To Pay For The Freedom Dividend, Andrew Yang Says Our Mental State Matters To The Math – Forbes

Presidential candidate Andrew Yang fields questions from the audience at a New York City gathering.

As the clock ticks and cameras glare across the stages of the democratic debates like the one held Thursday night in Los Angeles, Andrew Yang and the rest of the presidential contenders know to sacrifice policy proposal details for performative punch lines that might better resonate across Twitter. Yet without the finer explanation, voters must come to conclusions based only on a basic understanding of complex plans that might fundamentally change our country.

Away from debate stages, Mr. Yang has begun an effort to address the problem, connecting with smaller audiences to more deeply discuss his flagship policy proposal for universal basic income (UBI). His version of UBI, which he calls the Freedom Dividend, would give $1,000 a month to every American adult. On a recent Sunday night in a SoHo apartment, Mr. Yang sat casually in the center of the living room answering questions and discussing the details.

The plan, though straightforward in its most basic structure, attracts criticism for its audacity in the context of our free market mentality and the countrys already mounting debt obligations. As U.S. national debt crosses the $23 trillion mark, skeptics particularly question the plans cost, which Mr. Yang acknowledges could exceed $2.8 trillion in the first year of its implementation.

While Mr. Yang has struggled to widely project his responses to criticisms partially thanks to the lack of speaking time hes had in front of national debate stage cameras, his argument in defense of the plan also consists of historical context, economic theory and even biological thinking that feels best fitted for a TED Talks stage. With these kinds of mini, TED-like gatherings, it seems Mr. Yang is hoping that people who think about the plan more deeply might have more impassioned conversations that make their way to Mondays water coolers and beyond.

With the room to discuss the dividends more nuanced details, Mr. Yang framed the costs and effects in ways even some loyalist attendees may not have heard. But first, and true to the point of his MATH button adorning his blue blazer lapel, Mr. Yang spent much of the early part of the evening making the room think about the numbers, citing specific, dollar-for-dollar revenues that he argued would offset the dividends costs, including the institution of a 10% value-added tax (VAT).

Still, some economists, though not present at the event, have consistently argued that Mr. Yangs math doesnt add up. Andy Laperriere, head of policy research at market research and investment firm Cornerstone Macro, suggests that while the dividend could theoretically provide some benefit to the broad economy given the risks facing the labor market amid exponential automation, the plan couldnt gain its footing because of its sheer cost of implementation.

Theres a basic logic problem here thats hard to overcome given UBI requires such an enormous amount of money, Mr. Laperriere says. Even if you accept as fact that were spending $1 trillion on things like health care and homelessness and that we could recoup $1 trillion from the VAT, that still doesnt come close to raising the money.

Economists like Mr. Laperriere also often raise the issue of a VAT diminishing the intended benefit of the UBI, since consumers would effectively need to use those new dollars to pay that new cost of consumption. Since a VAT taxes the production of goods and services, companies could subsequently increase the price of those goods and services, thereby at least partially passing the tax on to the consumer.

To some extent, paying for UBI with a VAT just means were putting money in one pocket that comes out of the other, Mr. Laperriere said. And if youre exempting some consumer staples from tax, then the tax would just have to be higher elsewhere.

At the event, Mr. Yang acknowledged the possibility of companies passing along the tax, but argued that the extra costs would not come close to canceling out the UBI. Mr. Yang and others also pointed to the more indirect ways in which UBI could pay for itself by eliminating other government costs. Congressional candidates Chivona Renee Newsome and James Felton Keith both argued that while means-based benefit programs like welfare emphasize the neediness of Americans, UBI instead reflects inherent deservedness, which sheds stigma and can convert government dependency into personal motivation.

Its not a handout and everyone gets it, Ms. Newsome said. That takes the shame out of poverty.

That paradigm shift, along with the fact that recipients cant stack UBI on top of existing benefits, could theoretically pull people away from current welfare programs that cost roughly $550 billion annually.

Beyond these secondary revenue sources, Mr. Yang explored the intangible effects on families that he believes best support the cost of the plan, suggesting that Americans happiness and overall mindset matter most to the economic outcome. In fact, Mr. Yang explained the Freedom Dividend found its name not just from polling well for its flag-waving charm, but for what the dividend is actually intended to provide: A sense of freedom from the burden of financial hardship. This more nuanced thinking about the interconnectedness of mental health and personal finances seemed revelatory even to some of the more obvious supporters in the audience.

Our human mind is programmed for scarcity, Mr. Yang said. While Americans are the unhappiest theyve ever been, creating a sense of abundance can create secondary effects that economists overlook when considering how to pay for the policy.

With 40% of American families unable to cover a $400 unexpected expense, Mr. Yang suggested such financial pressure can hurt close personal relationships and breed decisions that drive families deeper into distress, issues that contribute to happiness in the U.S. reaching its lowest level ever. This breathing room from financial burden and a sense of basic financial security allows families a better opportunity to reduce anxiety and increase happiness, which in turn yields better financial decisions, and so on in a virtuous cycle.

Something like the freedom dividend can be profound to the lived experience, Mr. Yang said.

While economic theory suggests supplemental income could incentivize some to work less, Mr. Yang believes the sense of relief among most families would inevitably benefit the broader economy. As people feel more secure and optimistic of the future, theyre more likely to consume appropriately and to find better-matched jobs, an important factor to productivity that economists and other candidates federal jobs guarantee plan overlook.

There is something to that part of the argument, Mr. Laperriere says. When I graduated college and I wanted to work on Capitol Hill where I knew Id make no money, I went home to work at a restaurant first. With the safety net of some money in my pocket, I was more willing and equipped to take the risk.

While its clear some economists and Mr. Yang might disagree on the math when it comes to budgetary building blocks like the VAT, the detailed thinking around UBIs more theoretical benefits seemed to strike a chord with attendees who left with enthusiasm to continue the conversation.

As Mr. Yang continues along the campaign trail, voters will need to decide whether theyre willing to take the expensive leap of faith toward a solution that might improve Americans mental health, families financial well-being and our economy amid technological disruption. And whether or not Mr. Yang can convince enough of the electorate, he seems willing to not only explore the math, but the details beyond the numbers that might matter most.

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To Pay For The Freedom Dividend, Andrew Yang Says Our Mental State Matters To The Math - Forbes

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