A Radical Fix for the Social Safety Net: Replace It All With One BIG Idea

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"Social engineers, on both the right and the left, have made [Social Security] complex in order to achieve their ends without anyone being able to see what they were doing. Whatever really underlies the 2,728 rules in Social Security's handbook and the tens of thousands of rules ... that 'clarify' the 2,728 rules, our Social Security system as currently designed is a travesty that leaves most of us largely in the dark about our retirement incomes." -- Boston University Economics Professor Larry Kotlikoff

Precisely. And it's not just Social Security. The whole social "safety net" system in America is pretty messed up. With names like Medicare and Medicaid, SNAP, TANF, SSI, WIC, and Section 8, this hodgepodge of dozens of federal and state programs costs tens of billions of dollars a year just to administer.

Yet it's still rife with abuse, with allegations of cheating by welfare recipients, doctors and hospitals billing Medicare for services never performed, government housing assistance and mortgage relief being collected by folks driving BMWs, not to mention a pervasive unemployment and underemployment problem so vast that one out of every seven Americans now needs food stamps.

It's enough to make you want to just chuck the whole system and start over.

And in fact, that's precisely what Allan Sheahen proposes in his July 2012 book -- recently issued in paperback -- on the "Basic Income Guarantee," or "BIG."

What BIG Is

At its heart, BIG is just what it sounds like: a government guarantee that every adult citizen in America will receive a basic level of income, sufficient to survive on, which comes to $11,500. That's $10 above the current federal guideline definition for poverty for a single person in America. So institution of the BIG program would (if one ignored the fact that some poor people have children) eliminate U.S. poverty in a single stroke.

This money would be paid out with no strings attached -- no work requirements, no reductions for folks who earn too much. But also no cost-of-living differentials for folks living in places like New York City, where $11,500 doesn't go very far, as opposed residents of someplace like rural Alabama, where one might conceivably subsist on it. And it would be paid out to every American citizen age 18 or older.

What BIG isn't

Thus, BIG isn't so much a program to give away money to the poor (or the lazy or irresponsible, depending on your opinions), as it is a floor level of income that would be guaranteed to every adult, no exceptions. Nor is it "just another welfare program."

Rather, BIG would replace the hash of today's social welfare programs, all of which cost time and money to administer -- badly -- with a single system of grants that everyone is entitled to.

How BIG Works

The BIG idea also isn't a creation of fuzzy math. As Sheahen lays out in clear, easy-to-understand numbers, it's possible to ensure a minimum level of income to everyone in America in just a few easy steps:

First, everyone gets $11,500, tax-free -- from the unemployed kid just out of high school to the multibillionaire Jeff Bezos tinkering on his rocketship out in the desert between boardroom meetings at Amazon.com.

Second, anyone who needs more than $11,500 is welcome to get a job and work for it. Everyone pays a flat 35 percent income tax on their wages, so that, for example:
  • If you have no job, you can just scrape by on $11,500 a year.
  • If you earn $50,000 a year, you end up with (65% x $50,000 = $32,500) + $11,500 = $44,000. (The mathematically inclined will notice that that's an effective 12 percent tax rate for the average American earner.)
  • And Mr. Bezos, who took home a $1.68 million paycheck last year, gets to keep $1,092,000 of that, plus his BIG payment of $11,500 -- so $1.1 million and change.
Third -- there is no third. While the system could be tweaked by cutting spending here, adding national health insurance or free education there, or raising the taxes somewhere else, the basic idea of BIG is elegant in its simplicity.

Won't people abuse BIG?

Absolutely. In any country with citizens as creative as ours, some scoundrels will find a way to "work the system," and Sheahen acknowledges this.

But trial runs of BIG-like programs in the past have shown that while some folks may try to mooch off the system, by and large BIG does what it's intended to do: Free people from the fear of starving and eviction in the event of a temporary loss of work, so that they can do more productive work. For example:
  • A wife might decide to stay home and raise the kids, rather than feeling compelled to earn a second income.
  • A laid-off autoworker might take a year to retrain to service the robots that took her old job.
  • A warehouse worker might switch to part-time hours, and take afternoon classes for his college degree.
  • Or a college graduate might ditch his "McJob" and spend a few months interning for free in his field, in hopes of landing a "real job."
Trial runs of BIG conducted in the decade between 1968 and 1979 saw an average 9 percent reduction in total hours worked by people in the program, but with wide variations. For example, in one experiment, husbands with families to support worked only 1 percent less with BIG than without -- despite having their basic income needs covered by the government. Overall, the "biggest" reduction in work hours under BIG was found among mothers, both single and married, as they cut back hours at the office by between 7 percent and percent to spend more time at home raising the kids. Across all trial groups, fathers were found to work only 6 percent less.

