Financial Security for All Citizens

Golden Gate

Like many of my fellow Americans, I was horrified when the Great Recession threw back the curtain on our economy and revealed shocking inequities built into our economic system. I spent a lot of time reading data, looking at charts, and listening to personal stories. Much of that made its way into The Adventures of Unemployed Man.

This knowledge continued to percolate until one day I had a Big Idea for solving a lot of things. Not everything, of course, but a lot of things. I’m not an economist, financial advisor, or investment banker—although I have met a few of those people and found myself wondering (like the guy in Idiocracy): “Why am I the smartest person in the room?” So I wrote my idea down and sent it to friends less financially innumerate than me and, to my stunned satisfaction, they thought it could work! Whoa…

Ready for this? I’m gonna break it down all serious-like.

POURING THE FOUNDATION

It’s important to remember that what I’m proposing here isn’t a one-time fix, but a system that becomes self-sustaining over time. Follow along (you can just read the bold parts if you’re in a hurry):

  • Start by creating a publicly owned National Infrastructure Bank (NIB), and when each citizen is born, have the U.S. Treasury make an initial deposit at the NIB in his or her name. These initial deposits can never be withdrawn from the NIB by anyone, and they are nontransferable.
  • Have the NIB invest in state municipal bonds, plus some U.S. Treasury bonds. Today, when states borrow money for infrastructure projects (new bridges, schools, levees, renewable energy projects, etc.) they issue municipal bonds. These bonds are available to private investors and even foreign governments. They are safe investments because states are constitutionally obliged to pay back their loans. They earn low interest rates (historically 4.7%). The NIB will also invest in U.S. Treasuries (which historically return 5.3% interest). The NIB will make no direct investments in private enterprises, as that would open the floodgates for cronyism (more details on that later).
  • By earning an average of 5% interest annually, each citizen’s account balance will more than double between birth and age 18. Keep in mind that this is without any additional deposits made by the citizen or his parents between birth and age 18. Such deposits could be possible under this system; the earlier those deposits are made, the greater the return.
  • Once a citizen begins working, 10% of his or her income goes into the NIB account. This would NOT be in addition to current taxes—it would replace existing Social Security taxes.
  • After a citizen turns 18, she can, in any given year, choose to receive or defer the interest income from the accountIf she chooses to receive interest income in any year, it is sent as a monthly or quarterly disbursement from the NIB. It is tax-free; however, unless you have a qualifying life event (such as becoming a student or retiring at age 65) a small fee is taken out of the interest income and put back into your account—which keeps it growing and compounding ever so slightly over time. This makes a big difference in how much money you have at age 65, as you’ll see in the examples below.
  • This creates a financial floor below which no citizen can sink. It would eliminate the need for current forms of welfare, disability, unemployment, social security, and some other programs. However, creating an alternative system for these programs is not the primary goal here. Things are just getting interesting…
  • More important, these accounts create a foundation for long-term financial security and retirement for all citizens. While conservatives have long argued for the privatization of social security, that is NOT being advocated here. Their privatization idea is, in essence, a transfer of the public’s social security savings to Wall Street banks as a massive pile of play money that could be invested in anything. It would expose our nation’s retirement income to total destruction. What’s proposed here is a completely different approach.
  • In approximately 80 years, the system would become SELF-SUSTAINING—with no additional money needed from Treasury for initial deposits. When a citizen dies, all money generated by the initial deposit goes toward the establishment of new accounts for newborn citizens. See examples below. Today, we spend nearly $800 billion a year on Social Security.
  • If you die before age 65, your lifetime income contributions of 10% get transferred to the accounts of your heirs or next of kin, along with 100% of your projected retirement income as a survivor benefit. This is similar to how Social Security survivor benefits work today, with the important difference that a parent’s projected retirement has real value from a young age. If you made any additional deposits to your account, those deposits, plus the interest they earned on their own, also go to your heirs or next of kin. After you retire at 65 and/or begin living off your interest income, you can pass along only deposits and income contributions that exceed the amount of money you’ve withdrawn in the form of interest income. In any case, you never put more into these accounts than you (or your heirs) get out of them in one form or another.
  • Finally, peg tuition rates at public universities to a percentage of each citizen’s interest income, with all students paying a portion of their tuition from that interest income—providing the means for affordable education for all. Technically, this could be viewed as an optional component of the program, but I think it’s an essential one, because improving America’s human capital is critical to ending poverty and promoting a smart, sustainable economy. (I also believe in universal free preschool, the kind of program that renowned socialist Richard Nixon almost made happen when he was president, but that’s a separate issue—like I said, this doesn’t solve everything.)

