This article is one of a series of summaries of progressive federal policy ideas written by Think policy fellows. Think does not have a position on any of the proposals mentioned in this summary as we are focused on state-level policy, rather we offer these descriptions as helpful tools for candidates and elected officials who may be interested or face questions on these topics.

In America, there are millions of people who have a full-time job but whose income is so low that they fall below the poverty line and struggle to pay for basic necessities.[1] With income inequality increasing, a generation reaching retirement, and the threat of technology eliminating jobs, many politicians see the need for relief and have proposed a universal basic income (UBI). This idea dates back to the 16th century and is discussed in many countries across the globe. 

A universal basic income (UBI) gives every citizen a periodic payment, no strings attached. The amount of money given to each individual varies depending on different plans and goals, but at a minimum, it would be enough to cover basic needs and therefore provide some notion of financial stability. In the United States, a common amount discussed is $1,000 a month. Therefore, a UBI of $12,000 a year per citizen would cost the United States an estimated $3 trillion per year, which is more than ¾ of the 2019 total federal budget.

The only presidential candidate to make universal basic income a core component of their campaign was Andrew Yang. While Elizabeth Warren agreed with the need for financial security and Pete Buttigieg noted that UBI was “worth taking seriously”, other candidates have not embraced this idea. In fact, Joe Biden argued against UBI in a 2017 blog post and Sanders suggested that a better approach to fighting job loss from automation would be “guaranteeing a job in this country to anybody who is prepared to work.” Below are details of Yang's UBI plan.

Freedom Dividend

The Freedom Divided was introduced by then-presidential candidate Andrew Yang in response to studies claiming “one out of three Americans will lose their jobs to new technology in the next twelve years.”[2] Under this plan, citizens over the age of 18 would choose between a basic income (of $1,000 a month) and current, means-tested welfare programs. It was purported to be financed by consolidating some welfare programs and implementing a 10% Value Added Tax (a tax added to a product at each stage of production, something common in many countries).

Supporters of UBI assert that it would:

  • Boost economy: A monthly influx of funds would give more people the means to spend more money, mostly in their local community. Also, research has found that adopting a $12,000 UBI would grow the economy.[3]
  • Reduce poverty: A UBI has the potential to reduce poverty by allocating funds monthly to each citizen, therefore establishing a floor for people to rise from poverty. In the status quo, people experience shame/stigma for being on welfare and endure a convoluted eligibility process for different programs. A Universal Basic Income would be more streamlined and transparent than the status quo by ensuring each individual is guaranteed a basic income.
  • Confront automation: Automation has already eliminated millions of jobs; a UBI could lessen the impact of unemployment and enable those individuals to seek additional education or other employment options. Tech titans like Elon Musk have argued that universal income “will be necessary if robots take humans’ jobs”. Experts from Brookings point out, however, that while automation destroys some jobs it also creates others.
  • Address the welfare trap: Some argue that the current welfare system implicitly encourages recipients to remain on welfare because, once enough income is earned to pass the statutory defined income thresholds, welfare ceases.[4] This may incentivize people to maintain a low enough income to continue receiving welfare benefits. Consequently, a UBI could remove incentives to keep income low enough to stay on welfare and instead incentivize people to pursue more lucrative jobs.
  • Lessen the government’s role in poverty: Rather than providing the poor with cash assistance, the government allocates a variety of specialized benefits and budgets to be spent on specific necessities. Many argue that the poor understand their needs better than the government and should have autonomy on how their assistance is spent.

Opponents assert that UBI:

  • Harms the economy: Corporations that are taxed to fund a UBI (i.e. Value Added Tax) will pass the tax onto the consumer, therefore cancelling out the effects of a UBI.
  • Is too expensive: A UBI is estimated to cost at least $3 trillion per year, which is more than ¾ of the total federal budget. Funding such a program without substantially cutting existing programs and raising taxes makes it economically infeasible.
  • Disincentivizes working: Because of a cash guarantee each month, people fear that it will encourage individuals to stop working and become lazy. There are many studies that have discredited this concern.
  • Encourages bad behavior: Some contend that recipients would spend a basic income on alcohol and drugs. However, it is worth noting that a World Bank review of 30 scientific studies concluded that concerns about “the use of cash transfers for alcohol and tobacco consumption are unfounded.”’
  • Hurts low-income Americans: If a UBI were to replace existing social programs, it would deprive the poor of targeted support and leave some individuals worse off. Funds previously allocated to assistance programs like housing vouchers, food stamps, etc., would instead be allocated to people all across the economic spectrum inherently directing less money to programs specifically targeting the poor.[5]

[1] Data shows there are over 12 million full-time workers aged  25 to 64 who live below the poverty line.

[2] To read more about The Freedom Dividend and the reasoning behind Yang’s plan, follow this link

[3] This study was conducted by the Roosevelt Institute and spearheaded by economists focused on financial inequality, it discusses the macroeconomic effects of a Universal Basic Income

[4] The ‘Welfare Trap’ asserts that the welfare system offers short-term relief and influences long-term poverty. Many established right-leaning think tanks, research institutes, and media outlets have reported on this dynamic including: Foundation for Economic Education, CATO, and Illinois Policy.

[5] The Freedom Dividend plan does not suggest UBI would reduce Social Security payments. Some fringe proposals from think tanks (like the AEI) suggest that Social Security would need to be repealed for a budget-neutral UBI.