A Truly Great Idea
By: Stephen Yearwood
Tags: Unemployment, Economics, Poverty Alleviation, Social Justice, Taxation

The truly great ideas are those that are simple yet transformative.

“Energy equals mass times the speed of light squared.” [Medium apparently doesn’t do superscripts.]

That’s about as simple as it gets. Yet, it transformed our understanding of the Universe.

Really, every transformative idea can be stated in a simple premise. Of course, ‘simple’ and ‘easy’ can be two very different things. Understanding the derivation, the applications, and the implications of such ideas can take years of effort.

One truly great idea would be to use an income paid to (eligible) citizens to supply the economy with money. It is at least as simple as the idea contained in that famous equation; it would transform society as surely as that equation transformed physics. This idea would, among other good things, provide the means to eliminate unemployment (at no cost to anyone) and poverty (without having to redistribute anything). It would make those outcomes as certain as that equation of energy and mass proved to be.

This is not something I came up with this morning. I have been working on it for years. I can state with total honesty and complete confidence that there are no hidden costs and no potential problems that are unaddressed. There are options that would have to be decided for it to be implemented, but the paradigm is fully worked out. [If it matters, I do have an M.A. in economics.]

When this idea first came to me I had no concept of its potential. For that matter, I had no notion of how — or if — it could be accomplished.

Actually, I was wondering about justice and the economy. It had occurred to me that political democracy is thought of as being a just process, so I was wondering if it might be possible to borrow from political democracy to make the economy more just.

After all, people sometimes think of making a particular purchase as ‘voting’ for this version of a product over other versions of it. To cast a vote is to ‘spend’ it in favor of this campaign as against any other alternative. So there is a strong analogy between democracy and the marketplace: in some sense money is to the economy as the right to vote is to the political process.

I worked out that one reason why democracy is a just political system is that in it the right to vote is justly — democratically — ‘distributed’.

Voila! How about a democratically distributed income?

What could such an income be, I wondered? It couldn’t involve redistribution via taxation (e.g., a UBI). Such a scheme might be enacted in a democratic political process, but it would not of itself be a democratically distributed income in the sense that the right to vote is an intrinsic, democratically distributed ‘currency’ in a democratic political system.

Currency? Again, voila!

The democratically distributed income could be created as needed and form the supply of money (as currency) for the economy. Like the right to vote, it would be free. Like the right to vote, it would be intrinsic to the system. Like the right to vote, it would not be available to every citizen, but would be available for an unlimited number of people. Its availability to (adult) citizens would be even more universal than the right to vote is: even felons just released from prison could become eligible for this income.

I then began to think about the economics of the matter. I’ll spare the reader the process and jump to some of the major outcomes that, I have learned, could be achieved by implementing such an income (over and above the two already noted).

To be clear, though, there would still be no limit on income or property/ wealth. An “allotted income,” as the democratically distributed income can be more succinctly (and neutrally) called, would, however, provide an absolutely, positively guaranteed minimum income for citizens. (A legal minimum income for non-citizens would be another issue.)

The amount that the income should be is not set in stone, but for the sake of economic stability, it would have to be set at some amount and left there. For the sake of economic coherence in changing from what is to what would be, it should be based on some existing metric. It might as well be set at enough to eliminate poverty. So it could be based on the current median income. Using that as the metric, in the U.S. it could be set at $15/hr.; $600/wk. (but see below, regarding the absence of taxes). People making more than that amount would continue to be paid as at present.

It would be as easy as not to pay the income to one parent (or legal guardian) in a household with at least one dependent child (non-adult) living there (one remittance of the income only, regardless of the number of children). Ending unemployment and poverty does not depend on including that option, but if the vast unemployment that many people are saying robotics and AI are going to create did materialize, that would help that situation; for that matter, two people could as easily be paid the income for working in the home if at least one dependent non-adult lived there (should robots take on all other work).

I eventually realized that the same process could be used to fund government — all government, from central to local — forever at the current per capita rate of total government spending. That would eliminate the need for taxes and public debt. It would also put the government on a strict budget, but one that would automatically adjust to changes in the size of the population (by far the biggest single determinant of spending by government). With no taxes of any kind, $15/hr.; $600/wk. would be the equivalent of more like $20/hr.; $800/wk., based on average taxes paid by people making that amount of money currently (income taxes, sales taxes, property taxes, and excise taxes).

It turns out that doing both of those things (implementing the allotted income and funding government that way) would make the economy self-regulating. The means would not even exist to use fiscal or monetary ‘policy’ to try to ‘manage’ the economy.

Sustainability would be increased (even without additional regulations or any changes in behavior). That’s because both the supply of money and spending by government would be governed, passively but effectively, by demographics. Moreover, it would not be necessary to seek to increase output in order to increase employment/income/taxes. Within the demographically governed ‘pie’ people would be free to compete for unlimited income.

To prevent inflation money would have to be returned to its point of origin, but people and businesses would be able to retain plenty of money (proportional to income) and, unlike taxes, no money would be collected from any person or business before it could be used for purchases or investment. All any individual would have to do to avoid having any money collected would be to make purchases/investments. Businesses, could do that, too, but the only place the money could go would be to some other business, adding to the amount of money it had on hand.

Again, this idea could be adopted by any nation — or any group of nations (without challenging national sovereignty). In the U.S., it could be enacted with a single Act of Congress. It could even be implemented by the existing central bank (in the U.S., the Federal Reserve System), though allowing it to directly fund government would require a change to the laws governing it.

For those who think this idea is too accommodating of ‘the rich’, I ask: which is more important, taking from the rich or absolutely, positively eliminating unemployment and poverty? Besides, if on average people who are not rich pay proportionately more of their incomes to taxes than people who are rich do, they would benefit proportionally more from the absence of taxes. For the record, I am poor.

While working on this idea I have been trying constantly to get it into our public discourse. Why editors across the spectra of media and ideologies have refused to publish it is beyond me to understand. At a very minimum, it would seem to warrant public scrutiny. As it is, this idea needs advocates.

A brief (“5 min read”) summary of the nuts and bolts of this proposal is available here in Medium. There are links at the end of that post to more detailed accounts of it. There are also other related posts under my name in Medium.