Important note: The plan details outlined here (and all examples below) leaves employer contributions off the table. Today, employees contribute 6.2% to Social Security and employers match that contribution to send a combined 12.4% of income to Social Security. A similar matching system could be established for the plan proposed here, but for simplicity’s sake I have simply used a 10% contribution from individuals. With employers’ contributions on the table, the system would be even more viable and solvent with contributions totaling 13% instead of 10%.

Another important note: I’m separating Social Security from Medicare here, even though today they are two halves of a twin system. Today, employees contribute 1.5% of their income to Medicare. The plan laid out here is really about Social Security and related financial security programs like unemployment, disability, and welfare.

WHAT AM I ATTEMPTING TO SOLVE?

Oh, not much, I just want to…

  • End poverty as we know it
  • Make welfare, food stamps, disability, and other programs unnecessary (by replacing them with something better and more comprehensive that is also smarter and more financially sustainable).
  • Make college education affordable for all.
  • Fix our nation’s crumbling infrastructure, with the added benefit of creating jobs that cannot be outsourced.
  • Reform our social security system so we can achieve better retirements.

That’s all. I believe what I’m proposing has the potential to do all this.

CAN WE AFFORD IT?

OK, let’s say that, beginning tomorrow, when each citizen is born Treasury prints $200,000 and deposits it into an account at the National Infrastructure Bank. That’s just another huge government expense, right? Not exactly.

  • For a one-time $200,000 investment (or less, depending on other factors like employer contributions), our government moves the following expenses for each citizen off the books: social security (which alone could easily cost well over $200,000; we spend $725 billion on it annually today), unemployment insurance, disability insurance, welfare, and other expenses.
  • Not only do we save all these expenses for each citizen, but the ever-growing untouchable principal extends those savings to the next citizen’s account, and the next—making our one-time investment pay in perpetuity. This is how those expenses come off the books over time.
  • The ongoing upgrades to our infrastructure would produce a domestic economy that is healthier, promoting domestic jobs and broad-based prosperity, which in turn improves revenues. Infrastructure projects require domestic hiring that cannot be outsourced.
  • The government’s balance sheet could also be improved by virtue of the NIB investing in U.S. Treasuries.
  • Our nation’s infrastructure is crumbling—and failing to maintain it is costing us more than $120 billion a year in damage control. The NEA estimates that it would cost more than $400 billion just to bring our schools out of their current state of disrepair.

SNAPSHOT OF OUR CURRENT RETIREMENT SYSTEM

  • The average American 65 and older has an income of less than $20,000/year, with 70% of retirees getting more than half of their income from Social Security benefits. Currently, nine out of 10 individuals age 65 and over receive benefits. The average benefit is $15,000/year.
  • This year Americans will collect more than $700 billion in combined Social Security and Medicare benefits.
  • Social Security protects you if you become disabled (from a separate fund financed by payroll taxes). Disability is an example of a life event that would allow you to live on the interest income from your account. In no way am I proposing that this protection be any less than it is today.
  • Social Security protects spouses and minors in the event of a parent’s death. More than two million children and surviving spouses caring for children now receive survivor benefits from a deceased worker (survivors receive 100% of the deceased’s retirement benefits, which can be a very meager amount). This level of protection must be maintained or improved upon.
  • For the past 20 years, the Social Security program has been the largest single item in the federal government’s budget. “The amount of money flowing through the Social Security system each year is larger than the total economies of all but the 16 richest nations in the world,” says U.S. Social Security Administration historian Larry DeWitt. The Social Security program has collected more than $13 trillion in income and expended approximately $10 trillion in payments since the first tax collections began in 1937.

Remember, retirement is only one of the things I’m trying to improve. If improving retirement were the only goal, you could start this program with much smaller initial deposit amounts.

