America is at a Turning Point — How a Basic Income Guarantee and Free Market Capitalism Can Create a Great Society Allen Bauer Follow Apr 8, 2016 · 18 min read

Usually when the topic of a basic income guarantee is brought up it’s met by opposition that it cost too much, people shouldn’t be given money for free, people will become lazy and no one will work, or people should have to work for anything they get in life.

People freak out and call it socialist or communist and conjure up images of Stalin and Hitler. They imagine no one will be allowed to make anything above $1000 a month. Why should anyone be a doctor they say when he’s not allowed to make more than $1000 a month? Why not just stay home and not work and make the same amount?

Of course this is false. Under the basic income guarantee each adult in the US would receive $1000 per month and each child $400 a month. People are still free to work and make as much money as they want. Government doesn’t take over the means of production.

Everyone receives the money regardless of their need or income, so it’s a fair system. Only enough is given out for the basics and beyond that people do have to work for their money if they want more.

As far as affordability, about half the money is already there for what we currently spend on our present day welfare system. Many of the current government agencies could be shut down by simply giving money directly to the people instead of paying the government to oversee the programs.

The current system traps many people into generations of poverty by not allowing them to make money or save money without the fear of losing all of their current welfare benefits.

But enough about our normal dialog on basic income. Let’s take a deeper look at the non-financial benefits.

People won’t work if they get free money, or will they?

Let’s take a look at the lottery today. A lot of us play it from time to time. For a moment it gives us the chance to imagine what a life free of financial worry would feel like.

The problem with most of the lotteries is they’re set up to where only one person or a very few win millions and millions of dollars and everyone else stays poor. But what if instead of one or two multi millionaires the lotteries paid everyone a basic income amount of say $1000 a month for life?

We actually have one lottery in Michigan called Lucky for Life that sort of does that. While the top prize does pay $1000 a day for life, the 2nd prize is $25,000 a year for life. Of course they do offer lump sum payments in lieu of the lifetime payments. But wouldn’t it be a better idea instead of having 102 new millionaires a year to have 3102 people a year win $1000 a month for life?

Now imagine if you won $365,000 a year for life. Most of us would make some drastic lifestyle changes. A lot of people would quit their jobs. But now let’s say we won $1000 a month for life. It would be pretty cool to have that extra money. I probably wouldn’t quit my job or change my life in a drastic way though and neither would most people.

If I had a job I hated, I probably would use that extra money to get some training in a career I loved. I’d probably use that money to pay down debt, start an emergency fund, college funds for the kids, buy a house or use the extra money to pay off the mortgage quicker.

Nothing drastic or disruptive, but it would have a huge long term positive impact on my life.

Less stress on the poor and middle class.

Most of us would feel a lot less stress and financial worry in our lives. A lot of us tend to think this would only benefit the poor. But even if you’re middle class and have a good job, house, career and family, think about how much better it would feel to know you have extra money coming in each month guaranteed.

Let’s take the average middle class family with 2 kids. That would be an extra $2800 a month coming in (2 adults at $1000 per person and 2 kids at $400 per person). Now the stress of a job loss due to the economy or corporate buyout or merger is reduced because we know we still have $2800 a month coming in. Normally if we lost our job we go to $0 per month and then watch our savings deplete rapidly which causes huge stress levels.

Less stress leads to better health.

The facts are most of us are stressed out. Stress leads to medical problems. Medical problems lead to higher medical costs and loss of quality of life. With less stress we can live a few years longer and healthier. We could also reduce the cost of healthcare nationally.

Less stress lead to better relationships.

One of the major causes of arguments and divorce is money and finances. Money won’t solve all of our problems but with that stress gone we can focus on what’s truly important in our relationships.

Empowerment of women.

Another good thing about a basic income guarantee is it would empower women by giving them their own financial freedom. How many women today stay in a bad or abusive relationship for financial reasons? How many are trapped in low end jobs because they need more flexibility to juggle family and the needs of their kids? Having money for the basics so that worry is gone will give power back to women.

Empowerment of workers.

It’s a fact that most workers wages have remained stagnant for decades even though profits have massively increased. Many skilled workers through no fault of their own found themselves out of work due to the financial melt down on Wall Street.

Companies made massive layoffs while top level managers received huge bonuses. Workers quickly blew through their savings and cashed in their retirement plans at penalties. Many lost their houses and everything they had.

They were forced to take jobs below their skill levels often at part time so their employers could avoid paying health insurance and other benefits. Right to work laws were passed in half the states that have weakened unions. When unions are weaker wages fall not only for union workers but for all workers.

