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 citizen 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 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 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. Those incentives 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. (Social Security benefits are untouched because that is earned income. Veteran’s Disability is untouched because we the people are repaying veterans for the cost they paid to protect our lives (this could also be seen as earned income).) 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 citizen.

 

That sounds like a lot.

Yes, it does. I don’t pretend that this fight will be easy or 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 stimulus checks during a respiratory pandemic is not the same as sustainably paying for the Freedom Dividend.

During 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 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 still apply to everything else to some degree.

 

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 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.

A VAT is a transactional tax on every purchase, 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 when 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 far more than the combined net worth of the 400 richest American individuals. 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 and diapers 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 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: universal 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 populous. 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.

 

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 is threatening to “steal” your job (if it hasn’t already) is supposed to make our lives better, not worse. The Freedom Dividend is the first step toward changing the 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 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 directly addressing 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 succumbing 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 potential 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 a 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 do.

I have more questions.

And I have more answers. Over time, I will add more to this site about the benefits of the Freedom Dividend as well as more about its mechanics such as preventing rent spikes, protecting your dividend, and value-add thresholds in supply chain management. For now, if you have specific questions, reach out to me directly or through social media under the Connect tab. Be sure to check back on this page for more info as time moves on.

*I want to be clear 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 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%.

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