An example retirement: John Smith, born in 1948, starts receiving Social Security benefits at age 65 and lives to 80. For those 15 years, he receives the average benefit of $15,000/year, for a total of $225,000 in retirement benefits. If that same amount (actually, a far smaller amount of less than $25,000) had been invested at a National Infrastructure Bank at John’s birth in 1948, and had he made the same modest income, his retirement INTEREST income would be at least $60,000—FOUR TIMES the $15,000/year he currently receives. His account principal would be at least $1,500,000. We would avoid the $225,000 in today’s expenses for John’s retirement and establish an account balance large enough to finance at least five new accounts at the $200,000 level prescribed today—making the whole system self-sustaining. (The math upon which this program is based works forwards and backwards in time.)

EXAMPLE LIFE SCENARIOS

Below are some additional life scenarios that show how National Infrastructure Bank accounts would work in real life. These examples assume:

  • $200,000 initial deposit in each person’s NIB account at birth. (It’s likely this program could work with a smaller initial deposit, but I’ll leave that determination aside for now.)
  • An average 5% interest on NIB’s investments in municipal bonds and Treasuries (which have historically earned between 4.7% and 5.3%).
  • The need to increase the initial deposit amount each year, so that every 20 years the initial deposit would double (in this example, to $400,000 in 20 years).

As you’ll see, this will require less and less monetary input over time from Treasury until, in around 80 years, the system becomes self-sustaining.

Dying young and poor: At 17, this dude rappels off a train bridge and falls to an untimely death.

Result: At 17, his account balance has grown from $200,000 to $458,403. Even though he never contributed to his account, this principal can fully finance the next newborn’s account, with more than 50K to spare (there is excess in the system, which contributes to overall financial health and allows the NIB to respond to population increases, etc.).

Dying young and rich: This lucky guy’s grandparents make an additional (optional) deposit of 50K in their grandson’s NIB account at birth. At age 17 he competes in the America’s Cup and Larry Ellison shoots him with a harpoon.

Result: He had an initial deposit of $250,000, of which $50,000 came from his family. At 17, his account balance is $573,004. This is $114,600 more than the poor kid’s account above. Since it will take around $400,000 to fully finance a newborn’s account at the time of this young man’s death, that leaves over $170,000 in the account above this sustainability threshold. The grandparents (or the estate or the young man’s heirs or kin) get their deposit back along with the interest that deposit would have earned on its own. In this case, they get back roughly $100,000. That leaves the NIB with $70,000 above the amount needed to finance a newborn’s account. The excess can go toward the establishment of new accounts for newborn citizens.

Dying right after college: This young man graduates from Chico State with a degree in drama, goes on a reality show, and gets crushed by a guy named Blaze.

Result: He went to college using the interest income from his account. The principal was untouched. Thus, at the time of his death, the principal in the account is more than enough to finance a newborn’s account. Also, his parents aren’t on the hook for any student loans because he didn’t have to take any out, which means a better and less cruel society.

Dying when life begins at 30: A woman leaves college at 23 and only works for seven years making an average of $100,000/year (probably an average income for a new graduate in 2030), and dies in a knitting accident at 30.

Result: Her account earned interest for 23 years, growing to $614,304. For the next seven years, her contributions of $10,000 per year, combined with the growing principal, compounded to $949,879. Note that she contributed only 70K in seven years—so why does her account have 85K more in it at the end of seven years? Because she added to the overall principal, which compounded every year. At the time of her death, this woman’s account could finance a new account using $600,000, with almost $300,000 going to the creation of a new account. Since she died before age 65, the NIB takes the $70,000 she deposited, plus interest, less the interest income she used to pay for college, and transfers that sum to the accounts of her heirs or next of kin.

Dying at age 80 having lived a life of poverty: This man drops out of high school. He holds terrible low-wage jobs his whole life, making an average of $10/hour ($20,000/year). To make ends meet, he elects to receive his interest income every year from age 20 to 80 and spends most of it on backpacking trips and weed. He’s eaten by a grizzly bear in Yellowstone.

