Universal Basic Assets: The Tip of the Universal Basic Income Arrow
We Need a Better Solution for Asset Poverty
Wage income has plateaued for most Americans while debt has grown, so talk of and experimentation with a Universal Basic Income (UBI)—a few hundred to a few thousand dollars a month for every adult in the country—is well-founded.
But UBI doesn’t sufficiently address asset poverty, which dwarfs income poverty in both magnitude and impact. A third of American families don’t have enough savings to survive three months at the poverty line with the loss of a job. Most American families don’t have a nest egg to invest in a downpayment on a home, capital for a small business or a college education. Two-thirds to four-fifths of families of color lack this essential nest egg.
As described in my upcoming book, A Few Thousand Dollars: Sparking Prosperity for Everyone, the idea of Universal Basic Assets (UBA) responds directly to asset poverty by offering matched savings based on a sliding scale for all people to invest in savings, entrepreneurship, homeownership and higher education. When you save a dollar to invest, you earn a matching dollar (or three, depending on where you fall on the sliding scale). Unlike most universal basic income proposals, UBA also helps close the vast racial wealth divide.
Both Experimentation and History Show Universal Basic Assets Work
The success of UBA hinges on an idea that has been confirmed by decades of rigorously-evaluated policy ideas: given a reasonable opportunity—a few thousand dollars and peer support—middle- and low-income people, women and people of color will start businesses, create jobs, buy and keep homes, go to college, have careers, save money and invest. That is, they will grow the economy from the bottom-up.
This conclusion is also confirmed by American history. Democratic investments in the common genius—universal public education, the Homestead Acts, the creation of the 30-year mortgage and the secondary market by the federal government, and most essentially, the G.I. Bill—helped millions of families prosper and build intergenerational wealth. However, they bypassed people of color, women, foster children and immigrants, who are disproportionately on the worse end of America’s yawning wealth gap.
The G.I. Bill was actually an amalgam of UBI and UBA. Returning G.I.s received $20 per week for up to 52 weeks and low-interest college, business and home loans. The asset component of the G.I. Bill had the more transformative effect. Returning G.I.s took income benefits a third of the allowed times—an average of 18 weeks—while millions used the bill to attend college, start hundreds of thousands of businesses and create the suburbs. The returns to bill’s education benefits alone were $7 for each $1 invested.
A Prosperity Bill for the 21st Century
We need to deal working families at all income levels back into the American economy—the same way dealt returning G.I.s back in after World War II. My UBA proposal, which I call the Prosperity Bill (with further detail in A Few Thousand Dollars), would marry the G.I. Bill and the 401(k), two remarkably effective development policies of the last century.
The Prosperity Bill offers sliding scale, matched savings for five overlapping accounts:
- Universal Savings Accounts (USAs) to insure families can create a reserve of savings for accidents and illnesses
- Matched Business Accounts to spur entrepreneurship
- Home Accounts to restore homeownership and enable every family to salt away a downpayment
- Generation Accounts to insure successive generations of kids aspire to college and build intergenerational wealth
- Prosperity Accounts to underwrite all the above and more (such as saving for citizenship fees and assistive technology)
The Prosperity Bill Answers Hard Questions
Challenging questions for the UBI movement have clear answers from the Prosperity Bill.
Where would the money come from? UBI programs are estimated to cost as much as $2.9 trillion a year. That would require gutting the entire existing safety net and imposing large tax increases on wealthy households. But we already have a $700 billion annual family asset-building budget in the form of tax subsidies for homes, businesses, education, retirement and saving—think the mortgage interest deduction, preferential capital gains rates, pension fund exclusions and the 529 college savings program. These subsidies are enormously unfair and unproductive: Millionaires get an average annual benefit of $160,190 while working families (the 60% of Americans earning under $55,000 per year) get an average of $226 each year.
If we simply reallocated half of the existing federal wealth budget, we could match the first $1000 in savings of every American on a sliding scale. This would also underwrite progressive educational endowments for every child, which could exceed $50,000 in college savings by age 18—obviating $100,000 to $200,000 in college debt.
Have recipients earned these benefits? Matched savings accounts demand that participants save and use their accumulated benefits to underwrite high-return investments. These undertakings are hardly self-executing—they require, expect and reward the genius and work of common people.
What if large swaths of jobs continue to disappear? UBI seeks to replace the need for jobs, but does little to create them or increase wages. On the other hand, new businesses have created all net new jobs in the last 30 years, and the nest eggs created by the matched saving of the Prosperity Bill would build the personal savings that provide seed capital for most new businesses. The best defense against job loss and wage stagnation may well be a vigorous offense in business and job creation.
How do we address the racial wealth divide? UBI does little in this regard. Since the Prosperity Bill is on a sliding scale, the poorest fifth of Americans would get more matched funds for every dollar of savings, and the poorest fifth are overrepresented by people of color.
We can fund Universal Basic Assets and unleash the full productive capacity of the American people without spending a dollar more in our federal budget. Decades of rigorous innovation and history show the way. We just need to pay attention to what we have learned and have faith where it should have always been: the common genius of the American people.
All attendees at the Prosperity Summit will receive a pre-release copy of A Few Thousand Dollars. If you are not attending, please pre-order a copy so you can be among the first to read it upon its official release October 9, 2018. Let us know what you think of the book on social media using #AFewThousandDollars.