Crucially, Sheahen notes that "none of the researchers found evidence of people who simply stopped working so that they could live off" of BIG.

A BIG Idea Whose Time Has Come?

As an author and a board member of the U.S. Basic Income Guarantee Network, Sheahen has been pushing the U.S. to institute a BIG for the past 30 years for the establishment of a level playing field for income in America, and a revamp of the social welfare system.

But in fact, this movement has been around even longer than that.

Libertarian and science fiction author Robert A. Heinlein, for example, outlined a world in which BIG was a fact of life in his first, unpublished novel, "For Us, the Living" in 1938, and advocated for its adoption (as a "social credit") under President Franklin Delano Roosevelt.

Thirty years later, in the 1960s, proposals for institution of a Negative Income Tax (yet another name for BIG) began being seriously considered in Congress. From 1968 to 1979, municipalities in New Jersey and Pennsylvania, Iowa and North Carolina, Indiana, Washington state, and Colorado all set up pilot projects to test the idea (with the aforementioned results). In 1980, Alaska went whole hog with a version of the program, establishing the wildly popular Alaska Permanent Fund to share the state's oil wealth with its citizens through annual dividend payments.

Fast-forward 30 years more, and it seems the time has come around again for America to discuss whether we deserve a Basic Income Guarantee.

Motley Fool contributor Rich Smith has no position in any stocks mentioned, and hopes Mr. Bezos won't mind being singled out up above -- seeing as most folks will buy the Basic Income Guarantee book on Amazon.com, after all. The Motley Fool recommends Amazon.com and also owns shares of Amazon.com.

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Steve Godenich

The Swiss idea of BIG which works out to be about 25% of GDP works. Tying BIG to 25% of GDP with a Flat 35% Income Tax on Total Personal Income(TPI) and roughly 50% or more work participation may work in the USA (about $28k/year gross). The sum of $11,500 won't fly as a replacement for Social Security and current contributors and recipients would have to be properly bought out or aged out. Extraordinary Health Benefits would still need be covered by the government. To both gain universal favor and sooth Malthusian Theorist Fears, minor children's BI would need to be held in trust till they reached their majority That is essental to guaranteeing the welfare of the child for the usual reasons. It would need to be geared to the individual, not the family. The huge benefit to labour would also be felt by Capital in the market economy by eliminating tax and employment benefit contributions by businesses. Business wage costs would also be reduced by the amount of the BIG. Who loses? That's simple, big government bureaucracy, red tape and cartels lose. From the Capital side, entrepreneurship becomes the new bright star on the block.

December 02 2013 at 9:39 AM Report abuse rate up rate down Reply
1 reply to Steve Godenich's comment
Steve Godenich

Correction, not $28K/year, rather about $2100/mo gross or $1400/mo net for the 2012 US figures.

December 02 2013 at 9:47 AM Report abuse rate up rate down Reply
jhon.morinho

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November 30 2013 at 2:11 PM Report abuse rate up rate down Reply
Man Of Action

Love this idea. the super wealthy(1,000,000 and up) will hate this and spend billions so it wont pass. I think it would reduce crime, desegregate the title 1 housing grants and break up the concentrations of poverty in the cities. with BIG income one could live where ever they could afford rent. No more live here where we take grants as in the suburbs local housing codes stop title 1 living. The poor could escape bad school districts and give there kids a chance at a life. America will never go for this however,we are too racist.

November 28 2013 at 6:40 PM Report abuse rate up rate down Reply
Ellen Hadley

I think that originally the world belonged to everyone, and all were free to go where they wished and gather whatever they pleased. Then we, the powerful, took it over and allowed ownership of certain properties only to those who could afford it, leaving not much for the powerless. I think that we, the powerful, should pay a monthly rental, or BIG, to the powerless for our use of the land that was originally theirs. And let's pay it to ourselves as well, since we too were among the original owners of the wold.

October 09 2013 at 11:48 AM Report abuse +2 rate up rate down Reply
marie

Outside the U.S., the idea of a Basic Income is receiving more serious consideration. Here's a good short video on the topic. https://www.youtube.com/watch?v=4RkX6enCbYM

October 08 2013 at 6:10 PM Report abuse +1 rate up rate down Reply
marie

ED (below) raises the the most valid concern regarding the basic income idea that I see in the comments below: what about irresponsible people who would use their basic income to buy drugs instead of food?

