Editor’s note: This commentary is by John Sales, a geologist who is retired from a career in both academia and research for a major oil company. When not writing scientific papers, he focuses on alternative energy, affordable housing and homelessness. His special interest group is a bevy of grandchildren. He lives in Danville.
Current Social Security covers the elderly, but with huge administrative overhead, few options for the recipient, and many cracks, the unfortunate fall through. Here is another way that might combine the best and avoid the worst of current Social Security, eliminating or lessening many of America’s worst social problems. It assumes the same amount of money now going into Social Security was used instead for a minimum guaranteed income in the form of a universal stipend (the Stipend) for every American. This could be patterned after Alaska’s successful oil dividend dispersal.
Average Social Security benefits total $330,000. Dividing by our 82 year life expectancy, gives an equivalent stipend of $4,024/year, $335/month, $77/week, $11/day for the same cost. Distribute it with ATM technology and efficiency. Numbers of people are large, but the logistics are simpler than banks do every day — no new technology needed. A fool-proof safety net $335/month, available 24/7.
Bailout and post-bailout recovery have enriched the rich at the expense of the rest. But the Stipend would be a functional $4,024/year tax cut for everyone — a stimulus that would truly trickle down and up. Most are not spending because they feel insecure. With the Stipend, those with jobs would feel freer to spend it in the marketplace, stimulating job creation. The unemployed would have enough to be minimally housed, fed, warmed and transported.
The Stipend would hold families together and lessen domestic violence. Economic stress is the single biggest reason for family breakdown. The Stipend would lessen this stress and would be a big step in reestablishing viable one-job families.
Unwed mothers and deadbeat dads: The Stipend should not be just for “adults.” That approach discriminates against children. With universality, a single mother with five children ($2,010/month) could do well by them. Under the “adults-only” axiom ($335/month) they would all be entirely destitute (a single mother with five children can’t reasonably hold down a job and can’t raise them on one stipend). Counter to this, an unwed mother could game the system by having a lot of babies. There is a workable solution: No reduction in stipend for the first child, half reduction for the second, but after that all her children’s stipends are put in escrow until they are 18. Ironically, this would help insure that kids currently least likely to succeed might become most likely to succeed (They could enter college with over $72,000 in their bank accounts). Likewise for deadbeat dads — a reasonable amount of their stipend should be taken for child support.
Lowering the crime rate: Abject poverty and lack of upward mobility (no hope of getting out of it) is the single greatest contributor to the crime rate. Canada has as many guns per capita as the U.S., but less gun crime, and a higher index of upward mobility. When Namibia instituted the equivalent of the universal stipend, the crime rate decreased over 40 percent.
Anyone with a steady income who left their Stipend, even in indexed funds, would likely retire a millionaire. Consider the first 10 years of the Stipend – roughly $40,000 (40t). The stock market historically doubles every 10 years, leaving a possible five doublings (d) before retirement at age 60: (1d=80t, 2d=160t, 3d=320t, 4d=640t, 5d=1280t). But that’s only the first 10 years’ stipend. Because each successive 10 year increment has one less chance of doubling, you can get your approximate total net worth at retirement by multiplying the above figures by two (1280t x 2 = 2480t). Even if the market performed at half of historic, you would still retire a millionaire.
If you don’t have to do as much crisis spending, you are more likely to do systematic savings. Thus the Stipend would be a strong impetus for saving that individuals, families and the country needs. The more we all save, the less the demand for lending and the more available to lend — what lending was still needed would be cheaper and more readily available — a strong additional stimulus.
You could never be completely destitute. If you invested it all and the market crashed, you would always have $335/month. With five others ($2,010/month) you could rent or buy a median three-bedroom home, with money left for frugal food, heat and transportation.
Many more would complete college: If a couple with one child saved their combined three stipends ($12,072/year) for 24 years (the child starting college at 20 and getting a degree at 24) = $289,728. This is more than 10 times maximum Pell Grants ($5,500/year x 4 years = $22,000), with no crippling loans to pay back. Nations besting us in job creation all stress early and thorough education of the poor, especially in science and math. In two of the top ones — South Korea and Finland, all education is free and teachers are paid on a par with doctors and lawyers. The Stipend would be the single greatest step in correcting these basic education inequities.
