Political observers have consistently dismissed Andrew Yang’s chances of securing the Democratic nomination, and I’ve agreed with their assessment. Yang also agrees–he has terminated his campaign.
Policy folks and political pundits alike have also dismissed his signature proposal–a UBI, or Universal Basic Income. I don’t agree–and neither does the Brookings Institution.
Now, don’t get me wrong–no one who isn’t imbibing very strong drink thinks American lawmakers are likely to pass, or even consider, a UBI any time soon. But as I argued in my most recent book, Living Together, there is a high probability that millions of jobs will be lost to automation within the next 15-20 years–presenting a challenge America’s current inadequate and bureaucratic social safety net is clearly unable to meet.
In my book, I laid out a number of reasons how–despite Americans’ deep cultural disdain for social welfare programs–a UBI would be both efficient and socially unifying. I also took a stab at explaining how we could pay for it. Nevertheless, some of the sources I identified would require ending fossil fuel and other subsidies and curtailing military expenditures–measures we should take in any event, but that would obviously be politically difficult.
So I was excited to come across an analysis by William Gale of the Brookings Institution that not only made a persuasive case for a UBI, but for his preferred mechanism to pay for it. Here’s the lede:
The Congressional Budget Office just projected a series of $1 trillion budget deficits—as far as the eye can see. Narrowing that deficit will require not only spending reductions and economic growth but also new taxes. One solution that I’ve laid out in a new Hamilton Project paper, “Raising Revenue with a Progressive Value-Added Tax,” is a 10 percent Value-Added Tax (VAT) combined with a universal basic income (UBI)—effectively a cash payment to every US household.
The plan would raise substantial net revenue, be very progressive, and be as conducive to economic growth as any other new tax. The VAT would complement, not replace, any new direct taxes on affluent households, such as a wealth tax or capital gains reforms.
A VAT is a national consumption tax—like a retail sales tax but collected in small bits at each stage of production. It raises a lot of revenue without distorting economic choices like saving, investment, or the organizational form of businesses. And it can be easier to administer than retail sales taxes.
Gale’s UBI proposal is similar to–but smaller than–Andrew Yang’s. The linked article gives the details of how the VAT that paid for it would be structured, and readers with a background in economics are encouraged to read and analyze those details.
The article also explains several of the virtues of the proposed combination of a VAT and a UBI.
The Tax Policy Center estimates that the VAT in conjunction with a UBI would be extremely progressive. It would increase after-tax income of the lowest-income 20 percent of households by 17 percent. The tax burden for middle-income people would be unchanged while incomes of the top 1 percent of households would fall by 5.5 percent.
It may seem counter-intuitive, but the VAT functions as a 10 percent tax on existing wealth because future consumption can be financed only with existing wealth or future wages. Unlike a tax imposed on accumulated assets, the VAT’s implicit wealth tax is very difficult to avoid or evade and does not require the valuation of assets.
Liberals have typically viewed VATs as regressive, but Gale points out that they can be quite progressive when combined with the UBI. He also notes that conservatives should support a VAT because the evidence suggests that VATs almost never increase overall government spending.
Assuming that Gale’s numbers are sound, a VAT would generate more than enough money to pay for a UBI.
Granted, under a UBI, all those caseworkers and number crunchers hired by government to decide who is worthy of support and who is not would lose their jobs. But they would have a UBI, so they wouldn’t starve…
i would watch how wall street manipulates the numbers,and or, reign terror by simply having a ression to show its unfavorable thoughts to such a plan.UBI!im all for it,as would many like myself who grew up hands on and working on the items most in suits see disgusting.im watching trumps state of the union,and the fuel prices dropped,when usually, the refineries are gearing down for yearly maintenance. watch the numbers? ive seen where trumps election boosted the numbers immediatly,in jan 2016/ and a few months later..this isnt a plan,consprracy,etc, its what they can do when it doesnt go,or against,their way,.. i spent a few hours yeaterday looking over some u tube music,, seems the investment industry,likes to cut the vid in half and shove its ad in the middle of a song… no regard for manners, just drop in and tell you how lucky you are to have us managing ,,,your money,,,not mine… then the rest was bloomburg ads,, telling me how lucky i am to have a billion air,, who stole the wages of the working class,for himeself and his buddies,to beocome millionaires,billionaires,and left the guy who does the work scraping by. pelosi is supporting him…so much for a leadership.. as i read european news,seems this subject is already in plan,and implemented to some degree. its not welfare when,your right to work,job,seat taken,or?, doesnt exist..id be all in on the seventies idea of ZPG, zero,population growth, not as china did, but can we foresee a future where we actully respect what,this earth,and the economy to provide,in harmony? we are here to provide thought,opinions,ideas,and plan respectivly,,we see how the rich are,and what they have left us.lets not be blind,none of this will ever be done in a few years,more probably decades,but, implement something,and bring the masses to a public forum,no news,no debates…public meetings where we,actully face to face, start to make the world, a better place…bake some cookies,shake a hand, have a discussion,share the ideas.
