Assuring Security for All

Sections:

• There Is an Alternative, and Its Rising
• Protecting Nature's Gifts
• Building the Hometown Commons
• Sharing Knowledge and Culture
• Assuring Security for All - CURRENT PAGE
• Reclaiming Our Time and Quiet 
• A Path Ahead 

Private savings aren’t enough. We need universal trust funds and ways to share risk. In pre-industrial days, common pastures, streams and woods provided food and fuel for all. Then, the commons were enclosedand people moved to cities.

Writing at the time of these enclosures, Tom Paine argued that, since loss of the commons meant loss of sustenance, displaced citizens ought to be compensated. To do this, he proposed a ‘national fund,’ financed through a tax on private land, that would pay yearly dividends of roughly $2,000 (in current dollars) to everyone.

Paine’s prescription remains remarkably relevant today. Not just land, but water, air and other gifts of nature are being claimed by private corporations. At the same time, people need more dollars than ever just to survive. Why not use nature’s wealth to augment everyone’s wealth?

Instead of a ‘ownership society’ in which everyone looks out only for themselves, America could be a ‘co-ownership society’ in which many assets and risks are shared. The following models show how and why.

Since the Alaska Permanent Fund began paying equal dividends to each Alaska resident in 1982, the state’s population has risen by about 50 percent, the Permanent Fund has grown from $4 to $30 billion, and Alaskans have received more than $13 billion in dividend checks. Because distributions are based on 5-year average earnings, dividends are still depressed by the dot-com crash and 2002–03 recession.

The Alaska Permanent Fund

Under Alaska’s constitution, the state’s natural resources belong to its citizens. Jay Hammond, Republican governor of Alaska in the 1970s, took this provision seriously. When oil began flowing from state lands on the North Slope, he pushed for the royalties to be shared among Alaska’s citizens. Many battles later, the legislature agreed to a deal: 75 percent of the state’s oil revenue would go to the government as a replacement for taxes. The remaining 25 percent would flow into a Permanent Fund, which would be invested on behalf of all Alaskans equally.

Since 1980, the Permanent Fund has grown to $30 billion and paid equal dividends to all Alaskans (including children) out of the income earned from its investments. Annual dividends have ranged from $800 to nearly $2,000 per person, depending on the performance of the stock market. In effect, the Permanent Fund is a giant mutual fund managed on behalf of all Alaskan citizens, present and future. Even after the oil runs dry, it will continue to benefit everyone. Economist Vernon Smith, a Nobel laureate and libertarian scholar at the Cato Institute, has called it ‘a model governments all over the world would be well-advised to copy.’

An American Permanent Fund

Entrepreneur and author Peter Barnes has taken Alaska’s model a step further. He’s proposed an American Permanent Fund which would pay dividends to all Americans, not just those who live in Alaska. Revenue for the nationwide fund would come from several sources, the most significant of which is the auction of permits to emit carbon dioxide. Gas, oil and coal suppliers would be required to buy enough permits to cover the CO2 emitted by the fossil fuels they sell.

‘Just like oil for Alaskans,’ Barnes explains, ‘the air is a shared inheritance of immense value to all of us. At present, we let polluters dump their trash into our asset for free. The result is far too much pollution. If, instead, we charged polluters for diminishing our common wealth, we’d gain in two ways: first, there’d be less pollution, and second, there’d be income for everyone.’

For the average person, dividends from the fund would offset the higher prices they’d pay for fossil fuels; people who use car-pools or public transit would come out ahead. Everyone would gain from cleaner air, a more stable climate, and less dependence on foreign oil.

I T ’ S  O U R  W E A LT H
Nature’s gifts, wrote Tom Paine in 1790, are ‘the common property of thehuman race.’ When they are privatized, citizens must receive payment in exchange.

E M P O W E R M E N T,  N O T  D E P E N D E N C Y

The late John Rawls, one of America’s leading philosophers, distinguished between predistribution and redistribution of income. Under redistribution, money is taken from‘winners’ and transferred to ‘losers.’ Under predistribution, the playing field is leveled byspreading ownership of property. The property itself then distributes income to all.