Of course, this is already a problem with the current welfare system. Someone may go out and squander their whole month's welfare check in a day. Then what will they do? Hopefully, go to a homeless shelter, but unfortunately, sometimes turn to crime instead.

With the basic income system, technology can help such people, whom most will agree, have a serious psychological problem. Basic income can be distributed to people's accounts on a one-day-at-a-time basis. Someone who finds themselves without food because he has already spent his daily allowance on drugs therefore would have, under the basic income system, a daily new chance to seek medical help for his condition and make a new start.

Basic income is a radical idea to Americans. But think it over, and you may start to realize that it is provides the best so-far imagined system for combining security with liberty.

October 08 2013 at 2:33 PM Report abuse rate up rate down Reply
marie

I'm seeing some very misplaced criticisms of the basic income idea. Let me explain.

Yes, fraud, bureaucracy, and disincentives to work ARE problems for the CURRENT welfare system but NOT for the basic income plan. Under a basic income plan, people would not be required to prove they were or were not working, so there would be nothing to lie about. There would be no costly system of monitoring and checking people to determine whether or not they qualified for the basic income. If you were on welfare and got a job, you would still get your basic income, so there would be no disincentive to get a job. Whoever you are reading this, YOU would get the basic income too!

I think the basic income should be funded by a national sales taxes and through the scrapping of the current welfare system. This would be the ultimate in nonintrusive transparency. No one would look through your financial records to determine what rate you should be taxed at, and people would not be able to lie or find loopholes to avoid paying taxes. Rich people buy more, so they would pay more sales tax. SO SIMPLE. I believe the purchase of stocks, bonds, etc., should be taxed just like any other purchase, but there should be NO GRADUATED INCOME TAX.

Just a basic income and a national sales tax. No one looking at your books or telling you what to do. You get enough to survive and you take it from there.

October 08 2013 at 2:19 PM Report abuse +1 rate up rate down Reply
Curt Welch

Excellent article! But this desire to fear that people will not work is unfounded. We don't need so many people working in the economy. This is becuase the machines do most the work now, not the meat robots, and the only people we need working, are those that are good at designing, building, and tending more machines. Everyone else can go home and retire. Find something useful to do with your life like help you fellow man instead of competing against him all the time. The more people we have that decide not to work, the more the wages will go up for those that want a job where the machines have not yet replaced them.

The people that don't understand how important a BIG is, are the ones that have not yet come to grips with the fact that humans aren't doing the work anymore. Mark Zuckerberg didn't make himself worth 3 billion by hiring a few thousand "workers" and stealing their pay away from them by underpaying them. He made himself worth 3 billion, by building SALVE ROBOTS (called computer servers), to work for him and he took all their pay for himself. He's a robotic slave owner. This is how money is made today - by owning the best technology, not by working with our hands.

We need more and better robots now, not more meat robots. Not many of the population have the skills needed to build better slave robots, and there's no point in making them compete with the good robot builders, for a right to have food to eat. Make all the slave owners, share a cut of the wealth, their slaves are making with everyone. That's what a BIG really is, and why it's needed. We aren't taking money that Mark made with his own hands away form him to pay for the Big. We are taking some of the money his slaves are making for him, away from him.

October 08 2013 at 2:18 PM Report abuse +1 rate up rate down Reply
1 reply to Curt Welch's comment
marie

Although I am a strong believer in Basic Income, I haven't until recently really "bought" the argument for it that there aren't enough jobs. Now, though, I do. Why? Because I'm seeing a crazy phenomenon here in Fort Erie, Ontario. People are trying to build an environmentally damaging high-rise on a dynamic beach even though there is already a housing glut and even though the high-rise will damage the tourism economy, destroy the habitat of a protected species, result in beach erosion, and dirty the waters of a popular public swimming beach. People are building a eco-disaster auto race track on a fragile creek system when there is no demonstrated market for it. People are trying to keep a horse track open when it is losing millions of dollars every year, dollars that taxpayers will be expected to provide. Why do people support these projects? Because they think they might create jobs, even if they are seasonal, low-paying, temporary jobs with no room for advancement in an industry that cannot sustain itself. People are blind to what the long-term consequences of commercial endeavors will be to their children's generation, because all they can think about is they need jobs now. Why undertake projects that damage the environment and that cost the taxpayers money just to create jobs? Better to give people the money they need to live and let them devote their lives to projects that make the environment and economy better. Then the paid jobs we do have will be real, useful jobs, not fabricated ones that actually harm us in the long run.

