On the 21st Century: It is Time to Change How U.S. Citizens Are Compensated

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress and signed into law by President Trump on March 27th, 2020.  It is estimated to cost U.S. taxpayers $2.2 Trillion.  A small part of the package includes direct payments to individual taxpayers, estimated in the amount of $290 Billion, or less than 13.5% of the total bailout. 

Besides providing cash to small businesses to keep employees working, CARES gives wealthy real estate investors an estimated $1.6 million each in tax breaks.  Before the President’s signature had time to dry, however, stories of giant publicly-traded corporations taking money intended for small businesses began appearing everywhere.  These corporate giants left nothing for small business.  Weeks later Congress had to pass additional legislation adding $480 Billion to the program.  It appears that most of this bailout money is not going where it was intended to go, to help save our economy, but instead is going into the pockets of those already wealthy.

According to Hale Stewart, in a piece he wrote for The New York Times  in 2010, 70% of U.S. economic growth is driven by consumers, ordinary Americans spending money on clothes, food, cars, boats, medicine, homes, electricity, lumber, haircuts, dry cleaning, and so on.  Knowing this is true, then why do politicians consistently give money to businesses in an economic emergency rather than giving money directly to consumers to spend?  It makes no economic sense.   At best, only 30% of bailout money should go directly to businesses, and then only to those most affected by whatever emergency has arisen. 

The COVID-19 pandemic has shown the glaring inequities in the U.S. economy.  Large numbers of our citizens are employed in low paying jobs.  This means people don’t have the cushion required to keep the economy going if they lose work for a few weeks or a month.  Give them the money they need to live a basic life. Let them work and earn additional income in our new “gig” and online full-employment economy. Then, get out of the way as they rebuild the U.S. economy in record time.  Quit thinking 19^th and 20^th Century store-front businesses need to be kept alive in the 21^st Century with bailouts.  They do not. 

If you believe in capitalism as a valid economic system the only question you need ask is, “How do I get cash into the hands of consumers?”   Do not attempt to save the businesses, save the people and then watch these consumers save businesses.  Consumers will choose what businesses survive in our new economy.  If consumers want Amazon to grow, it will grow.  If the people want environmentally sound businesses to grow, then these businesses will prosper.  A true capitalist would let consumers decide what is important in America.  It is not the job of politicians and lobbyists and corporations. 

How can we do this?  Start by giving every U.S. citizen over the age of 18 a minimum payment of $2,000 per month.  Make no exceptions for their income.  Make no exceptions if they are married.  Make no exceptions if they are living with their parents.  Make no requirement that they work or be employed.  Give every citizen $24,000 a year, tax free, via direct deposit or debit card recharge.  Let them spend it any way they see fit.  Whether they choose travel or rent, food or video games, it’s their choice.  Call the program, Americans First.

Stockton, California, has been experimenting with this type of program for about a year.  The program gives a group of citizens $500 each month.  What the city has found to date is interesting.  Recipients are spending this "extra" money every month on food, merchandise, utility bills, and car repairs and gasoline.  People are continuing their employment and spending the money on necessities, not buying drugs or lazing about as warned by naysayers.

Americans First would assure those who already receive a Federal benefit, like VA disability, Social Security, SSI, or a Federal pension, would be paid a minimum of $2,000 per month.  If a recipient already receives $1,600 per month, she would receive an additional $400 each month to supplement her social security.  If someone receives more than $2,000 monthly from any similar source, that amount would stay the same.  However, only the first $2,000 would be free from Federal taxes.  Two adults in the same household would receive $4,000 monthly.  If they have three children under the age of 18, they still receive only $4,000.  There would be no reward for having children.  If the child is over 18 years, then that child would receive $2,000 in their name, not their parents. 

Giving U.S. citizens direct payments is not a new idea.  Interestingly, every time cash has been given to citizens in recent history it has been done by a Republican President.  Richard Nixon, George W. Bush, and Donald Trump have all given money directly to citizens.  You would not dare call these men communists, socialists, progressive, or even liberal.

Under the Nixon Administration, beginning in 1969, the Family Assistance Plan provided families with financial assistance ranging from $1,600 to $2,400 each month.  In 2008 President Bush provided checks in the amount of $600 to individuals, $1200 to couples and $300 for each child.  Social Security recipients received $300 each.  Extended in 2009 under the Making Work Pay Act, individuals received an additional $400, couples $800.  And, though to date not everyone has received their payment, President Trump personally signed checks in the amount of $1,200 for individuals and $500 for each child under the age of 16. 