For any of these progressive policies to be put into place this country would first have to undergo a massive change in its attitudes towards money, the acquisition of it, and each citizen’s responsibility towards society and the environment. I do not see that happening in my lifetime what with nearly half of the population supporting unbridled greed, racial discrimination, and the destruction of the Constitution with or without the likes of Donald Trump*.
As for Bloomberg, jack smith, IMO he is none other than Trump with manners and a certain level of self control.
The self-checkout stands in more and more stores are doing away with cashiers. Shopping at my local Kroger last Wednesday there were two cashiers working instead of the usual one open line with customers lined back into between the food aisles. Most of the self-checkout stands were dark. I have told workers trying to lead me to a self-checkout line that I write checks and I do not want to put a cashier out of work. The fact that cashiers at Kroger now require I produce photo ID to cash my checks means they are protecting me so I don’t mind.
Businesses and banks are trying to push everyone to automatic payment deductions from bank accounts which is another form of automation putting people out of work. There is no consideration for the majority of millions of Americans whose bank account balances are low enough that bill paying is done by juggling due-dates on bills to prevent overdrawn accounts and fees charged by businesses and and banks which further depletes low-income bank account balances. The Chase bank in my neighborhood shut down months ago claiming not enough customers to warrant keeping it open. This is a low to middle-income area; banking in person to withdraw cash, transfer or deposit money is done in person. These are Americans trying to stay off of social welfare programs and keep bills paid on time using their available income. We don’t all want to bank on line or use phones to manage our lives and the majority of Americans do not live on an income high enough to be controlled by banks and those we do business with; such as utilities which are necessities. Their only interest is higher and higher profits to be paid to CEOs due to fewer employees to pay; interest in corporations and businesses serving the public has gotten lost to greed and avarice.
Theresa Bowers; KUDOS! The more information that comes out about Bloomberg the more he appears to be exactly what you observed, “Trump with manners and a certain level of self control.” His racist views obviously go much deeper than he admits and his sexism is questionable having a long-time partner rather than the respect to accept her as his wife. His lavish spending habits on his campaign, which is based on his highly questionable changing party affiliations impresses those who ignore his political history. He became a Republican to run for Mayor of New York City; during his 3 terms as Mayor he switched to an Independent and barely over one year ago became a Democrat to run for president…against Trump. He is one of the rich with low or non-existent taxes to pay. He also trusted and hired Steve Goldsmith to serve as his Deputy Mayor which blew up in his face due to his arrest for wife abuse, incompetence and lies. We do not need another billionaire to buy the presidency.
Yes, the most salient point today is the manipulation of money and how the wealthiest are determined to get all of it, one way or another. It’s the worst-case scenario that Karl Marx envisioned for capitalism (Sorry, but he had THAT part of human nature figured out.). Capitalists abhor taxes, controls and anything resembling wage equity in addition to not minding throwing those that made them rich under the bus. It’s like the scorpion begging for a ride across the river, then, halfway across, it stings the coyote. “The did you do that?”, the coyote asks. “It’s in my nature.”, answers the coyote.
In WW II the highest tax bracket was over 90%. When Eisenhower became President, he ran on cutting taxes. His whopping tax cut reduced the top level to around 75%. Everyone was thrilled. We built the Interstate system, everyone bought a new care, the middle class boomed. Corporations grew faster than during the war and made pots of money. So, why, over 325 million Americans and 50 million of those living in poverty/homeless/illness, is it so tough for the rich to accept paying maybe 40% in wealth tax? Why would they bitch about having their Bahamian tax shelters eliminated? They are American patriots who care about the overall well-being of the nation aren’t they?
Sorry about the sarcasm. I know all too well that our culture worships money and not the betterment of our citizens. I know that power is more important than being agile enough to save the planet from our excesses, waste and stupidity. I’m glad I’m old.
Yes, the UBI should have been entertained in unison with our push toward globalization since our higher paying jobs took off for countries where labor costs were low coupled with almost no environmental regulations. And, as Sheila points out, the Fourth Industrial Revolution and automation will eliminate millions of jobs. This has already started.
Instead, we swapped out high paying jobs for low paying ones, mainly in the service industry. It’s why median wages haven’t gone up since the early 90s for a large chunk of Americans households while education and healthcare have grown three-fold. All the productivity gains have gone to Wall Street and CEOs.