October 08 2013 at 4:28 PM Report abuse +1 rate up rate down Reply
Bob

Sounds perverted . . . as though the United States would shift from the ideal that each individual has the equal opportunity to determine their own destiny and is responsible for their own outcome to one in which individuals are guaranteed an equal outcome by the state (guaranteeing a certain level in life . . . with food, shelter, medical care, education, child care and cell phones).

October 04 2013 at 8:07 PM Report abuse rate up rate down Reply
2 replies to Bob's comment
marie

Bob, you're not understanding the concept at all. The idea is in no way to ensure equal outcome. It is very much a free market concept. Have you ever played Monopoly? Each time a player passes go, he gets $200. Each player can choose to invest that $200 as he sees fit with the result that the final outcomes are VERY different. But by giving each person the $200, each person DOES get a good OPPORTUNITY to determine their own destiny. So the ideal being promoted by basic income is exactly the one you espouse: to ensure that "each individual has the equal opportunity to determine their own destiny and is responsible for their own outcome."

October 08 2013 at 1:37 PM Report abuse +1 rate up rate down Reply
Curt Welch

Bob, the United States has already shifted away from the idea of of each individual having an equal opportunity. A Basic Income is the way to shift it BACK to the way it once was where everyone had a fair opportunity. There are mobility statistics that prove to this to be true. The odds of someone raising out of the class they were born in has steadily been declining. If you are born to poor parents, you are far more likely to be poor yourself today, than in the past. If you are born rich, you are far more likely to stay rich today. Inequality makes it harder to climb that ladder of success.

In the past, humans were valuable assets in the economy. No business could survive without lots of highly skilled humans doing the work, This fact that business so greatly depended on the skilled hands of humans, is what gave even the poorest people, a fair chance to advance. The rich needed them. Owning lots of lands, did nothing for you, if you couldn't talk lots of humans, into working the fields for you.

But today, machines are doing most the work, not the humans. If you own lots of land, you no longer have to talk 1000 people into working for you to tend your crops. 10 people are all that's needed, with a a few millions of dollars of farm machines. Farmers invest in machines, not people.

If you owned a automobile factory, you once had to talk 1000 skilled workers to work for you, or else no cars would come out. But now, 10 skilled workers, operate the robots, where once 1000 worked.

Bankers once had to hire rooms full of CPAs to do all the bookkeeping an accounting for them, They had to hire lots of tellers. They had to hire lots of middle management to mange all these people. They had to hire secretaries and file clerks to manage all the paperwork and answer all the phones. They had big buildings full of humans. Now they do all the work with computers and they employ a small groups of executives and engineers to make it all work. All the well paid average workers are gone.

The rich don't need the poor anymore. They need other rich making more machines for them.

With this shift from a human driven economy, to a machine driven economy, the poor no longer have any power at birth to get a leg up in life. The rich don't need them. There's no mail room jobs for the poor to get their foot in the door and climb the corporate ladder any more. Computers deliver the mail. To get your foot in the door now, you need to be top in your class from Yale, Harvard, or Stanford. Those are the only guys getting their foot in the door.

This growing shift from human labor, to machine labor, is what is driving inequality higher and higher. The few that manage to correctly use the technology, strike it rich, and the rest struggle. Mark Zuckerberg created so much wealth, that he's made the equivalent of a million dollars a day, since he was born. But it's his machines that are doing all the work to make him rich, his computer server.

October 10 2013 at 2:00 PM Report abuse rate up rate down Reply
1 reply to Curt Welch's comment
Curt Welch

To offset this shift from a human driven economy, to a machine driven economy, we don't need entitlement reform, we need inequality reform. We need to force the rich machine owners, to share some of the massive wealth their machines are creating with the rest of us. That is what a Basic Income is all about. It's about the people of the world, taking back the wealth that was taken from them, as the machines have been displacing humans in the work force.

The people of the world need to stand up, and demand, that if these rich machine based corporations are going to operate in their country, and use the natural resources of their country, they are going to have to share a cut of the wealth the machines produce with everyone in the nation. That's inequality reform and it's money DUE to the people, by the business that are displacing humans, with machines.

But it is wrong to try and try to assign blame as to which business are displacing the most workers. So we just tax all economic activity equally, and take an even slice all across the board, which then goes to the people. If we took about a 20% cut of activity in the US, that would produce a Basic Income payment of about $1000 a month. And with that in place, we could reduce or eliminate much of the rest of the welfare systems currently in place, like minimum wage laws, and food assistance, and housing assistance, and unemployment insurance,

This is $12K of income we are talking about. That makes no one rich. It's poverty level existence. But it's the all important boost up the ladder, to give everyone a fair chance at climbing the ladder higher.

