Universal basic income – the next phase

How about giving each citizen, at birth, an untouchable bank account that matures at a certain age?

By Morf Morford

Tacoma Daily Index

You have probably heard of UBI (Universal Basic Income) where each citizen gets a set income each month.

But how about starting each citizen off, at birth, with an untouchable bank account that matures at a certain age?

I’ve always thought the second system would work far better.

That’s also what Bill Ackman, the chief executive of the hedge fund Pershing Square Capital Management proposes. https://www.businessinsider.com/bill-ackman-give-americans-cash-birth-universal-basic-income-equity-2020-12?

The plan, what could be called “birth capitalism,” is simple; the US government would create an investment account for every citizen born in the country, a program that the billionaire calls “Birthright.”

Birthright funds would be invested at birth in zero-cost equity index funds, be prohibited from withdrawal until retirement, and compound tax-free for 65 years or more.

The sheer math of a program like this is inevitable.

If you know anything about exponential growth, you know that a tiny investment, over time yields remarkable results.

At historical rates of equity returns of 8% annually, a $6,750 at-birth retirement account would provide retirement assets of more than $1 million at age 65, or $2 million at age 74.

A smaller initial investment would yield lower results of course, but even that would be a motivator and fountain of ever-growing engagement in our economy.

Such a program would be expensive – and would vary based on the birth rate – but it would certainly be vastly cheaper than any welfare or senior care programs.

If you know anything about the Rich dad, Poor dad book, you know that this is one of those principles that wealthy people have used for generations if not millennia.

Investing in the future, whether as a culture, or in one’s own family, is virtually always a winning strategy – and, as every “rich dad” knows, as individuals prosper, the larger community prospers.

I have a friend who set up an investment account for each of his children at birth. He invested $10,000 for each one.

By the time they reached adulthood, each one had several hundred thousand dollars. This was more than enough for college, down payment (or more) for a house or enough to start a business.

I don’t know the fine print on the agreement, but, at minimum, each one of these kids had a jumpstart on their peers.

Imagine if we, as a nation, gave each generation a similar jumpstart in relation to those of other nations.

And what if, as people got older, even past retirement, they became wealthier, instead of poorer?

If there is anything a community, and certainly a national, economy cannot afford, it is massive levels of poverty and a large segment of the population that contributes little (at least financially).

To keep its citizens financially stable (and certainly not a negative force) in their final years would be of benefit to everyone.

Many older citizens, especially widows, have property but little income.

A program like this would allow them to keep their homes, or perhaps free them from the obligation of keeping them, but either way, a cushion of savings would save them from anxiety and financial vulnerability.

I know that there will be two immediate objections to programs like this; first, the expense and second, the fairness of it.

As to the expense, investing in a program like this shows a vastly higher return than NOT doing it. But I also know that, for those who object, this is not a convincing – or immediately measurable argument.

We could start with a smaller amount, maybe one thousand dollars, and track the results.

The amount, in perspective, is quite low. Most public schools get in the neighborhood of 5-6 thousand dollars for each student, each year, in their district.

This “birthright” payment would be about the cost of one year of schooling – and would pay back far more since it would accumulate value over the years.

As to the “fairness” of it, what aspect of our economy, citizenship or even biological parentage is “fair”?

To contend that because those born one year get this “birthright” endowment, while those born a year earlier, or outside of our borders, do not get it, argues that the system is inherently unfair.

It is “unfair.” Just as those born in certain neighborhoods, or under certain conditions have a more difficult childhood than others could be seen as “unfair.”

A program like this would build-in a financial foundation of increasing fairness.

At least, as a result of this program, there would be very few, if any, senior citizens living in poverty. The “dollar-divide” between older citizens would be largely eliminated.

Whatever you think of it, and whatever practical and budgetary complications arise, it’s an interesting premise, one that has worked well for wealthy families for generations.

As Bill Ackman put it “In addition to helping all Americans build wealth for retirement, Birthright would encourage greater financial literacy, and give all Americans the opportunity to participate in the success of capitalism.”

Spain, Scotland, Germany and Canada have experimented with UBI-style programs – as a have a few US cities.

Whatever your economic or political philosophy, I think we all recognize that technological innovation, recessions and pandemics hit us unequally, something even approaching an equal starting point could make a huge difference in the end results of a durable economic system.

I think we all can agree that inequity is hard-wired into our economic system.

Many are born into prosperity while many are largely locked out of it.

My bias is the more opportunity we can offer to more citizens, the more solid and resilient our economy will be and that is to everyone’s benefit.

Investing in each citizen and their future could be the best investment ever.

Editor’s note: The News Tribune had a couple recent articles related to universal basic income: https://www.thenewstribune.com/news/local/article247727750.html and https://www.thenewstribune.com/news/local/article247542860.html