Neoliberalism crushed the American Dream. When students who graduate with degrees and thousands in loans can only find employment in the retail and food sectors, we are going to have an uprising.
I know UBI has been done on a small scale in several communities. It would be interesting to read early studies of their successes/failures.
Also, the primary problem is the political will to get UBI passed — any progressive policies which go against the Oligarchs and their politicians will be difficult to pass in Congress. Once again, the Oligarchs are being warned in Davos about the civil unrest across the globe as a result of their greed, but they are slow to respond and their media mouthpieces, even slower.
What we will most likely see in the short term, is precisely what Trump has proposed in his budget, is cutting Social Security, Medicare, and Medicaid. The Democratic National Party seems offended by the proposal, but if you trust the party of Wall Street and the MIC to do the right thing for the people on Main Street…good luck with that!
Forgive my skepticism, but wouldn’t the poor also pay the VAT? Yang wanted to give everybody $1,000.00 per month. How did he come up with that number? It won’t pay the rent in most cities. It would pay for food, but less food, if there’s also a VAT to pay. What would be exempted from the VAT? Would the VAT replace all existing taxes, including FICA and Medicare?
I don’t have data handy, but anecdotally in my lifetime I have seen automation replace jobs, but at the same time it has created new jobs. Even now, long after the IT revolution began, we have thousands of jobs going unfilled because we don’t have the skills to fill them. What we need are more and better training programs. Pay people to learn the needed skills, and while we’re at it, we also need to eliminate barriers, such as lack of adequate transportation and childcare.
I have visited several value added tax countries and yes, its administration is far easier than, for instance, the wealth tax proposed by Warren, which I favor. I consider the UBI to be a bone thrown to the peasants to keep the pitchforks out of the street but am in favor of helping the poor in general. The question is how. One of my concerns is pricing. If at each level of commerce a VAT is added and prices are adjusted upwards to pay for this new mechanism to enhance revenues and the costs to automated production are deductible from producers’ income to the state, then how are the poor helped, even with a UBI to keep them in a docile state?
I am holding out for a specific target to enhance badly needed revenues to government, like a UBI AND the wealth tax (both adjustable as automation ravages our social contract) proposed by Warren. Piketty and Stiglitz favor a wealth tax, though Piketty writes that it would be difficult to enforce unless universal what with easy movement of capital across international borders. (Warren claims to have solved that and other such problems in her proposal.)
Thus I agree with Sheila in principle and suggest that once we rid ourselves of Trumpites who are only interested in sacking the countries’ resources rather than governing that we address this important issue of distribution of the wealth and income to all Americans in an era where the drumbeat of automation leaves us with no choice. As I often write elsewhere in re the Protestant ethic of no work – no food, if you think lazy recipients of welfare are bad now, just wait until automation renders nearly all currently held jobs obsolete. As a result, Locke’s social contract is in for some serious updating, and I’m not sure that mindsets of such as those of Graham and McConnell are up to the task.
This is a bit of 1,2,3. (1) All “universal” taxes like VAT and gas taxes hurt the poor the most. DUH (2) You will never convince folks that handing out a bit of money is anything more than than “let them eat cake”, especially when rich folks get it equally (3) Many, many surveys suggest that most people believe taxes should be progressive with the rich paying proportionately more – they used to and few (except the rich) complained. So….
A better idea? Close all the “loopholes” that the rich ONLY use and put back “luxury” taxes on the things only they buy. They can afford both.
I definitely need to get your book and read it. Sounds like you have a lot of great ideas. I know a lot of people are really upset that you ain’t got out of the race
People are upset that Andrew Yang got out of the race.
One of the things that seems fundamental to liberalism is that it has no aversion to wealth. What it is adverse to is connecting wealth to power, to government. Of course there are the wealthy who see their wealth as entitling them to power and they are the enemy of libralism, of freedom, of democracy.
Another mental stumbling block is that liberalism is averse to capitalism. Of course that’s not true either. Libralism has always supported the mixed economy which is the only survivor of the 19th and 20th century experiments in economic alternatives to it. What liberalism, freedom, democracy see as necessary is regulated capitalism with the focus on requiring robust competition; representing all stake holders in the economy like workers, consumers, supply chain partners, investors, government, and perhaps now most importantly the environment that all humans exist immersed in; and progressive taxation to redistribute some of the wealth that capitalism redistributes only up back to those who create all wealth, workers.