Nothing creates more freedom and power, in a person's life, than a guaranteed stream of money to build a life on top of.

Nothing makes it easier to start a business, than knowing that every person in the country, has money to spend for your produce or service. The poor can't create a business, and make money selling a service to other poor -- the people they know, and understand the best. But when everyone has money, people have a way to start business, to take care of each other in their same socioeconomic class. And then the money that comes into their neighborhood, stays in their neighborhood, instead of going right back into the hands of the rich.

In the 70's the rich decided the poor were gaining too much power, and voted the republicans into office. And they they then voted for lower taxes on the rich, so the rich didn't have to keep giving so much to the poor. And inequality has gone though the roof over the past 40 years because of this. The poor put their foot down, and elected Obama to change this and to improve the life of the poor. But the rich, being the spoiled brats they are, have no used the little power they have left, to shut the government of the poor down. The rich would rather have no government, than have to share their money with the poor. This can not continue. We need inequality reform in the US.

October 10 2013 at 2:18 PM Report abuse rate up rate down
setanta54s_back

they can't PAY for the existing safety HAMMOCK safety SEATS not safety "net" to begin with
and never mind the FRAUDS the same way THEY DO.
you can CALL medicare etc till you're blue in the face reporting on the crap tacked onto your statements/duplicate billings ,getting billed and then FINDING OUT your number IS ON 6 DIFFERENT accounts--
the USUAL OVERWEIGHT fat SLOBS / NONENGLISH SPEAKERS using foodstamps WIC cash and CREDIT CARDS while YOU PAY with cash and counting out pennies BUYING THE MINIMUM while their carts are OVERFLOWING..

aaaaaaaaaaand those ""in charge"" could NOT care any less.


this IS WHY we are now IMPATIENTLY WAITING FOR THE STHTF.


and check THIS OUT- gubmint shutdown me hone--

$445,000,000 to the Corporation for Public Broadcasting during this alleged shutdown.


gooooooooooooog;e it

October 04 2013 at 1:12 PM Report abuse -1 rate up rate down Reply
1 reply to setanta54s_back's comment
Curt Welch

setanta54s_back you anger is totally justified. But the rich have fooled you into believing they are your saviours, and the government is your enemy. You are their puppet. That is exactly what the Koch brothers spent $150 million to make you believe. And it's obvious from what you write, that their money was well spent.

Vote for a Basic Income guarantee to take the money away from the likes of the Koch brothers, and give it to YOU, not the government. Then you can use the money, in the free market, to pay for whatever is most important to YOU.

The reason we have been doing welfare in the form of government services, is because it's all the likes of people like you will LET the government pass without having a crying fit over "socialism".

This world is in desperate need for more socialism right now. But not this half assed type that is created in the form of expensive complex government welfare programs. Do it the right way, just tax the entire economy, and give the money to everyone. Get the government out of the picture, except for their role of taking from the rich, and giving to the poor.

October 10 2013 at 2:25 PM Report abuse rate up rate down Reply
1 reply to Curt Welch's comment
Andrew

Universal basic income isn't really socialism. Socialism would be a series of state run enterprises, like we have now. This is.. something else. It's more approaches distributism, geolibertarianism or social-capitalism. It was promoted by the likes of Hayek and Milton Friedman. Come to think of it, it's pretty remarkable how agreeable the idea is with such a broad range of ideologies in that messy anarcho-social-libertarian-whatever diversity.

There are many widely observed forms of socialism (or socialisms), each with varying degrees of social organization: state-socialism, libertarian-socialism, anarcho-communism, anarcho-syndicalism, etc. Less widely observed are the diversity of capitalisms: state-capitalism, corporate-capitalism, market-capitalism, entrepreneurial-capitalism, etc.

I think a key feature of the UBI concept is that disrupts the whole dimensionality of capitalism vs socialism by offering a decentralized contrast to the centralization of capitalism (ownership by private capital) and socialism (ownership by state capital). Rather, the main theme of the UBI is decentralized individualism.

A UBI would help promote the more individualistic, small-business, entrepreneurial form of capitalism by creating a more risk-tolerant society that isn't tied a single source of income. It would in turn help promote a more decentralized distribution of private capital owners.. in a way, fusing the concept of the capitalist and the socialist. It's interesting that two such nominally opposing forces (or at least their non-statist variants) might converge upon the same path.

November 20 2013 at 11:25 PM Report abuse rate up rate down