With a basic income guarantee workers no longer need fear having all their income cut off. If they are in a crappy low wage job where they are treated badly they are more likely to quit and move onto a better job.

Many times workers have either time or money but not both. This prevent them from going to college or learning a new trade or skill. With the basics now covered a worker could afford to take a brief break from work to gain new skills to land a job they would prefer to work at.

In higher costs cities that still pay low minimum wages workers now have the freedom to move to lower costs areas and find employment there. This free market effect would force employers in higher cost areas to raise wages or risk losing workers moving away to lower cost areas. Right now most workers don’t have the financial resources be able to quit their job and lose all income plus the cost of moving.

Better for employers.

With a basic income in place and everyone receiving a government check, it would be the perfect time to implement a true national healthcare program that would require everyone to be covered. Part of the cost of this could be deducted right off the top of their check, much like Medicare Part B payments are taken out of Social Security recipients.

With everyone covered health insurance costs would go down. Part of the reason for high costs now is people tend to not purchase health insurance while they are young and healthy but then want it when they are older and more likely to incur medical expenses. This creates what the insurance industry refers to as adverse selection and drives health insurance premiums higher.

Perhaps we could further reduce costs by having one flat rate for everyone regardless of age or sex. So younger people would tend to pay more now but would enjoy not seeing their rates go up with age later on when they need coverage the most. Since the money is coming directly our of everyone’s basic income check people would not miss the money.

So why is this good for employers? Employers would no longer be the source for health insurance. Health insurance would be provided directly from the government. While there may still be some sort of health insurance tax to be split between the employer and employee, employers would be relieved of the burden of the cost of providing health insurance.

The biggest problem beyond the cost is not knowing how much it will go up each year. For employers this frees up not only money and gives price stability, but also frees up time and resources involved in ever changing compliance issues.

This ultimately leads to less employer stress. They can focus on their business and be out of the health insurance business.

Good for the Arts and Music

Everyone loves art and music but no one wants to pay for it. We’ve all heard the term starving artist for this very reason. But let’s face it art and music does create value. When vacationing many people would choose to visit a city with cool looking art and good music over a boring place with no art or music at all.

A basic income allows artists and musicians not to starve. If they choose to create value by creating art they are now free to do that without having to worry about their basic needs being met.

Eliminates Child Poverty

A sad fact today is many areas have a child poverty rate of around 20% to 25%. That’s one out of every 4 to 5 children growing up in poverty in what is supposed to be the greatest nation on Earth. Let that sink in a minute.

Just this week I drove down my street and noticed a house with all their belongings placed in the front yard. This was obviously an eviction or foreclosure. The saddest thing about it was seeing children’s toys there. I thought to myself what if that was my family. My daughter’s toys sitting out there as the snow came down. It really made me want to cry.

I did read a story this week too about a woman who’s family was just served with an eviction notice that won $500,000 on a scratch off lottery ticket. Part of me hoped that this was them, but it’s probably not. While I’m happy for this woman and her family, unfortunately the lottery isn’t a good system to save everyone.

Eliminates poverty and homelessness.

While child poverty is bad, what about people without children or who’s families were split apart because of poverty and now are homeless? While many cities including mine pass ordinances about homeless people begging for money, it really doesn’t address the underlying issue.

None of us want to see homeless people in the street or have to be worried about being approached by them. Some of us don’t mind helping them out, but we don’t want to be scammed either. Plus it creates a danger of crime with people having to do whatever it takes just to survive.

Reduces crime.

All of us want safe neighborhoods. No one wants to fear for their safety or worry about their house being broken into while they are away, or worse yet while they are there.

While money never will solve all crime, it can and does have a dramatic effect on reducing crime. Many people steal for financial reasons just to survive. It may seem easy to say just get a job, but some people can’t get a job. I mean think about it, would you hire an unkempt stinky person who is homeless and only has one set of clothes? They don’t have a phone to get ahold of them. It turns into a catch 22 situation where they can’t get a job because they are homeless and they need to have a home before they can get a job.

We could also put a stipulation that in order to keep receiving a basic income guarantee you would be required not to commit any serious crimes like violent crime or home invasion or stealing. Obviously people incarcerated would give up receiving their benefits, we could also have penalties for crime where their basic income could be temporarily terminated or permanently terminated. This income could also be used for victim restoration.

Allows mobility.

Let’s say I want to drop out of society and not work for a while or forever. Right now it’s hard to do with no income. With a basic income guarantee I still probably can’t do this in a high cost area, however it does give me the financial means to move to a low cost area such a rural area and live in the mountains along a stream in the woods.