Bankruptcies, foreclosures, repossessions, homelessness, and crime, all on the rise, might plummet. Now even hardworking people are forced over the edge by circumstances beyond their control, often medical. The Stipend would be a viable buffer.
What in heck’s a Google? A startup we chuckled about now dominates several tech realms and employs well in excess of 20,000 of our youngest and brightest. They have now outgrown San Jose and invaded San Francisco, with paychecks so large they are causing rents to double and the older residents of the City by the Bay to picket in the streets (“Time,” Feb. 3, 2014). Micro loans of as little as $25 have been seeds for successful business startups like Google — the large and dependable stipend could be a dynamo for job creation.
Administrative overhead would decline drastically. About half the bureaucrats in Washington work in entitlements. A significant percentage would become unnecessary with universality and ATM distribution, and their salaries could be added to the endowment for the stipend — the amount saved might allow us to retain present benefits for elderly and disabled, while implementing the Stipend for everybody.
The Stipend would justify the free market. Now free market initiatives are resisted because the Left feels trickle-down doesn’t work and the safety net is full of holes. The Stipend counters these arguments and justifies a more aggressive free market. With the combination of a universal stipend and an increase in minimum wage, huge numbers of us would be spending that are now hunkered down.
You could never be completely destitute. If you invested it all and the market crashed, you would always have $335/month. With five others ($2,010/month) you could rent or buy a median three-bedroom home, with money left for frugal food, heat and transportation. These could be a single mother with five children, a widow renting to two couples, or six complete strangers. Don’t like that idea? Leave it in money market funds — absolutely secure. This would be the equivalent of the present system except that you, not Uncle Sam, would have control.
By reducing overhead, we could actually beef up programs and professionals working one-on-one and in small groups with those with special needs.
Minimum wage: Every one wants a living minimum wage, but too big a one can price you out of the market, lower total jobs available, and depress apprenticeship and mentoring — core needs for a successful career. A high minimum wage risks more workers being replaced by machines, and domestic workers being replaced by foreign workers. An alternative is available with the universal stipend — subtract the stipend ($1.38 per hour) from the proposed increased minimum wage ($10.10) This would still give a functional minimum wage of $10.10, but the minimum wage itself would remain relatively low at $8.72, keeping American workers more competitive in the world marketplace.
The American worker is more productive than when the minimum wage first started — technological advances give workers more leverage to produce. We are trending toward a time when one American owning one gigantic robot is responsible for our total GDP, and the rest of us are sitting around on our hands. This would obviously cause that one very rich person to go broke — no one else has any money to buy his products. We aren’t at that extreme, but this is what is holding back the economic recovery and jobs creation. We need income redistribution to balance the marketplace so multitudes at the bottom have the wherewithal and confidence to buy the goods made available by advances in technology, and to become productive themselves.
Cost in perspective: I picked these figures because they were revenue-neutral compared with Social Security, but they also fit a centrist philosophy — the stipend should not be a livable wage, but should keep you secure if you work together with others. It can be lived on in a hard chance by pooling resources with just five others. It is, by design, only about one quarter of current, and one fifth of projected minimum wage. It is more than 8 times smaller than the $34,000 equivalent being proposed in Switzerland. $4,024/year X 300,000,000 of us is a little over $1.2 trillion. We spent that much in a shorter time bailing out banks and businesses to thwart the recession. If interest on the national debt were calculated at historic, rather than the artificially low 2.4 percent currently being used, interest on our national debt would soon be approaching that $1.2 trillion, which is a little over 7 percent of U.S. GDP. When you consider the savings by streamlining and the potential boost to the economy through the bull market it might spawn, it’s a bargain.
Now, declining numbers of workers support increasing retirees, causing payroll funding of Social Security to be in continual shortfall. It might be better to fund the Stipend from the general fund as a fixed percentage of GDP and drop payroll deductions — GDP goes up everybody gains, down everybody pains. This change in funding would also be an additional boost to workers and small business — the dominant groups that make up the presently declining middle class. The stipend and other government programs would simply have floating funding. This could be one way to eliminate our increasing national debt and chronic deficits. We should seriously consider a universal stipend.
