Early in 2019, 100 randomly selected lower-income residents of Stockton, Calif., will start to receive $500 a month. In exchange, they’ll need to do, well, absolutely nothing, and can spend the money on absolutely anything.

This is free money, in every sense — and quite possibly a model for a not-so-distant-future U.S. economy, where a big share of Americans are retired and robots handle more jobs. In this America, men, women and children receive a government-guaranteed regular payment — a universal basic income — regardless of age or how much money they make, simply because they are Americans.

That is, if Americans can get beyond their ingrained belief that taking money for doing nothing — even to supplement their paychecks — is un-American.

In many ways Stockton, whose pilot program runs 18 months, is a perfect petri dish in which to rethink and innovate on the centuries-old dilemma of how to give more money to those who need it most. This racially diverse city of about 315,000, 80 miles from far wealthier Silicon Valley and San Francisco, was walloped in the 2008 financial crisis — the median home price plunged almost 70% — and declared bankruptcy in 2012. Though it emerged from that bankruptcy in 2015, Stockton is a stark example of how uneven the U.S. economy’s decade-long recovery has been. The city’s median household income is about $46,000, almost 25% below the national average. One in four Stockton residents lives in poverty. Unemployment, which approached 20% in December 2009, is currently 7.5%, still almost twice the state average.

Michael Tubbs, mayor of Stockton, Calif., endorses a form of universal basic income for the city. Jonathan Burton/MarketWatch

Stockton’s progressive, Stanford University-educated mayor, 28-year-old Michael Tubbs, is a Stockton native raised by a single working mother. In an interview recently in his bright, modern office reflecting a revitalized downtown Stockton, Tubbs said he was skeptical at first about basic income, but has since become “more and more convinced” that the guaranteed money can make a meaningful difference.

“You’re given the ability to make decisions without restrictions and guidelines about what you can and can’t spend it on,” he said. That’s not the case with most entitlement programs. “Providing people cash with no strings attached is a form of empowerment.”

The newest research shows that unconditional cash transfers boost work productivity and quality of life, including better mental and physical health, and reduce crime. A study by the Roosevelt Institute in New York, a left-leaning think tank, concludes that giving $500 a month to every adult American could meaningfully grow the U.S. economy and address its widening wealth gap. (The top 1% of Americans now receive 20% of the national income, while those in the bottom 50% receive 13%; in 1980, the numbers were essentially reversed, at 11% and 20%, respectively, according to the 2018 World Inequality Report.)

In the U.S., the rich are taking more; not so in Europe. World Inequality Report

Yet basic income in the U.S., characterized as a utopian solution by its true believers but as welfare, socialism or worse by its detractors, has gone nowhere. Basic income did enjoy a bit of a heyday in the U.S. in the 1960s and 1970s and was even embraced in conservative circles; free-market economist Milton Friedman went so far in 1962 as to propose a negative federal income tax that would guarantee a basic income to the poorest Americans while also incentivizing work. Other ideals of the era — the four-day workweek, the 30-hour workweek, the all but limitless vacation allotment — have fallen by the wayside, even as U.S. labor conditions have worsened.

Since then, political will for basic income has been essentially nonexistent in the U.S. on a national level, though Hillary Clinton said in her memoir, “What Happened,” that she considered making basic income for all Americans a 2016 presidential campaign promise. The closest the U.S. has ever come to implementing a guaranteed income was the Family Assistance Plan in 1969. This legislation, inspired by Friedman’s idea, would have given $1,600 a year (about $11,000 today) to every family of four with no income. It passed the House but not the Senate. The driving force behind this radical notion? Republican President Richard Nixon.

“ By 2030, automation will have displaced 73 million U.S. workers. ”

Universal basic income 2.0

Half a century later, basic income is getting a high-tech, data-driven makeover built for today’s world. Notably, some of Silicon Valley’s elites are sharing their fortunes and time to find ways to guarantee all Americans a regular supplemental income, regardless of need. The Stockton program, for example, is funded by a $1 million grant from the Economic Security Project in New York, a private effort that includes Chris Hughes, a Facebook FB, +0.20% co-founder. Basic income also has support from high-profile entrepreneurs including Facebook’s Mark Zuckerberg, Tesla’s TSLA, +1.95% Elon Musk and Virgin Group’s Richard Branson.