I have the choice to escape the rat race of the high cost crowded city and move to a much smaller laid back place with a slower pace of life. Maybe I just need a long vacation or I want to write a book or manifesto. I now have the financial means to do just that. I can also come back from it whenever I like and probably be able to save up a good chunk of change since I’m not spending much money if any.

Allows us time with our family and friends.

Think about how busy we are. Many times kids grow up and leave the area in search of their own careers because the economy back home just doesn’t allow them the opportunities they need. With a basic income maybe the kids would stay back home knowing their basic needs are met and find a lower paying job in the area to make some extra money.

Or how about when a loved one has bad health or is in their final stages of dying? Most of us feel torn between taking off work and losing the income we need to keep our own family afloat and choosing to spend time with our parent, spouse, child or someone else close to us who is dying and in their final days.

Maybe instead of both spouses working one spouse may choose to stay home with the kids and raise them for a more tradition type of family some people dream of. I know my mom stayed home with me until I went to school then started her career back up again. Many times when families figure out the high cost of daycare and the low wage of the second spouse it doesn’t make sense to have them work especially if you have a guaranteed basic income.

Increased entrepreneurship.

Many people dream of starting their own business but can’t afford the risk of giving up a steady income from their job. With a guaranteed income people can now take that risk and not worry about meeting their basic needs while getting the business up and running.

With more entrepreneurship people become more self sufficient and create more jobs. Many people would be happier working for themselves instead of doing the dreaded Monday through Friday routine and going to a job they hate for 40 plus years of their lives.

Again this creates a happier more productive society.

Volunteer work.

People were asked if they would quit their job and stop working if they received a check for $1000 a month. Most people said they would not. But when asked what they thought most other people would do, most responded that they thought everyone else would stop working. So in general we tend to think everyone is lazy and will stop working with the exception of ourselves.

In real life studies there was a slight almost unnoticeable decrease in work by maybe an hour or two a week overall. Many people who chose to work for themselves, there was actually a large increase in the amount of time they worked. The only two groups in the study that stopped working were pregnant woman/women with small children and teenagers.

Most of the women returned to work once their children were in school full time. Most of the teenagers who quit work had a higher graduation rate. They chose to study instead of earn money which wasn’t needed since they had the basic income.

But one thing we also overlook is people who love to do volunteer work. Most of my friends who are retired and drawing a pension from work and/or social security seem to be more active than when they were working.

A lot of people choose to do volunteer work after they retire and no longer have to work for an income. They have their money and may enjoy some time at home and nice vacations, but most of them just can’t stand to sit still. So they get involved with groups and organizations that do a great deal for the local communities and volunteer their time and expertise. Many times they even take on leadership roles and greatly improve the effectiveness of the organization’s impact on the community.

Educational opportunities.

As I mentioned before many times we have time or money but never both. By having a basic income guarantee many people will then be able to afford to take the time off they need to pursue further educational opportunities. The more educated the people of our community are the better it is for all of us and the less likely they will need our support. In fact most will end up contributing more to society with their new skills.

Freedom not communism.

We need only to look back in history to the Soviet Union where everyone had a job. Not that the job was necessary or needed but the goal was everyone had a job. But overall their society was far from the utopian dream their leaders envisioned.

Many people tend to confuse a basic income with communism or socialism that crushes the will of the people and their dreams. However, communism and a basic income guarantee are at opposite ends of the spectrum.

In a communist society government controlled the means of production. They controlled most major decisions in a persons live such as where they would live, what type of job they would do etc. without the consent of the person involved.

With a basic income guarantee we simply replace the current welfare system with one that gives power back to the people to manifest their own destinies. It takes the power of the government away which usually holds people back and puts that power back into the hands of the individual.

People simply have a floor level of income that just barely keeps them above the poverty line and nothing more. If they want more it’s up to them. Businesses still control how they run their operations. People still decide what career they will go into, what type of education is best suited for them, and if they will start a business instead of working for someone else.

Overall a basic income guarantee gives freedom back to the individual. It takes that power away from the government and the corporations and puts it totally back in the individual’s hands.

A person is guaranteed nothing more than the basics and it this point to go beyond that I believe would be counter productive. This simply empowers the individual giving them more freedom and options than has ever existed in history.

Embracing automation and elimination the minimum wage.

Going along with the Soviet example above where jobs were simply created for people to have work and not because the job was necessary, this could free us up from this mindset we currently have when it comes to automation.

Today’s debates when it comes to jobs seemed to be centered around increasing the minimum wage first to $10.10 and hour and now all the way up to $15 an hour.

While $15 an hour may make sense for some high cost areas, it could be very disruptive for many low cost areas. While I believe a minimum wage if ushered in slowly and gradually can be a good thing for helping to provide a living wage. It is also counterproductive in some ways in that it fails people who are not working by making the income inequality gap even wider for them.