There are lots of details that need to be important policy considerations about how to maintain the liberal democracy that is the birthright of all Americans and it’s these details that are the topic of most of the policy discussions among Democrats but by almost no Republicans who spend their time blaming Democrats for being against wealth and capitalism.
jack smith: Interesting that you mention zero population growth. That was a concept first discussed in the 1970s by Paul Ehrlich. That concept, which my wife and I acknowledged by having two children – our replacement number, was timely in the 1970s, but I believe it is too late now to have any impact. Biologists and ecologists used the term carrying capacity for the limit that a natural system has to sustain a population. At 7 billion and counting, I believe we are far past earth’s carrying capacity which has resulted in increased demand for resources, created more waste and carbon emissions, strained water resources and contributed to climate impacts. We are still paralyzed by discussions about birth control and abortion while we reproduce ourselves and everything else into extinction.
UBI will be decades coming – if at all. Taxes will continue to help those who least need help. There is no political will for change on the scale that is required. We think and speak in the abstract while we witness the effects of our inaction on the nightly news.
Good survey, Pete. I have always said that I have no objection to rich people – so long as they take us along for the ride. The problem is not wealth; we have lots of it. The problem is in its distribution. What to do? Elect politicians who are not in on the fix and who will support a more equitable distribution of the wealth with a view toward simultaneously eradicating poverty.
Peggy, in referring to training the skilled laborers to fill tech jobs, you say, “Pay people to learn the needed skills, and while we’re at it, we also need to eliminate barriers, such as lack of adequate transportation and childcare.”
My riff on the subject:
There is a barrier. You bet, and it is larger, deeper and wider than transportation or childcare. The great barrier to widespread tech knowledge is the huge BALK against studying–studying anything at all–that millions of “American” individuals brandish like a Congressional Medal of Honor on a generals chest.
Ironically, that BALK is favored by the very population that needs retraining the most. The guy who replaces his lost job with a gig roofing houses or unstopping sewers (supplemented by unemployment and drunken binges) most likely will reject the chance to improve his skills in a job retraining program…even if he’s paid to attend.
One example. Ten years ago an enterprising teacher in Anderson, Indiana invented a funding mechanism for a retraining program for ex-GM laborers, which would, yes, pay them to attend and be entirely financed by grants. Sounds good, right? But not one of the thousands of ex-GM workers showed up for classes.
Why?
Studies have been made. But I like my study best.
In coffee shops, I grill face to gritted teeth the bastards who refuse to attend classes like that. Here’s what I hear.
“You are trying to change my spots. You are trying make me into a higher class dude. How dare you! The last thing I want to be is some hoity-toity; I would throw up every time I look in a mirror. It’s a class thing. It’s the same thing that ruined my marriage–she tried to change me. Even learning to be an electrician or an HVAC makes me contaminate my soul by reading instruction books. I f__king hate to read.”
I look at the dude I’m talking to; I mean, I really look at him.
He’s squinting. they’re squinting. The skin around the eyes is tan. These dudes need glasses but have never acquiesced to getting glasses. No wonder he hates to read, hates to study. For him, for them, reading creates physical pain and likely always has.
So, I grill the bastards on why they don’t get fitted for glasses. Over and over and over again it’s a class thing. Wearing glasses would be an insult to these people’s self-image and to the class to which they believe they belong. When you grow up hating and disrespecting people who wear glasses, the only way you will ever wear glasses yourself is when you learn to be comfortable hating yourself.
On my college baseball team we had a first baseman who struggled at the plate and finished the season batting 168. The next year, he started the season wearing glasses and 20 games in he was batting over 400 and had become the campus hero. Guess what he did. He threw the glasses away and went comfortably back to batting under 200. It was fine: he got back all his buds; who wouldn’t sacrifice a 400 batting average for a few beer drinking friends? The next year, he dropped out of college and joined the army, where he refused training programs and accepted being a grunt in a recon platoon. Eight years later, he died in Vietnam. Just like that, America solved a problem–it felt a duty to find a job or a life for ONE LESS person.
Dying off of those who refuse to prepare is the only way we’re going to get rid of the problem. Progress always puts these sort of people in the ditch. You may help them out of the ditch, but ever-onward progress will put them in the ditch again and again.
Maybe a Universal Basic Income is the answer, a kind of permanent bandage for a wound that will never heal.
A considerat.ion, when people only visit countries with VAT taxes on goods, and perhaps services, they are able to get a refund when they depart that country. How will we keep the ultra wealthy from claiming citizenship in another country?
Perhaps they already are buying citizenship in other countries as they “rape and pillage” the resources left in The United States.
People with less resources often have more adaptability to discomfort void of luxury. As the middle class of our country continues to shrink even more, those of us transiting to less resources and accommodations may be able to learn how to “do with less” thus joining others already there. And like the Phoenix, perhaps we can then all “rise out of the ashes” together.,..especially with minds like Sheila, Gerald, and Pete , to name just a few, to guide us to sustainability. Or we will starve and fall into history.