2020 Presidential hopeful Andrew Yang’s proposal for UBI is rapidly gaining traction amongst Americans, and it’s no surprise as to why. His data driven methodology speaks to the fact-starved thinkers who have been craving adult level conversations around policy. In short, his vision is to institute a monthly “dividend” of $1,000 per month to all American citizens who opt in to receive it. Still, his creative approach falls prey to several traditional impediments to addressing inequality in America.
It’s not enough – Relative benefit v. absolute benefit, inflation, and the expensive aftermath - especially considering the bureaucracy behind the program. $1000 per month is not enough, especially as the market adjusts and inflation takes its toll. Once we have to raise the monthly dividend, how high will it go? There will be the same fight against increasing it as there has been around minimum wage.
Unamerican – it’s involuntary for taxpayers. Even if you do believe the program will reap the universal rewards it promises, somebody is paying for it without their approval. It’s not a zero sum game – for everyone to receive $1000, some people must be paying in significantly more. Marginal taxation is not new, so the response to it is no mystery. People despise paying taxes and will seek creative methods to reduce their tax bill. That will not change.
Inefficient – with no vetting process and a check for everyone, a) some people are getting checks that don’t need it (Yes you can opt out, but why would you? Look at how many wealthy people still get social security. It’s not like they give it away because they don’t need it.) b) once the inefficiency is observed, it will be incredibly difficult for the government to effectively and accurately weed out those who are undeserving of the income supplement. Again, just look at the selectivity of social welfare programs and our thinning middle class.
Solutions – replace government-sanctioned dividend with citizen-supported donations
It’s not enough – so let the market decide. Give the program participants flexibility with respect to donations and recipients, and accountability for the results. With more selective donations, there wouldn’t be as much of an inflationary impact since some people still wouldn’t qualify. The recipients who do pass the vetting process would really benefit, and those who don’t would be motivated to get involved.
Unamerican – so make it voluntary. Critics might think that affluent citizens would opt out or be cheapskates...but now they have accountability over the success of the system. If they opt out or don’t give enough, the consequence will be protests, disgruntled citizens, backlash, and an explanation. While donation amount could be kept private, donors who give heavily would be motivated to share their statistics to garner the approval of the people. (A recent example is Matt Kuchar, who recently won a golf tournament and stiffed his caddie. After public outcry, Kuchar realized the error of this ways, apologized and paid the caddie a more reasonable compensation.) The success of the program would be measured in statistics, which would appeal to wealthy donors to whom demonstrable results are paramount. The program could fail because the money is not used effectively after receipt. Poor investment, hoarding cash, or vice spending could cripple the system and render it ineffective. This evidence would enable wealthy donors to point towards these failures as a rationale against increasing donations, or against the program. The onus falls on both sides of the transaction, and both parties are properly incentivized to see the system succeed.
Inefficient – rather than perpetuating the inefficiency of other methods for addressing poverty and job erosion, a vetting system would ensure that only those who need/deserve the dividend would receive it. Through a data driven approach, this group of qualifying cases would evolve over time as different industries are disrupted by AI, or different demographics become at-risk for economic disparity. Membership in these groups would be automatic based on inherent factors, but continued good standing would be based on lifestyle indicators such as criminal record. This is not to say certain groups would be totally excluded. Instead, the groupings would just enable selectivity on the part of donors, and better data analysis and attribution as the program progresses.
This program would be operated as a for-profit entity, and launched as a direct alternative to a government administered UBI. Based on the several points made above, wealthy donors and prospective recipients, alike, would prefer a private methodology over Yang’s pitch. Once operational, a competitor could be launched that operates more efficiently or effectively than the initial entity. Privacy, user interface, vetting system, administrative fees, transparency, data analysis and ultimate results would all be the independent variables controlled by companies operating in this space. In true, American form – may the best team win!