Here are some commonly known features of the economy in the United States and other advanced industrial countries. Actual industrial production of almost anything is in serious decline. What production gets done is increasingly done by robots. It is increasingly rare for any person to work full-time for a single company for their whole career. Formal employment, with pension, health benefits and other perks is increasingly replaced by contract work—the gig economy—with the individual entirely responsible for retirement savings, health coverage, child care, and anything else that used to be covered by responsible employers.
All of these changes have contributed immensely to the soaring profits of major corporations and astonishing salaries for corporate chief executives. And for the rest of us, all these changes have made for a life that is increasingly insecure, with little chance for a rising standard of living. And that, in turn, means that the vast majority of society are living so precariously that they lack enough money to spend to keep the economy running at capacity. More goods and services are produced than can be consumed.
Perhaps it is time, in these advanced societies, to sever the connection between money and work. Of course, that connection has long been absent for those who live on rents from their property, but for most of us, if you want to eat, you have to work. Indeed, now it is more and more common to see senior citizens who just must keep working because they have inadequate or nonexistent pensions and minimal or no retirement savings. For the poorest of us, including children born into poor families, there is not enough income to escape from poverty and deprivation.
Suppose that every woman, child, and man whose income fell below the poverty threshold received a monthly income that would suffice to keep them out of poverty.
Suppose, instead, that we conceived of the poverty threshold as the absolute minimum that any individual or family should have to deal with. Suppose that every woman, child, and man whose income fell below the poverty threshold received a monthly income that would suffice to keep them out of poverty. That would mean that social programs like SNAP (Food Stamps) could be cut back because every family would have the means to meet their basic food needs. Every family would be better able to afford housing, so housing vouchers and subsidized public housing could be cut back.
People would still work, and still get paid, but they would be relieved of worry about falling through the floor if they lost their jobs. The successful among us would still get rich; indeed, more people might be willing to take the risks of starting a business if they knew that they could at least get by even if the start-up went belly-up.
But, my god, what would this cost?! Well, for illustration, let’s start with the federal standard for Medicaid eligibility, which in 2017 was $16,643 for a single person. Round it up to $17,000. There are about 45 million persons in the country who fall below that level. So providing those 45 million with an income of $17,000 would cost $765 billion.
Where would those funds come from? For a start, the federal contribution to Medicaid is about $500 billion. State contributions vary, but are also significant, certainly in the hundreds of billions of dollars. If no one were below the threshold anymore, all those funds would be available. The entire budget of Housing and Urban Development is about $40 billion. If people had adequate incomes they wouldn’t need HUD’s assistance. The budget of the SNAP (Food Stamps) program is about $80 billion. The need for SNAP would disappear if people had incomes above poverty level. All these federal budget items together amount to about $620 billion. If the guaranteed income were adopted and funded, it would cost $765 billion, less $620 billion, leaving a shortfall of $145 billion. But if all the formerly Medicaid-eligible were now paying taxes on $17,000, each would pay about $600 in income tax, for a total of new tax revenue of $27 billion. That leaves $118 billion, which is surely less than the Medicaid expenditures of all the states.
So the upshot is, this is affordable. People who are unemployed, people who have only part-time or gig work, people who are not in the labor force, children, would all have a guaranteed minimum income as a springboard for risk-taking such as moving to find work, or taking a break from work to gain more education. The administrative costs should be far less than the $620 billion that Medicaid, HUD and SNAP now cost. And the economy would be healthier if even the poor had money to spend.