Andrew Yang's Freedom Dividend and Other Cash Programs
December 17, 2019
Yang has said that someone would have to choose between cash and cash-like programs and the Freedom Dividend. Extremely detailed specifics have not been released, but the general consensus is that this refers to (at least) these four programs:
- Supplemental Nutrition Assistance Program (SNAP) aka Food Stamps
- Supplemental Security Income (SSI)
- Temporary Assistance for Needy Familes (TANF)
- Women, Infants, and Children (WIC)
The UBI Center estimates that out of the $177 billion spent on these four programs, $133 billion is given to people whose total monthly assistance is less than $1,000/month. Therefore, those people will likely opt-in to the Freedom Dividend and forego their cash programs. The rest of the $44 billion would be kept by the people whose assistance exceeds $1,000/month and they will not opt-in to the Freedom Dividend. $133 billion represents roughly 5% of the existing safety net of $2.5 trillion and roughly 5% of the entire Freedom Dividend program of $2.8 trillion, or 2.5% of the combined new $5 trillion safety net.
It doesn't sound great that someone needing assistance would have to give one thing up to gain another, even when that new thing is larger. Here are some points to consider.
The Freedom Dividend vs Existing Cash Programs
- Most of the cash programs today are meant to be temporary. The Freedom Dividend is for life. Compare these adult lifetime totals: SSI $385K, SNAP $70K, TANF $29K, WIC $4K, Freedom Dividend $720K ($600K if you take into account the new taxes and price increases). WIC and TANF are generally for 5 years. SNAP and SSI can be much longer if you are unable to work. The Freedom Dividend is for roughly 60 years for the average lifespan of 78. The graph below shows an example of how much money someone would accumulate from getting $1,000/month with the Freedom Dividend (the green line) vs the other cash programs. This is not taking into account any increases due to compounding interest for money saved. Yang has said that the Freedom Dividend will track with inflation, as do the other cash programs. This graph assumes having one child at age 25. If someone qualified for TANF, WIC, SNAP, and SSI all simultaneously, one would need to add together those four lines.
- Program by program, the existing safety net isn't that big compared to the $1,000/month Freedom Dividend. SNAP is $126/month on average for an individual. WIC is $70/month on average. SSI is $536/month on average. TANF is $486/month median.
- The amount of assistance that people will forego to get the Freedom Dividend is roughly equal to the amount of assistance that they will have to forego if the minimum wage is raised to $15/hour. See my other page here.
- The Freedom Dividend is not Yang's only program for the needy. Yang has said that those with specific circumstances will get special programs that stack on top of the Freedom Dividend. The Freedom Dividend is just the foundation, not the entire house. So while there are some programs that it overlaps with, it doesn't mean there won't be other programs that help compensate. On the Next Big Idea youtube interview, Yang said specifically that disability would be strengthened as a separate program.
- There are many people that should be receiving SNAP/SSI/TANF/WIC today that don't. The four top cash programs today give out $177 billion a year in benefits. The Freedom Dividend would overlap with $133 billion of that. However, an additional $334 billion dollars would be needed to give the same benefits to everyone that qualifies for cash programs today but doesn't get them. The Freedom Dividend would instantly cover the 7 million people that qualify for SNAP and don't get it, the 28 million who are disabled but don't receive SSI (qualifying or not), the 33 million who qualify for TANF and don't get it, and the 7 million who qualify for WIC and don't get it. While we may not like Yang's approach to the existing cash programs, we would need to hear from another politician that has a plan to address this $334 billion gap in order to make a fair comparison. See chart below.
- The Freedom is a cash program for meeting basic needs. That is why it overlaps with other cash programs. Programs like SNAP, TANF, and WIC help families meet basic needs such as food assistance. The purpose of the Freedom Dividend is "meeting basic needs for all". So it does make sense that there would be some overlap somewhere. And while the richest Americans will also be sent the Freedom Dividend, they will also be paying more than the amount of the Freedom Dividend into the system through the new taxes which fund it.
