Universal Basic Income (UBI) Explained with Venmo.
Andrew Yang wanted to give a $1,000/month to every American adult. It was called a “Freedom Dividend.”
So where would the money have come from?
Here’s the story of one Freedom Dividend told with smart animals (and robots) Venmo-style. There are 47 payments to America¹ shown in blue. That’s where the money comes from and it adds up to $1,000 — exactly matching the cost of the Freedom Dividend.
The journey begins on January 1st. You receive a $1,000 Freedom Dividend and use the money to pay for a furnace repair:
This sets off a chain reaction and here’s what happens next:
In just nine days the Freedom Dividend is already 75% repaid. Suppliers, manufacturers, distributors, retailers and end consumers are chipping in.
How will automation and artificial intelligence affect UBI economics? Let’s find out and have robots start contributing — on January 13th, self-driving Robot Truck collects tax revenue for hauling office furniture to Painsdale.
Eighteen days later the Freedom Dividend is 94% paid back. Artisans find new ways to generate income. Bear pays Pig for artisan terrarium accessories.
As the economy becomes more automated, interesting things start to happen. More robots get into the act. For the first time, robots collect tax revenue from other robots and it all goes to fund the Freedom Dividend. On January 20th, Robo-Editor buys processing and storage services from Robo-Cloud Computer and collects tax revenue to help pay for the Freedom Dividend.
On January 21st, Raccoon receives a data check from Robo-Cloud Computer in exchange for some shopping history. This is a new type of transaction that helps fund the Freedom Dividend.
Raccoon uses the money to help pay back the freedom dividend and pay for notarized documents.
With a few days left in the month, the Freedom Dividend is 99% repaid. On January 30th, Tiger provides healthcare services tax-free, but the math still works — tax-free healthcare does not affect the Freedom Dividend repayment percentage. Also Finally, in a random act of kindness, $9 is donated to the U.S. Bureau Fiscal Service bringing the repayment level to 100%.
In one month, the Freedom Dividend generated almost $10,000 in new economic activity and completely paid itself back.
So what’s the catch? Only this: leaks.
Leaks allow money to escape before the Freedom Dividend is completely paid back. Leaks happens when bits of the Freedom Dividend are used to repay debt, increase savings, buy imports, and fill sock drawers.
The way to stop leaks is to reduce consumer debt, set reasonable savings, balance trade (imports = exports), and keep money from accumulating in sock drawers.
When there are no leaks, the Freedom Dividend will completely pay itself back.
Here’s another question: what’s the use of getting $1,000 but then paying a 10% tax on many transactions? Are you actually “getting” anything?
Yes. Without the Freedom Dividend, this story would have ended without: a working furnace, a rented lake house, completed fish hatchery legal work, a guided mountain hike, heatpump flow rate tested, snow removal, a rented lift truck, a working compressor, a SCUBA dive, fixed kitchen tile, a safe boiler, a fishing trip, a skydive, application programming, explained math homework, an RV trip, proofread documents, a rented tuxedo, moved office furniture, roadside assistance, refinished bathtub, expertly mixed drinks, a working faucet, a working snowmobile chain, a canoe trip, mysteries investigated, parachute safety, a thriving terrarium, chopped firewood, a robo-proofread manuscript, robo-cloud processing and storage, payment for personal shopping history, documents notarized, a clean car, a working circuit breaker, a great sounding trombone, a waterproof tent, flowing well water, skis with sharp edges, de-iced door locks, sharp tools, a replaced button, a blood pressure check, a repaired camp stove gasket, a practice quiz, and a guitar string fixed.
This is the story of just one Freedom Dividend. Andrew Yang was asking voters to contemplate the impact of 250 million Freedom Dividends distributed to American adults — every month.
(Article updated on 11/22/2019)
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¹ Payments to America is a value added tax (VAT). To keep the infographic a manageable size, the last transaction is a nine dollar payment to the U.S. Bureau of Fiscal Service.
Sources:
Hoynes, Hilary, and Jesse Rothstein. “Universal basic income in the United States and advanced countries.” Annual Review of Economics 11 (2019): 929–958.
Alavuotunki, Kaisa, Mika Haapanen, and Jukka Pirttilä. “The effects of the value-added tax on revenue and inequality.” The Journal of Development Studies 55.4 (2019): 490–508.
Choi, David Y., and Jae Hyeung Kang. “Net Job Creation in an Increasingly Autonomous Economy: The Challenge of a Generation.” Journal of Management Inquiry 28.3 (2019): 300–305.
McGaughey, Ewan. “Will robots automate your job away? Full employment, basic income, and economic democracy.” Centre for Business Research, University of Cambridge, Working Paper 496 (2018).
Sumberg, Theodore A. “Leakage Problems in Flexible Taxation.” Journal of Political Economy 55.6 (1947): 572–575.
Shinohara, Miyohei. “The Multiplier and the Marginal Propensity to Import.” The American Economic Review (1957): 608–624.
tax.thomsonreuters.com/blog/what-is-the-difference-between-sales-tax-and-vat/
Illustrations by Bonezboyz (Shutterstock)
