“In January 2020, the CBO [Congressional Budget Office] projected that the federal budget deficit would total $1 trillion in 2020 and $1 trillion in 2021. Those projections are now obsolete. The CBO now projects the budget deficit in 2020 will be $3.7 trillion, which is nearly 18% of GDP: the largest deficit since 1945 (21 percent). The CBO projects that GDP will decline by 5.6% from October 1, 2019 to September 30, 2020. If that happens, this year's decline would be the largest since GDP fell by 11.6% in 1946. A deep recession will further increase the size of the federal budget deficit since lower economic activity will reduce tax revenues and increase some federal expenditures, such as unemployment benefits.” - The Post-Pandemic Economy: A Basic Outline of Things to Come
Poverty, income volatility, job instability, and lack of social mobility are real problems in the US. While most Americans manage to climb the socioeconomic ladder to achieve a decent version of the American Dream, some get stuck on the lower rungs. They need help. In previous posts (here, here, here and here), I proposed an Adult Student Basic Income (ASBI) that would effectively address these societal ills without diminishing labor market participation or labor productivity.
The ASBI would effectively address poverty, volatility of income, job instability, and insufficient social mobility without discouraging labor market participation and at minimal expense to most taxpayers. I had previously envisioned the ASBI would be $1000/month, but the post-pandemic federal budget is going to be under a lot of strain for several years and something’s got to give. So let’s reduce that to $900 a month.
The ASBI would provide a $900 monthly stipend up to six years total (minimum one month at a time) for adults enrolled at least part-time in approved postsecondary training and education programs, from ESL classes to apprenticeships to graduate school. The benefit would not be means-tested, so recipients could work as much as they want without jeopardizing their ASBI payments. ASBI payments would stop if recipients failed to meet participation and performance requirements but payments could resume following a reinstatement process.
An ASBI would be much more affordable if combined with healthcare spending reform. Several researchers have concluded that 20-25% of US healthcare spending is unnecessary. (See here, here, and here for details). That waste translates to around one trillion dollars a year. Mmmm. Now consider that almost half of 150 million US workers get health insurance through their employers and that private employers are currently spending an average of $20,000 a year on health insurance per employee. What if healthcare reform reduced the cost of employer healthcare benefits by 15%? That would translate to employers saving around $200 billion a year in benefits.
Why not implement a healthcare spending reform package that reduces employer healthcare benefit costs by at least 10% and then institute a new ASBI employer tax that collects about as much ASBI revenue as employers save thanks to healthcare spending reform? An employer ASBI tax actually makes sense, given that employers benefit directly from a skilled workforce. Plus, when coupled with healthcare spending reform, an ASBI tax would not increase the cost of doing business. A win-win proposition.
The ASBI would mostly pay for itself through reduced spending on other government programs, such as Federal Student Loans, Supplemental Security Income (SSI), Social Security Disability Income (SSDI), Temporary Assistance for Needy Families, Earned Income Tax Credit , and the Supplemental Nutrition Assistance Program. Pell Grants would be eliminated and many other safety-net programs would have smaller budgets because they are means-tested and anyone receiving an ASBI would either be ineligible for cash benefits or receive lower benefits from the other programs.
For example, the number of SSI and SSDI beneficiaries would likely go way down, because even part-time work jeopardizes eligibility for these benefits. The chance to earn more money would be an incentive to go for the ASBI instead of pursuing disability benefits, especially given that ASBI participation requirements would be compatible with many disabilities, e.g., flexible, self-paced online training with time spent on homework counting towards the overall time requirement. Having provided vocational counseling services to more than a thousand disabled adults, I'm fairly confident a good number of disabled people would be more interested in ASBI than in receiving disability benefits, not only because the ASBI is more generous than the average SSI/SSDI benefit but because recipients could supplement their ASBI with a little part-time work/occasional gig as their physical or psychological limitations allow.
I’m going to guess that around 45 million Americans would receive an ASBI per year. That’s more than double the number of adults who attended college or vocational school in 2018 (per the US Census Bureau). Note that the figure of 45 million year-round ASBI recipients has the same dollar value as 90 million half-year recipients.
Here’s how the funding might work:
What do you think? I think it’s brilliant. Pass it on to the next President.
—
Here are some other suggestions for strengthening the safety net during the coming hard times, care of Albert Hunt’s “Some realistic solutions for income inequality” (The Hill, June 10, 2020). I haven’t priced them out, but they seem like good ideas.
Enact the working families relief act, which would double the federal minimum wage over the next few years and expand the Earned Income Tax Credit (EITC). The Center for Budget and Policy Priorities estimates the higher minimum wage and expanded EITC would help 43 million Americans, including 8 million African Americans, and lift as many as 10 million children out of poverty.
Create a national “universal adjustment assistance” program that combines unemployment insurance and trade adjustment assistance for workers who lose their jobs to foreign competition. Such a program would also cover part-time workers, independent contractors and freelancers, as well as provide relocation help for jobs and retraining.
Provide universal pre-K for 3- and 4-year-olds. Pre-K would improve school readiness in young children, reduce child care costs, and eliminate a major barrier to work for caregivers.
Hunt also recommended an expansion of Obamacare, but I prefer my own healthcare reform proposal, which would provide universal coverage at less cost than the current system. For details on my proposal see Imagining a Post-Pandemic Future, Part II: Universal Healthcare on a Budget.