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Andrew Yang, dubbed a “random, opinionated person” by The Washington Post, has made waves on both sides of the political aisle with his 2020 presidential campaign. Running as a Democrat, Yang has appeared in interviews with hosts such as Joe Rogan, Sam Harris, and Dave Rubin, all of who are popular in conservative circles. He has been refreshing to political discourse with his detailed and quirky proposal and believes that the American economy is in the midst of a seismic shift, mainly due to rampant automation. To counter the loss of jobs, he has pushed for a $1,000-a-month, universal basic income scheme that would help citizens adjust to technologically evolving industries. But do his economic plans hold merit?
Giving every citizen above the age of 18 $12,000 a year would cost the government around $2.8 trillion. To fund this massive bill, Yang has suggested a 10 percent Value Added Tax on all transactions, at every level of production. This supposedly puts pressure on Silicon Valley companies like Amazon and Google, who are known to avoid taxes. The VAT is expected to generate around $800 million a year, with additional income over time since Yang has claimed that the VAT will help the US economy grow by around 13 percent.
However, a value-added tax will just make businesses pass the cost onto their customers. Costs will rise, and consumers–not companies–will be the most impacted by the tax. Yang’s claim that the tax will help growth reach 13 percent is also exaggerated, and reports show that the actual number is somewhere half that. In a recent interview, Yang has admitted to the regressive nature of the VAT, but stated in an interview that he is optimistic that the progressiveness of the UBI can tip the scales in his favor.
Yang’s UBI also comes with a catch. To opt into his $12,000 a year scheme, one will have to opt-out of some welfare benefits that the citizen receives if it adds up to over a $1,000 a month. This will reduce the burden on the government to provide these services, generating additional revenue for his UBI scheme.
Keeping aside the enormous improbability that Yang’s math will add up, his economic policies are based on a misguided fear. Yes, automation is swiftly taking over key industries, but simply giving people money is bound to exacerbate dependence on welfare rather than solving the issue. It is also important to note that trading other welfare benefits for $1,000 a month is unlikely to be beneficial to a significant minority of Americans, given that many of them are dependent on social security for their subsistence. The amount isn’t enough, and though Yang expects the money to return into circulation through spending, its unclear how this is beneficial from a long-term perspective. His 10 percent VAT is another contestable policy.
Andrew Yang brings an exciting, albeit unrealistic, solution to the table. While he deserves praise for his creativity, ideas can only be taken so far. His UBI is doubtless well-intentioned, but in all likelihood, it will result in massive deficits for the government with no real return besides a decrease in some welfare costs. Yang’s policies treat technological advance as a threat, but they have consistently resulted in economic benefits and will continue to do so.
Correction: We previously stated that the freedom dividend would reduce social security and disability. This was incorrect and we apologise for the error and have corrected it.