain-based database for who is and isn’t receiving their Freedom Dividend, that administration will shift its focus to forming partnerships around the country to create safe, secure, streamlined systems for identifying “off-grid” folks and getting them their Freedom Dividend as quickly as possible. Additional provisions will provide funding, incentives, and training for more social workers to assist people with making wise decisions around spending what may be the largest sum of money they’ve had in decades. This is simply a difficult task, but I’d rather give a million Americans a little too much money than allow one not to get their share of the pie.

What if there’s fraud?

There will be. Bet on it. It’s impossible to write around 250,000,000 checks every month and not make a single mistake or not let a single person skate by with an extra check unnoticed. And that’s just fine. In fact, that’s the whole point. It’s cheaper and more efficient to write off those errors and fraud as waste in a system this simple than it is to over-administrate, not just at the bottom line, but at the level of overall societal benefit, too. The beauty of the Freedom Dividend is that it is unconditional and we’re not going to fret about who doesn’t “deserve” it. That being said, there are two more situations worth clarifying details on.

When someone travels out of the country, their Freedom Dividend will be held and build up until they come back, at which time they will receive the cumulative total as a lump sum. Once someone crosses one continuous year out of the country, their Freedom Dividend resets to zero and no longer builds up. When they return, they’ll start new at just one normal check per month as if they just opted in. Could someone leave the country for 11 months out of every year and take their Freedom Dividend with them, thereby undermining the whole system? Yes. Am I worried about it? No, for all the reasons stated above.

When someone is incarcerated, they don’t lose their Dividend, but they do lose the Freedom to choose what to spend it on. Their Dividend is going toward their basic needs while they’re incarcerated. However, they get a check right when they get out, giving them an immediate opportunity to make positive, productive decisions.

For the record, I believe many of our laws are unjust. I see the slippery slope argument that the Freedom Dividend may become an incentive for the government to write laws to incarcerate more people to “take away” their Freedom Dividend. However, this is already our reality. Incarceration already puts people at an extreme economic disadvantage and we currently have legislators intentionally leveraging that fact to oppress millions of Americans. The Freedom Dividend will not appreciably invigorate that, though I find it to be a valid concern when thinking about the future of a government that pays us to follow its laws (even though I believe the Freedom Dividend is an ironic stepping stone to shifting our economy beyond money). That’s why Government Accountability is another pillar of my platform (and likely necessary to make the Freedom Dividend a reality anytime soon). All of my platform pillars work together.

I’ve been biting my tongue. What’s stopping my landlord from taking all of it?

In short, market forces.

Okay, let’s back up. Your concern is valid. Technically we have no way of accurately predicting the macroscopic effects of the Freedom Dividend until basic income is trialed macroscopically (and I mean even bigger than the Kenya trial). However, our knowledge on the topic is not zero. For the sake of argument, let’s consider rent control.

Economists at large don’t agree on much, but one of the few things they have managed to find consensus on is that rent control decreases the quantity and quality of housing. The mechanism behind this is traditional market forces, i.e. competition. If you look at an apartment complex, what’s on the other side of the fence? Typically another apartment complex. If you don’t like the price at one complex, you can just walk 200 feet and check the next one. Yes, housing is less elastic than some other markets, but it’s certainly not inelastic. In large cities, the signing rent price at any particular complex changes every day. With this kind of competition, it only takes one complex to decide to keep its prices down to force every other nearby complex to stay near the same price. Is the rent too damn high? Not really. In reality, your income is too damn low. The Freedom Dividend fixes that.

Will rent prices all stay the same after the sudden onset of the Freedom Dividend? No, of course not. That’s why I would opt to include some conservative vacancy control and vacancy decontrol that gradually sunsets over, say, three years to help cover corner cases where perhaps there’s an isolated apartment complex or an obnoxiously greedy landlord with only one or two properties. This also helps to protect those currently living in cities and loving it from a potential (but not guaranteed) surge in urbanization in the first few years.

I’m still not convinced.

That’s okay. I actually haven’t spent much time telling you all of the benefits of the Freedom Dividend, as there are many. Here’s the thing: I don’t want you to take my word for it. Universal Basic Income is certainly not my idea and I’m certainly not the only person fighting for it. As much as I’d love to keep you on my site reading about policy, all of the major technical points have been covered. If you still don’t see the Freedom Dividend as something worth fighting for by now, then I won’t convince you today on this page. It can take time to come around on Universal Basic Income. Feel free to message me publicly or privately with any questions or comments. I post about Universal Basic Income regularly on my social media and here are some resources you can check out to learn more.

https://basicincometoday.com

https://www.weforum.org/agenda/2017/01/why-we-should-all-have-a-basic-income

https://evonomics.com/universal-basic-income-accelerates-innovation-reducing-fear-failure/

https://econweb.ucsd.edu/~pniehaus/papers/ubi_covid.pdf

https://www.bostonglobe.com/2020/10/17/opinion/just-give-poor-people-money/

https://www.sciencedirect.com/science/article/abs/pii/S1570677X21000216

https://www.reddit.com/r/BasicIncome/wiki/index#wiki_that.27s_all_very_well.2C_but_where.27s_the_evidence.3F

4 posters from a street art project I performed with Income Movement where I ask Austinites what they would do with $2,000.
 

*I want to be clear in what I mean when I say normal. There’s a concept in economics that is rarely talked about called capacity utilization. It’s simply a measure of how much capacity of the economy consumers are utilizing. Put another way, it’s the percentage of stuff available to buy that we’re actually buying. When we’re close to 100% capacity utilization, that means consumers are consuming just about everything there is to sell. This is generally a positive sign for economic health (assuming no material shortages).

The capacity utilization of the US has been on a steady downward trend since we started measuring it in the 1960s, dipping as low as 65% during the beginning of the pandemic. So long as the reason that consumers aren’t spending money is that they don’t have any money (in contrast to being afraid to spend money), printing money and giving it to consumers will not cause inflation until capacity utilization is closer to 100%.

This is actually something I’d like to build into the Freedom Dividend: a Capacity Utilization Clause. If capacity utilization drops below 85%, the VAT is automatically cut in half across the board and the difference is automatically replaced by printing money until capacity utilization is back above 90%, at which point the VAT returns to normal values and the money printing stops. If capacity utilization drops because people become afraid to spend money rather than not having money, Congress should be stepping in and legislating anyway. However, I’m open to discussing leveraging metrics to automatically make that determination before the cut and print triggers rather than relying on Congress. We all experienced what happens when we rely on Congress during a financial emergency.

**The securities transactions tax is in part designed to reduce speculation and high frequency trading specifically. Similarly, the favorable tax treatment of carried gains/capital interest is mostly problematic because of those who abuse it. For these reasons, the first $100,000 of income per individual per year in each of these two categories will be tax exempt. Even if the total amount of money gained through tax revenue in these areas is minimally increased, the reduction of abuse in these markets will help curb our accelerating wealth inequity.

 
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