This is why I believe a basic income guarantee would be a better solution than increasing the minimum wage since it benefits everyone. With the basic needs of everyone being taken care of I also believe that a minimum wage would no longer be needed and could be eliminated or gradually phased out in reverse, slowly and gradually.

Now since everyone has a basic income we can finally decide if it’s better to have cashiers or automatic machines at places like McDonald’s without all the emotional arguments that go along with it.

If it’s all automated it eliminates a lot of jobs but also frees up labor where those former employees can move on to bigger and better uses of their time.

Think about when we first started out as humans on Earth. We were hunters and gatherers. Then came agriculture and changed the need for everyone to hunt and gather and allowed them to be more productive in other areas.

Then the industrial age came along and automated many of the repetitive manual labor tasks that were done by workers. At first it was disruptive with the loss of jobs, but quickly freed up and trained these employees to perform more productive tasks. As a result production increased.

We have same ability today. With artificial intelligence we are on the brink of automating perhaps 40% to 60% of all the current jobs today within the next couple decades.

Do we fight automation simply so people have a job and work like they did in the old days of the Soviet Union? Or do we provide everyone with a basic income guarantee and welcome in artificial intelligence which will massively increase production?

We can’t move forward with the old thinking of today that everyone must still work. What do you do with 40% to 60% of the population unemployed? How will we afford to take care of all of them using the outdated welfare system of today?

Someday in the near future we will have most of our trucking and taxi service done by robots, most of the restaurant service will be performed by robots, most manual labor job will all be done by robots.

So we have a choice to make. Move forward with basic income and automation or hold back automation and don’t implement a basic income. Not implementing basic income and moving forward with automation is really not an option. It’s more of a recipe for disaster.

With a basic income guarantee in place and no minimum wage, perhaps a better idea would be for employers to offer the same wage or even slightly lower wage but also giving employees stock options or profit sharing to all employees instead of just those in top management. This would allow employers to maintain stable labor costs, to avoid having to lay off people in down years with losses or low profits. At the same time it would give employees more of a chance to participate in increased profits of the company they work for. This results in a better partnership between employers and employees where everyone works together for the best interest of the company and each other instead of against each other.

Unifying our country.

We are at a turning point in our country today. On the surface things may appear that we are headed in two separate directions with each side heading to new extremes.

But it’s actually a natural reaction to the changes in our economy, technology and the way we work and produce. People are confused right now because things tend to look darkest before the dawn. They are afraid and think the problem can be solved by more liberalism or more conservatism.

But deep down I think many people realize even if their political party gained 100% control, things would still get worse instead of better. You see the problem is not a left or right problem anymore. What we need to do is take the best of both and make it work for us.

How do we do this? The basic income may seem like a liberal idea designed to give free money to everyone and not have to work for it. But the original backers of the idea were free market capitalists like F.A. Hayek, Milton Friedman and Charles Murray.

So why do liberals and free market economists agree on a basic income guarantee? Well the liberals like it because it does help the poor and middle class. It gives them enough to lift them out of poverty.

Those on the right or the free market capitalists like it because they know welfare will always be here, so why not take care of it in the most efficient manner possible. Once that is done, let’s move on to free market capitalism.

The main question we need to ask ourselves is what type of society do we want in the future?

As I mentioned America is at a turning point and we can choose what direction to go or we can fight it and let it drag us down a direction we don’t want to go.

If we do nothing and fight the changes that are coming we will eventually end up in society of very few at the top that own everything and the remaining majority in the peasant class who own nothing and simply try to survive in poverty.

Unemployment will eventually increase to 40% to 60% through automation. We cannot simply expect people to go back to school and learn new skills since we don’t even know what those new skills for those news jobs will even be yet. Yes, most of the new future jobs haven’t even been invented yet.

So we can choose a society like this of very few haves, who have everything and live a life of luxury while the majority of the have-nots will be living in squalor.

Do we, including the wealthy, really want a society where we see the sick and dying on the streets begging?

Or we can choose to become a new and great society. One in which everyone’s basic needs are met.

One in which people are able to achieve way beyond the basics with no limits to the wealth they may accumulate.

One in which everyone has dignity and the means to do whatever they want in life. Be it to learn and create new ideas, volunteer time, relax with their families, or work at careers and create wealth, they will have the means and freedom do this.

The choice is yours. Neither the left nor the right can save us. But the best ideas of the left and right combined can give us a society that the rest of the world will envy and use as a role model.

For those still wondering about how this would be funded check out my other article below.

Can We Afford a Basic Income?

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