Their motivation stems largely from concern about the future: the impact that technology, robots and artificial intelligence will have on how people live and work. As union membership has been nearly halved to 11.1% of American workers in the past 35 years, according to the Bureau of Labor Statistics, protections are few and far between. A 2017 report from New York–based business consultant McKinsey & Co. estimates that by 2030 automation will have displaced 73 million U.S. workers, with up to 54 million — one-third of the U.S. workforce — needing upgraded skills and new jobs.

By 2030, one-third of the U.S. workforce will need upgraded skills and new jobs.

“All of those things make work very different,” said Natalie Foster, co-founder of the Economic Security Project. “This is a moment to rethink the social contract. The future of money may also be the future of time. Can we imagine a world where people have money, but they also have time? What they do with that could quite literally change society.”

“ Can ‘free money’ be made palatable to a public that is highly derisive of government handouts? ”

First, advocates must change American society’s mostly negative reaction to basic income. Can “free money” be made palatable to a public that is highly derisive of government handouts?

Ironically, this same public has no problem with such “handouts” as income-tax cuts and home-mortgage deductions. “We give money away for free to rich people all the time,” said Rakeen Mabud, program director of the Roosevelt Institute’s 21st Century Economy and Economic Inclusion programs. “There’s no stigmatization of how they pay for it; we don’t ask what they do with it.”

In fact, when proposed as a way to counter job losses to technology, basic income finds firmer support. A Northeastern University/Gallup poll taken in October 2017 shows Americans about evenly split on a guaranteed minimum income for workers whose jobs are replaced by artificial intelligence, with 48% in favor and 52% opposed. Additionally, 46% of respondents said that, under those circumstances, they would pay higher personal income taxes, while 80% agreed that companies profiting from AI should pay more taxes to help finance a national UBI program.

Dividend for Americans

Still, a true UBI — money for nothing, for everyone — is a different story. To tell it in a way people will hear, some proponents suggest that basic income be presented and structured as a universal dividend. Much as stockholders are given a share of a company’s wealth, Americans would receive a common share of the national wealth. Unlike Social Security, this dividend would have no age requirement. It would be your right as a resident of the U.S. Call it an American Independence Dividend.

“It’s not welfare; it’s not a tax,” said entrepreneur Peter Barnes, author of “With Liberty and Dividends for All: How to Save Our Middle-Class When Jobs Don’t Pay Enough.” “It’s an asset that belongs to all of us equally. Everybody should get it.”

In the corporate world, of course, dividends are sacrosanct. Mature companies are prodded to part with cash that isn’t being used to grow the business or buy back shares. For example, stockholders pressured Apple AAPL, +1.02% to share its massive cash hoard, which the company agreed to do in 2012. Apple has since increased its dividend payout annually and now is seen as a reliable option for dividend-focused investors.

“ Where will the money come from? That’s the multi-trillion-dollar question. ”

The corollary for a government is that a mature country such as the U.S. could offer a dividend to its citizen shareholders. But where will the money come from?

That’s the multi-trillion-dollar question. Financing a common national dividend by increasing the federal debt or raising personal income taxes would be a tough sell. Alternatives include expanding the earned-income tax credit, a longstanding, popular federal program that currently benefits 26 million working American families and individuals. Also discussed is a tax on shared resources; Clinton, for example, contemplated taxes on oil and gas drawn from public lands, financial transactions and carbon.

Hughes, the Facebook co-founder, has endorsed modernizing the earned-income credit to give recipients more money in his recent book, “Fair Shot: Rethinking Inequality and How We Earn.” He also has put forward a unique idea to shower every adult American with cash: a data dividend, paid for from a national fund created by a tax on large companies that profit from internet searching and surfing.

“The amount of data we produce about ourselves and the profits from it would almost certainly grow in coming years, causing the fund to grow very large, very fast,” Hughes wrote in the Guardian earlier this year. “You could easily imagine each individual receiving well over $1,000 a year in just the next decade.”

American Solidarity Fund

Perhaps the boldest plan yet to provide Americans with a universal basic income is the American Solidarity Fund (ASF), a dividend-paying social wealth fund for the U.S. that its creator, Matt Bruenig, founder of the People’s Policy Project, unveiled in August.

Every American over the age of 17 would be given one share of the ASF, which could not be sold and would pay a regular dividend.

