Sunday 17 December 2017

What If Everyone Got a $1,000 Check Every Month From the Government?

What would you do with an extra $1,000 per month? For a lot of Americans, it would go straight into the bank — either toward an IRA, an emergency fund, or some stocks and bonds. For even more of us, however, it would probably go toward some type of frivolous spending. We’d probably go out and make some ridiculous purchases, or go on vacation. That, interestingly enough, is actually what would be intended if the government was handing out checks. Under a national basic income program, that’s exactly what would happen, too.
We’ve written about basic income before. And while we’ll get into what a basic income program is and is not, as well as the pros and cons, what you need to know is that it essentially amounts to extra cash in your pocket on a monthly basis. Sounds great, right? Well, it can be — but mind you that it’s a program meant to replace all other welfare programs. Instead of getting subsidies or food stamps, for example, you’d be getting a cash payment.
Everybody gets one, too. Not just those who are in the direst need. So, while even the homeless and lowest-earners are getting a check, Jeff Bezos and Warren Buffett are as well.
But again, we’ll talk more about that in a minute. What you need to know is that support for a national basic income program is growing. In fact, some places around the country (and internationally) are actively experimenting with it. And new research is being done to see what, exactly, the fallout would be of implementing such a program on a national scale.
What do those studies say? And is there a real chance that America could see a basic income program actually spring to life? We’ll get into it all. But here’s a teaser: A new study says that the program wouldn’t only work, it would lead to incredible economic growth.
First, though: the ins and outs of basic income, and then, what would happen if we all received $1,000 checks on a monthly basis.

What is basic income? 

  • Everyone gets a cash handout under a basic income plan — regardless of income level.
First things first, what is basic income? We’ve already covered it in the simplest terms. It’s a program in which everyone (tax paying adults, that is) receives a cash payout from the government. This, instead of having these payouts go through traditional social programs, like SNAP or housing assistance programs. Its purpose is to help subsidize the cost of living for the population, especially as jobs become scarcer (due to automation, in many cases). If you were to receive a basic income of $12,000, for example, the presumption is that you’d use that money to pay for food, housing, and other necessities.
With the basics out of the way, let’s dig into a new study from the Roosevelt Institute that looked at what would happen if a basic income of $12,000 annually was instituted.

The Roosevelt Institute study 

  • The goal was to answer whether the economy can withstand large increases in federal spending, and what would happen as a result.
As you may have guessed, installing a basic income program would be incredibly expensive. Federal spending would, naturally, go through the roof. But the idea is that that extra income would be spent by those receiving it, thus spurring economic growth. When people have more money, they spend it, right? That’s the assumption, and the Roosevelt Institute, a left-leaning economic think tank, looked at a few different models and what would happen if they were codified. Specifically, there were three different payout levels that were modeled out over an eight-year period. The most successful? $1,000 per month, or $12,000 per year. The results are surprising.
Next: What a $1,000 per-month payment would do for the economy.

What would an extra $1,000 do for the economy? 

  • The headline finding: $1,000 payments would lead to $2.5 trillion in economic growth.
You can see the headline figure above: If every American adult received a basic income of $1,000 per month, the Roosevelt Institute’s model shows an economic boon of approximately $2.5 trillion. That is, over that eight-year period that is modeled out in the study, our GDP would increase by $2.5 trillion or by 12.6%-13.1%. Those aren’t small figures, and given how interested policymakers (like the president, especially) are in seeing some explosive economic growth, it’s hard to ignore.
Researchers looked at other variations, too. Including smaller payouts.

How about other variations? 

  • There were three variations analyzed: $1,000 payments, $500 payments, and $250 for every child.
The $1,000 per month scenario was one of three that the study looked at. The other two were $500 per month, or $6,000 annually, and $250 for every child. All three saw positive results or economic growth on some level. But the biggest and therefore the most interesting were the results from the $1,000 per month model. The model also predicts that the federal government would make up for the giant leap in spending through increased tax revenues as a result of the subsequent growth.
But let’s get back to that $2.5 trillion for a minute …

About that $2.5 trillion … 

  • Some big assumptions were made to reach that explosive conclusion.
You may be thinking that this all sounds crazy. The government couldn’t seriously expect to dole out $1,000 per month to the country’s ~320 million people and expect to somehow come out ahead. Well, your skepticism is warranted. Because there are some pretty big assumptions that the researchers make to arrive at that $2.5 trillion figure. The biggest assumption? That people would continue to work when the $1,000 payments kicked in — so, they weren’t giving up on their careers and simply living off of the extra $12,000 per year. It’s money on top of what they’re already making. It’s disposable income, in many cases.
We would imagine, though, that there would be a certain percentage of people who would quit working if money was arriving monthly. It’s just hard to say how many — but we know that this would throw the study’s findings off to some degree.
Next: How does this study jive with previous analyses?

How does this compare to other analyses? 

  • Experiments are ongoing.
This is just one study of several that are out there concerning basic income. We mentioned that there are some places experimenting currently with basic income policies, but we still don’t have a good sense of how it would work out economy-wide. There are some things to take into account, though, when it comes to a basic income. For starters, there’s inflation. We would expect interest rates to rise, too. Not only that, but there’s that big question of whether it would disincentivize work. While the Roosevelt Institute’s study gives us some blockbuster results, there are plenty of things to worry about.
Finally, what are the odds that a government program like basic income actually gets implemented in America?

Basic income in America 

  • Recent polling shows that support for a basic income is around 50%.
At the end, we’re left with one big question: Is this actually something that could happen in America? For you dreamers, the answer is probably not. That’s not to say that it’s not piquing interest, however. Recent polls show that as many as half of Americans are at least interested in it (and who wouldn’t be when we’re talking about “free” money?). But given the current trajectory of American politics, which is steering much more toward corporate and business-friendly policies, rather than expanding social programs, don’t bet on seeing a basic income program come to fruition anytime soon.

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