According to Rawls, while redistribution creates dependency, predistribution empowers. Tom Paine would have agreed.

B R I TA I N ’ S  T R U S T  F U N D  B A B I E S

Every child born in Great Britain after 2002 has a trust fund. The government kicks in $440 to start the funds (children in the poorest 40 percent of families receive $880). It makes an additional gift at age 7. All interest earned by the funds is tax-free.

Parents, family and friends can add up to $2,000 a year to children’s accounts. At age 18, the children can decide how to use their funds.

YA N K E E  W E A LT H  R E C Y C L I N G

If wealth recycling sounds un-American to you, consider professional baseball, football and basketball. Each league shifts money from the richest teams to the poorest, and gives losing teams first crack at new players.

Even George Will, the conservative columnist, sees the logic in this. ‘The aim is not to guarantee teams equal revenues, but revenues sufficient to give each team periodic chances of winning if each uses its revenues intelligently.’

A grubstake for every child

Though America thinks of itself as a land of opportunity, not everyone gets the
same chance to succeed. One out of five children is born into poverty, while afew inherit millions. One way to even life’s odds is to give every baby a trustfund. Britain has done this, and America should do it, too. Here are two ways.

Senators Rick Santorum (R-PA) and Charles Schumer (D-NY) have sponsored legislation to create tax-free savings accounts for all newborns. The federal government would deposit $500 into each account ($1,000 for children in
low-income households). When they turn 18, the children could use their savings for further education, home purchase or continued investing.

Yale professors Bruce Ackerman and Ann Alstott have gone further, proposing
‘stakeholder grants’ of $80,000 to nearly all American children when theyturn 18. Use of the money would be unrestricted, but there’d be two conditionsfor receiving it: a high school degree or equivalent, and the absence of acriminal record. The grants would be financed by a small tax on existing wealth.In effect, wealth would be recycled from those who have succeeded to thosejust getting started.

Sharing life’s risks

Nowadays, people face a multiplicity of risks: suffering a costly illness or disability,
losing a job, failing in business. These and many other calamities can strikeanyone more or less randomly. Even longevity can become a misfortune if oneoutlives one’s savings.

There are two ways we can approach these risks: one is to individualize them, the other is to share portions of them so that no one is destitute. The first says,
‘Every person for him or her self.’ The second, as embodied in Social Security, says, ‘We’re all in this together.’

Social Security was America’s answer to one of the harshest side-effects of industrialization: millions of unemployable older people who couldn’t rely on their families, as they had in the past. Franklin Roosevelt’s ingenious solution was.....

........an intergenerational compact in which one generation of workers supports a
previous generation’s retirement, and in turn is supported by the next. Thanksto this pact, America has all but eliminated extreme poverty in old age.As it turns out, pooled risk sharing — sometimes called social insurance —has several advantages over individualized risk. One is universality:everyone is covered and assured a dignified existence. Another is efficiency:social insurance costs less than private insurance. The reasons includeeconomies of scale, simplicity of options, and lower costs for marketing,claims management and profit.

Health care, Canadian style

Nothing better illustrates the advantages of pooled risk sharing than a comparison of Canada’s health insurance system with America’s. The 1984 Canada Health Act guarantees pre-paid medical care to all Canadians. Every province now runs its own insurance program in accordance with five principles:

–  Each plan is not-for-profit.

–  All medically necessary services are covered.

–  All residents are covered.

–  Premiums are affordable.

–  Coverage continues when a person travels.

Canada also bans extra billing by medical practitioners. As a result, the system is incredibly simple. For routine doctor visits, Canadians need only present their health card. There are no forms to fill out or bills to pay. The system is supported by a combination of federal and provincial funds. The bottom line is indisputable: Canadians enjoy better health care than Americans, at about half the cost and a fraction of the hassle.