- If the Freedom Dividend counted as income, most people would be pushed out of the existing cash programs anyway. Today Yang talks about people having to opt-in to the Freedom Dividend and foregoing existing cash and cash-like benefits. Equally, he could have said that the Freedom Dividend counts as income when calculating the means-test for cash and cash-like programs. The result would probably be similar. If someone is getting assistance because they are near or below the poverty line, and then you raise them out of poverty (or nearly so) with a new program, they may still be the lowest combined income and benefits earners in the society, but any program that you design to help them out will now have to take the Freedom Dividend into account somehow.
- Most assistance can be taken away if you work or save more. Not so with the Freedom Dividend. If you are getting government assistance currently and you get a job making more than poverty wages, or have more than a few thousand in total assets, your assistance is taken away. The Freedom Dividend, seen as an assistance program, is not taken away regardless of job you hold,or money you saved, and is only ever temporarily taken away if you are incarcerated. In this respect, the Freedom Dividend is must less of a disincentive to work or save.
- Anecdotally, almost all participants in these programs have said they would prefer the Freedom Dividend to their existing assistance. A social worker surveyed her clients and posted the results to Twitter. 40 out of 42 respondents said they would prefer the Freedom Dividend. https://twitter.com/Achraf112ben/status/1204168836469198848?s=20 Here is a quote from that survey: "I get $509 in food stamps now with my two kids so I would get almost $500 more. I would buy all the other stuff I need- kids clothes, etc. I recently missed two months of food stamps for literally no reason. They just cut it off..."
- Once in place, it will be very hard for politicians to cancel the Freedom Dividend. Imagine how popular a program such as the Freedom Dividend will be. Can you picture a new administration trying to cancel it? People would march in the streets. However, when Trump announces a trimming of the SNAP program, do we all march in the streets? Having a universal cash program means that it would be much stronger and harder to dismantle piece by piece, the way that our 126 programs today can be.
- Other Countries also proposed overlapping existing welfare programs with their UBI. Hungary, Scotland, and New Zealand are three of the countries that have proposed a UBI, and they all proposed making it at least partially redundant with existing programs.
- The overlap between the Freedom Dividend and existing cash programs is only 5%. $133 billion of overlap represents only 5% of the entire existing safety net of $2.5 trillion, and 2.5% of the total new Yang safety net including the Freedom Dividend.
- The Freedom Dividend alone doubles the safety net. Overall, the Freedom Dividend doubles the safety net from $2.5 trillion to $5 trillion (according to my own math). Therefore "gutting the safety net" is not a fair statement. See charts below.
Today the safety net is $2.5 trillion. The amount of money that should be spent on people that fell through the safety net is an additional $1.5 trillion, bringing the total necessary safety net to $4 trillion. (see chart below)
By contrast, Andrew Yang's Freedom Dividend, combined with existing programs that it stacks with, and subtracting the ones that it overlaps with, is $5 trillion.
Whether an eventual UBI in America overlaps with any existing welfare programs or not, it is clear that the cash welfare programs we have today don't work well, don't reach everyone they were intended to, and are mainly meant to be temporary anyway. With existing cash programs:
- People have to skip work to attend meetings at the welfare office
- Paperwork needs to be filled out repeatedly to reapply for funding
- Sometimes people are cut off entirely from their benefits due to clerical errors.
- Millions of people are not receiving the benefits they qualify for, sometimes simply for not knowing they qualify (sometimes they are denied wrongly due to racism, class-ism, or because a program's budget is too low)
- The strict maximum income and net worth guidelines discourage people from getting a better job
- There is much more overhead to have to case-manage means-tested programs than universal ones
It would be much simpler to just send a check for $1,000 to every single adult, every single month.
Who qualifies for a cash program?
- SNAP - $1,354/month maximum gross ($1041/month net) income. Households may have $2,250 in countable resources (such as cash or money in a bank account) or $3,500 in countable resources if at least one member of the household is age 60 or older, or is disabled.
