In the wild world of the 2020 Democratic primaries, an obscure economic policy has been brought to the forefront by tech-entrepreneur-turned-presidential-candidate Andrew Yang. Yang is the founder of Venture for America, a non-profit organization that seeks to train young professionals and create jobs in emerging cities. You may have heard of his keystone policy proposal that he calls the “Freedom Dividend.” Under Yang’s proposed program, every American over the age of 18 would receive $1,000 per month from the federal government - with no strings attached.
According to Yang, upcoming economic disruptions caused by wide-scale automation and advancements in artificial intelligence will change (or already have changed) the nature of work. Yang has stated that automation will render human labor unnecessary in many sectors of the economy. In response, Yang has proposed the Freedom Dividend - a program to offset the massive economic impact that automation will have on human workers.
Though Yang’s proposal is seen as radical by many, it’s really just a form of Universal Basic Income (UBI, for short) - “a periodic cash allowance given to all citizens.” Yang’s Freedom Dividend may seem brand new in the mainstream discourse, but the concept of UBI itself is not a new one. Throughout its long history in the United States, UBI has been discussed and even supported by advocates with many different political ideologies.
An early advocate for the creation of a UBI was American Founding Father Thomas Paine. Paine, famous for his literary works encouraging the American Revolution, described what he saw as the need for a “Universal Guaranteed Income” as early as 1797 in his pamphlet Agrarian Justice. In the pamphlet, Paine laid out an early example of a UBI that served as reparations for families who could not claim private property in early America. He structured it in the form of a one-time payout of fifteen pounds sterling when a person reached the age of 21. To pay for this guaranteed income, Paine advocated for the establishment of a “National Fund” financed by an inheritance tax on land transfers. In addition to the one-time payout, the National Fund would also pay for a proposed public pension that gave ten pounds sterling per year to those over the age of 50.
Though Universal Basic Income is now seen as a far-left proposal, the idea has actually garnered support from noted conservative economists - most famously Milton Friedman. In his 1962 book Capitalism and Freedom, Friedman wrote about the concept of a “Negative Income Tax.” Friedman saw a Negative Income Tax as a way to replace existing welfare programs with direct cash transfers.
Friedman’s concept would distribute money to Americans based on income, and was briefly considered for inclusion in President Johnson’s War on Poverty. In 1965, the New York Times published a piece about the Director of the Office of Economic Opportunity’s support for Friedman’s proposal. Though this program was never implemented in the way Friedman advocated for, a very similar form of poverty assistance has since been created in the form of the Earned Income Tax Credit (EITC).
The EITC tackles poverty by providing a tax credit to the working poor. This program, like a Negative Income Tax, allows those in poverty to gain an additional source of income. According to the Center on Budget and Policy Priorities, the EITC lifted about 5.7 million people out of poverty in 2017, 3 million of them being children.
Technically, a Universal Basic Income as proposed by Friedman or Paine has never been established on a nationwide scale. However, the United States is actually home to a unique form of statewide UBI known as the Alaska Permanent Fund Dividend. Following the discovery of large oil reservoirs and the accompanying massive growth in state revenue, the Alaskan state government established the Alaska Permanent Fund - in which the government set aside a percentage of revenue from the drilling of land for oil.
Three years after the creation of the Permanent Fund, the state legislature established the Alaska Permanent Fund Corporation to manage the fund along with the Alaska Permanent Fund Dividend. According to the state’s Department of Revenue, these dividends are distributed as checks to Alaskan residents who qualify based on the length of their residence, their desire to stay in Alaska, and other factors. In 2018, the Permanent Fund Dividend paid out $1,600 each to 639,247 qualified residents!
Surprised to learn that UBI has been a talking point in United States politics for so long? Well, with Andrew Yang bringing the policy into the mainstream in 2019, it can only be expected that the concept of UBI will be scrutinized and debated even more intensely over the months to come.
Several Democratic candidates have criticized the merits of UBI, ranging from former Vice President Joe Biden writing “I believe there is a better way forward,” to Senator Elizabeth Warren saying “I think there’s so much more that we should do before we get there.” Other candidates have proposed similar alternatives to UBI, such as Senator Kamala Harris’s LIFT the Middle Class Act which provides tax credits to working families. With such robust debates surrounding Yang’s proposal, the future of UBI in the United States remains to be seen, but the history of the policy is a long and bipartisan one.