Why did these Republican Presidents do this?  Nixon’s plan was to get rid of the need for welfare programs.  Bush’s plan was to get money flowing into the economy after the great financial crash of 2008.  And, of course, Trump’s plan is to get money into the U.S. economy during a worldwide pandemic.

Nixon’s idea was sound.  If every American has a floor, a bottom that provides food and basic shelter, there would be no need for “welfare” or even unemployment insurance.  If you eliminated these poverty programs you would chop well more than a Trillion dollars from the Federal budget.  Citizens would have basic income, enough to allow survival.  If someone wants a better lifestyle, they can have it.  They can work in the “gig” economy or become a politician or school teacher or labor as a policeman or Amazon warehouse worker.  Very few Americans will settle for the lifestyle a mere $24,000 a year provides.  And remember, they would pay taxes on every cent they earned over their $2,000 monthly base.

One of the reasons our economy has been so sluggish since the Great Recession of 2008 is the American people don’t have any money.  According to the Bureau of Labor Statistics the median income for a full-time wage or salary worker is $900 a week.  These low paying jobs provide barely enough for food and shelter, much less extra money to buy non-essentials.  It does not make any difference that, until recently, unemployment was very low.

My plan puts money in the hands of people to pay for their bare necessities.  And, even a minimum wage job paying $7.25 per hour would give an individual another $15,000 to spend and push the economy out of its doldrums.  Americans First will allow us to see economic numbers not seen since the 1960’s or 1980’s.  In the 1960’s, even with a war raging in Southeast Asia, the average growth in the Gross Domestic Product (GDP) per year was 4.19%.  The 1980’s witnessed growth so dramatic President Clinton was able to turn the budget deficit around.

On the other hand, between 2008 and 2018, the GDP has risen an average of less than 1.6% a year. It has been slow to rise because the only people with money are the very rich.  They are spending all they can, but there are too few of them to bolster the economy.  We need to recognize that when all citizens have money to spend, the U.S. economy grows exponentially. 

Paying for this is relatively easy with the elimination of welfare programs like Medicaid, Aid for Dependent Children, private school vouchers, food stamps, unemployment insurance, and more.  Though you would be adding monthly to some payments for veterans and social security recipients, for example, you would subtract out those amounts that are already being paid to these people as that money is already budgeted.  For example, Social Security already pays out about $1 Trillion per year in benefits.  Thus, only the additional money would be added to the Federal budget monthly and Social Security is a self-funded program through FICA taxes. 

Example of New Federal Income Tax Rates 

Couple these budget savings with a progressive graduated Federal income tax program that collects taxes on all income over $24,000 per year and you’ve turned America around without bailing out any business.  The new Federal income tax schedule would eliminate all standard and itemized deductions.  No more maximum inheritance tax rates.  No more different rates of taxation for investors.    Money earned would be taxed no matter how it was earned…death, investment, or salary.  Individuals are individuals. No more married deductions and no more deductions for dependents.  Tax brackets for individuals would return to mirror those formerly used by the Eisenhower administration as you can see here. 

Corporations would be taxed similarly.  The only deductions allowed for corporations would be for reinvestment, e.g. for equipment, people, or real estate.  If you are not growing your business, you pay higher taxes.  The new code would provide straight dollar deductions.

I know many could argue against such an approach.  For example, is $2,000 the right amount for a floor?  What taxes should people pay for income generated above the floor? Will people work if they are given basic income? 

What I do not think can be argued, however, is that giving money to consumers, in a consumer-driven economy, is nonsense.  It is a better idea for our 21^st Century economy than 19th Century Darwinism.  Capitalism is about business, not people.  American citizens should not be treated as some sort of Darwinian experiment.  Businesses should be allowed to go under if they do not provide a good product, presented at the right price and at the right time.  

Because there is no work available or the work is changing faster than the skill sets or the only work available pays starvation wages is not an excuse to allow people to go under, to die.  Allowing people to die because capitalism has not evolved with the times would be worse than Darwinian, it would be immoral and, perhaps, criminal.