- SSI - $1,531/month maximum gross income, total resources owned less than $2,000 ($3,000 for a couple) outside of your house and a few other exceptions. Blind, disabled, or above 65 and needy.
- TANF - Average $1,000/month maximum gross (varies wildly by state). Asset limits vary by state, between $0-$10,000, but usually between $1,000 and $3,000.
- WIC - Less than 185% of poverty guidelines, around $1,900/month maximum gross.
- Freedom Dividend - No maximum income. No maximum assets. Any full US citizen over 18 that is alive and not in prison gets it.
How long do cash programs last?
- SNAP - When your kids are at home and under 18, or for 3 months out of every 3 year period, or if you are over 50
- SSI - Life (including childhood for certain disabilities)
- TANF - Only up to 5 years in most cases
- WIC - Only when children are under 5 years old
- Freedom Dividend - Adult lifetime (average 60 years)
What are the average individual benefit amounts of the cash programs?
- SNAP - $126/month while children live at home (18 years) and/or 3 months periods out of 3 years, or $70,000 in a lifetime
- SSI - $536/mo, or $385,920 adult lifetime (60 yrs)
- TANF - $486/month median benefit (varies by state) for 5 years maximum, or $29,160 total
- WIC - $4,200 per child. ($150/month during the first year and $50/month for 4 years after that)
- Freedom Dividend - $720,000 (18th birthday until death, which is 78 years old on average in the US, so 60 years)
How Well are the Existing Cash Programs Working?
- SNAP Participation Rate: 84% (16% of those eligible do not participate. 40 million get it out of 47 million eligible)
- SSI Participation Rate: 22% (77% of people with disabilities do not participate. 8 million participate out of 36 million eligible)
- TANF Participation Rate: Only between 10% and 25% of those who qualify actually get to use it. (1 million adults plus 2 million children get it out of 36 million people in poverty that are eligible)
- WIC Participation Rate: 50% (7 million out of 15 million eligible)
- Distributional Analysis of Andrew Yang's Freedom Dividend by Max Ghenis, UBI Center https://medium.com/ubicenter/distributional-analysis-of-andrew-yangs-freedom-dividend-d8dab818bf1b
- SNAP recipients nationally https://www.cbpp.org/research/food-assistance/a-closer-look-at-who-benefits-from-snap-state-by-state-fact-sheets#Alabama
- Average SNAP payment https://www.cbpp.org/research/food-assistance/chart-book-snap-helps-struggling-families-put-food-on-the-table
- Maximum income allowed for SNAP https://eligibility.com/food-stamps
- Average SSI payment https://www.disabilitysecrets.com/page4-44.html
- Maximum income for SSI https://www.fool.com/retirement/2016/04/26/what-is-the-maximum-income-to-qualify-for-ssi.aspx
- SSI participation rate https://www.ssa.gov/policy/docs/ssb/v78n2/v78n2p29.html
- TANF by state https://www.cbpp.org/research/family-income-support/tanf-benefits-remain-low-despite-recent-increases-in-some-states and https://www.openminds.com/market-intelligence/executive-briefings/state-tanf-programs-spend-cash-assistance/
- TANF reach https://www.cbpp.org/research/family-income-support/tanf-reaching-few-poor-families
- TANF length of time https://www.verywellfamily.com/tanf-grant-program-overview-2997412
- Number of people in WIC https://www.fns.usda.gov/wic/wic-2016-eligibility-and-coverage-rates
- WIC payment amount https://www.governing.com/news/state/why-are-fewer-moms-applying-for-wic-when-food-stamp-use-is-so-high.html
- Life expectancy https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=sp_dyn_le00_in&idim=country:USA:CAN:GBR&hl=en&dl=en
- Current retirement age is 66 https://www.nasi.org/learn/socialsecurity/retirement-age
- Hungary, Scotland, and New Zealand UBI proposals https://en.wikipedia.org/wiki/Basic_income_around_the_world