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Economic Security Should Be Lifelong

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In 1935, President Franklin D. Roosevelt’s Committee on Economic Security defined economic security as “the assurance of an adequate income to each human being” at every stage of life, and called for its establishment in the­­ US through a piecemeal process. Out of the committee’s work came what we know today as Social Security and unemployment insurance, the first pieces of a grander vision.

Eighty-four years later, the lack of economic security in America remains staggering.­­ Yes, thanks to Social Security and Medicare, insecurity among the elderly has declined dramatically, but among nearly everyone else it is as high as ever.

The root of today’s insecurity is insufficient labor income. This is due to multiple factors—globalization, automation, financialization, monopoly power, concentration of wealth and decline of labor unions—none of which are going away soon. Thanks to insufficient labor income, tens of millions of Americans live today on the financial edge, a paycheck or two away from existential panic.  This isn’t good for their health or stability, or that of their families and communities. It costs our country dearly and we need to address it head-on.

Economic security depends on three things: enough income to pay bills, a cushion for hard times, and the assurance that some money will be there for the rest of your life, no matter what. It is the sum of these elements that heightens peace of mind and the ability to save, pay off debts and plan for the future.

The appropriate response to our increasing economic insecurity is to extend economic security downward from old age to birth, making it a lifelong right. This could be done through a universal basic income, with a uniform amount of money distributed to every legal resident. Or it could be done less expensively using two venerable institutions, the Social Security Administration and the Internal Revenue Service.

The Social Security Administration sends monthly wire transfers to over sixty million Americans, most of whom are over 65. Recently, the National Academy of Social Insurance, a think-tank devoted to economic security, published a paper exploring the idea of lifetime assured income—a monthly payment to all Social Security cardholders regardless of age. (Disclosure: I was a co-author.) 

Unlike old-age pensions, lifelong assured income would not be funded by payroll taxes; given that its purpose is to supplement labor income, it can’t be financed by further taxing it. Instead, a variety of non-labor revenue sources would be used to provide a predictable flow of non-labor income to everyone. One potential revenue source is a national value added tax (VAT) similar to those in Europe. Democratic presidential candidate Andrew Yang has proposed funding a $1,000-a-month “Freedom Dividend” with a ten percent VAT.­­ Like any consumption tax, a VAT is regressive if it stands by itself but becomes progressive if all its revenue is recycled equally.

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Thanks !

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