Result: At age 20, when he began taking interest income, his account was worth $530,659. His interest income between 20 and 80 averaged about $25,000/year, more than doubling his income. He contributed the mandated 10% of income (in this case, $2,000 per year) to his account between ages 20 and 80. His account balance at age 80? $10,654,814. Yes, that’s how much a difference that $2,000 a year makes. As stated earlier, the interest income he received between ages 20 and 65 would also incur a fee; if we applied that here, his account would be worth significantly more. Still, even without that, at the time of his death at age 80, his account has enough to fund creation of three new accounts for newborns at $3,200,000 each (the amount needed for an initial deposit in 80 years). Even when someone contributes very little, this system is sustainable.

Dying at age 80 having lived a pretty successful life: This woman starts from somewhat humble beginnings. Her parents are educated, but not well off. They deposit $1,000 into her account at birth. She attends college using her interest income and earns a computer science degree from a top private school. She gets hired at a top tech company. Over the span of her adult life, she makes an average of $1,000,000 per year. She retires at age 65, and only then begins drawing the interest income from her account. At age 80 she dies in her sleep after raucous sex with her 22-year-old manservant.

Result: Had her parents not made the $1000 deposit, and had she not contributed to her account, her balance at age 65 would have been $4,767,980. Factoring in the $1000 deposit, but still leaving out her lifetime contribution, her balance at age 65 would have been $4,791,820. That’s a difference of $23,839.90 (what a difference an extra $1,000 makes over 65 years). However, that extra $1,000 makes an even greater difference when combined with her contributions. At age 25, when she entered the workforce, her balance was $680,657. Between 25 and 65 she made an average of $1,000,000 a year, contributing $100,000 a year to her account. At 65, her balance is $17,475,796. Only $4,000,000 of that is her own contribution. The interest income for her retirement is $873,789 a year—slightly less than what she’s used to making, which is typical for retirees (but the difference could be offset by her own investments outside this program, the same way people do today). She receives this amount every year without touching the principal. Between 65 and 80, she gets a total of $13,106,847 in interest income. In other words, she gets a lot more out of the account than she ever put in—nearly $10 million more. But no worries. When she dies at age 80, her account balance is still what it was when she was 65: $17,475,796. At the time of her death, her account can fully fund five new accounts for newborns at $3,200,000 each, with plenty to spare. Since she was over 65 and her interest income withdrawals exceeded the amount of her lifetime contributions, nothing still in her account will go to heirs or kin. But her Mazda Miata will go to her young boyfriend.

In these examples, we see that, thanks to the magic of compound interest over long periods of time, merely establishing these accounts makes them self-sustaining for generations. The growing principal, which can never be withdrawn, is enough to finance a newborn’s account whenever a living citizen dies, even if that citizen makes no additional contribution to the account (which is essentially impossible since 10% of their income goes to the account, and any interest income drawn from the account incurs a small fee that goes back into the account to keep it growing steadily). Everything the citizen makes and contributes, no matter how modest, is additional gravy that compounds over decades. Even in the worst-case scenario above, where a man takes his interest income for most of his life and contributes very little, his account can still finance three new accounts when he dies.

EXPECTED CRITICISMS OF THIS APPROACH

Expected Criticism: This is just nanny state nonsense. 

Answer: First of all, nannies are awesome. Just ask Arnold Schwarzenegger how he achieved the “nanny state” in his laundry room. But really? It’s the opposite of that. This takes us from a spending approach to an investment approach. We move away from taking care of people in a one-time way (welfare, food stamps, student loans, retirement, etc) and toward all of us taking care of each other in a sustainable and fair way over generations. People are actually highly motivated by the desire to take care of each other. See “Is Giving the Secret to Getting Ahead?” Remember, people today are forced to contribute to social security, and they’re free to chase greater returns with their own investments in the stock market or elsewhere. The same would be true in this program, with a few important differences: your NIB money would be invested in  municipal bonds (which would improve your life in various ways); you could elect to take the interest income at any point in life (not just for those who live until retirement age); you could leave all your personal contributions to the account (as long as they exceed what you’ve withdrawn) to any heirs; you could add to the account to make it grow and in this way take responsibility for it. In these respects, what I’ve outlined here is far less “nanny state” than current programs. It certainly isn’t more. I also think many people today see their social security and other taxes just go into the ether, but this program would get them actively involved in growing their accounts.

Expected Criticism: You’re messing with the markets, man! 