The ASF would be capitalized primarily with taxes and fees on private wealth, publicly traded companies and financial transactions. A public entity would manage the fund and its investments.

A one-time 3% tax on the market capitalization of U.S. public companies would seed the fund with around $1 trillion in cash or stock. For example, Apple and Amazon.com AMZN, +0.66% , each currently valued at around $1 trillion, would kick in roughly $30 billion apiece.

Then, an ongoing market-cap tax of 0.5% would keep money flowing into the ASF. The fund would also receive proceeds from a 5% tax on initial public stock offerings, and a 3% tax on mergers and acquisitions. The plan also includes smaller taxes on stock, bond and derivatives trades.

The ASF could also issue government bonds with a low interest rate and invest the proceeds in stock-index funds with the potential for higher returns. For example, the interest rate on one-year Treasurys averaged about 3% between 1990 and 2017, while the S&P 500’s total annualized gain averaged more than 11%, Bruenig observed. Had the ASF existed then, it would have realized this 8-percentage-point difference in return.

A stock-owning social wealth fund could also benefit from the government’s requiring the Federal Reserve to buy stocks instead of Treasury bonds with the money it prints. The Bank of Japan has done this for several years, Bruenig pointed out.

“This is a piece of the capital stock of the country that we all collectively own and collectively benefit from,” Bruenig said in an interview. “All 300 million of us are going to come together and collectively own 30% of the country’s wealth.”

“ The Alaska Permanent Fund is the gold standard for what basic income advocates believe the U.S. can achieve as a nation. ”

Alaska’s template for the U.S.

Sharing the wealth, collective ownership and being handed a dividend check simply because of where you live runs counter to the rugged individualism that many see as a key feature of the American character. In fact, residents of one U.S. state with a reputation for being rugged and individualistic have been tapping a social wealth fund for almost 40 years.

The Alaska Permanent Fund is the gold standard for what basic-income advocates believe the U.S. can achieve as a nation. A Republican governor, Jay Hammond, led a campaign in the mid-1970s for Alaskans to partake in the profits that companies made from the state’s oil and other natural resources.

Every man, woman and child in the state has since received a royalty share from this revenue through Alaska’s Permanent Fund Dividend (PFD), which made its first payout in 1982. The dividend amount changes year to year; in 2018, the PFD is $1,600 and available to anyone who has lived in Alaska for at least one calendar year — $6,400 for a family of four — no strings attached.

The now-$65 billion fund has become an indelible symbol of Alaska. It’s popular with Republicans and Democrats, conservatives and liberals. Bill Wielechowski, an Alaska state senator, calls the PFD “the third rail” in Alaska politics. “Everyone has a different idea of why they like it,” he said. “But everyone likes it.”

Moreover, research shows the PFD does not discourage people from working; the dividend is treated primarily as a bonus — most recipients use the cash to pay bills or save it.

“It is not looked at like an entitlement. We talk about it in terms of how we share our resources,” Wielechowski said. “This is your share, just like you own stock. Why should the benefit go only to a select few? It’s a way to make sure that everyone has a piece of the pie.”

Not incidentally, Alaska, helped by the PFD supplement, has the lowest level of income inequality of any U.S. state.

Social wealth movement

Americans’ rising financial insecurity due to automation and artificial intelligence is an obvious catalyst for the creation of a social wealth fund envisioned by the likes of the People’s Policy Project’s Bruenig. But if a universal, national dividend has a place in the future of Americans’ money, a groundswell of grass-roots support will need to grow among those who would benefit.

That’s what happened with Social Security, which came about after millions of retirees banded together in the early 1930s to support a government pension to care for them in old age. As their numbers and clout swelled, lawmakers listened; President Franklin Roosevelt signed the Social Security Act in 1935.

Barnes, whose proposal for an Alaska-like national fund appealed to Clinton, said he believes that a 21st-century version of the Social Security movement would lead to a universal dividend for Americans.

“At some point, some plan will catch on, and that will generate the noise the political class will respond to,” Barnes said. “It’s going to begin as something smaller; hopefully it will be set up in such a way that it will grow over time. If the robots come and put everybody out of work, fine — there’s an infrastructure that can deal with it.”

Jonathan Burton is a commentary editor at MarketWatch.