Answer: Markets are a man-made construct governed by rules we all agree on—well, some of us agree on. Markets are not a fragile natural ecosystem we’re trying to preserve as a perfect wilderness (although it must be said that all markets do depend on nature’s ecosystem). In government, in business, even in pro sports, rules are constantly adjusted to preserve the sanctity of fair play. In this case, we’re using investment vehicles that already exist in the market in a new way. Yes, it will have an impact on the markets for those investments. For example, we could give the NIB the first right of refusal on domestic infrastructure bonds issued at a fixed 5%, with those bonds being made available to other investors only if the NIB passes on them. We could also give NIB first right of refusal on U.S. Treasuries, with other investors and foreign governments waiting in line behind the NIB.

Expected Criticism: I’ve already outsmarted this system. All I have to do is take the interest payments my whole life and invest them in the stock market myself, which will outperform your stupid municipal bonds!

Answer: Wrong. But thanks for pointing out the main strength of this system. Remember, you can never touch the principal. So if you withdraw your interest and go invest it separately from the principal, even if you get fabulous returns, you won’t be able to outperform someone who leverages the large principal to maximize compound interest on a much larger sum over a lifetime. What this system allows you to do, essentially, is piggyback your retirement savings on a much larger amount of money—allowing your own savings to earn much greater compound interest than if you saved or invested only with your own earned income. That large principal then goes to the next generation to help them leverage much greater compound interest on their own savings, the same way you did.

Expected Criticism: Why don’t you let people put the money in their NIB accounts in the stock market?

Answer: First of all, the principal in these accounts isn’t strictly theirs—it’s essentially a trust fund started by the government (all of us) to promote the general welfare and establish financial security for citizens for generations to come. By design, the range of things the NIB invests in is very narrow (similar to how Social Security works today). It cannot invest in the stock market or private enterprises, as that would not only be too risky, it would  open avenues for cronyism, bribes, revolving doors, and fraud. We cannot risk having any portion of the population, or the staff at the NIB, making bad bets and blowing accounts that are designed to serve citizens in perpetuity. Not to mention, the vast sums of money in the NIB could disrupt the markets—that’s why the Social Security Administration only invests in non-marketable securities today (and this could be an argument for making municipal bonds non-marketable under this program). One other thing to remember: While each citizen contributes to his or her account, those contributions are comparatively small (if vitally important) to the larger trust. Would you want the guy born before you making investments with the principal that’s needed to create your account when you’re born? Since the principals roll over to newborn citizens, sustainability is the most important aspect of the program. You can always go invest in the stock market separately, as people do today apart from their social security contributions.

Expected Criticism: The interest you’ve calculated is too high. Have you seen interest rates lately?

Answer: Historically, interest rates on municipal bonds are 4.7%. U.S. Treasuries historically have been 5.3%. The average in this example is 5%. Remember, we’re talking about timeframes of hundreds of years. Also, if we make the NIB the default financier of state municipal bonds, we could consider pegging the rate at 5% to create stability.

Expected Criticism: This is the “guaranteed income” idea advocated by the likes of Martin Luther King and other commies.

Answer: Not really. The idea of guaranteed income is often viewed as an expense that government should make to support its poorer citizens, with advocates trying to figure out a way to justify the expense. What’s outlined here is an investment approach using currently available investments in a new way. It also weaves in the idea of a National Infrastructure Bank, which has been talked about in recent years, but not with accounts that earn interest for citizens. Also, individuals contributing to their own accounts creates a two-way street between government and citizens, not a one-way street from government to citizens. That said, there are aspects of the guaranteed income idea that could be explored as addendums to this idea; my concern is that they would bog down what I’ve outlined here, which at bottom is a pretty simple yet powerful revision of the way America currently finances infrastructure projects.

Expected Criticism: What if moochers just take the interest income every year? They would be impoverished as seniors and they wouldn’t pass the baton to the next generation, leaving the rest of us responsible for making up the difference.

Answer: First of all, Americans are some of the hardest working people on the planet. If you look at the math and the worst-case scenarios given here, you’ll realize that this is a non-issue. When you combine the 10% automatic savings that feeds the account, and the pre-65 interest income withdrawal fee that feeds back into the account (barring a qualifying life event like disability), you’ll see that it takes very little income to make it work because the interest is compounding over such a long period of time. From birth to 18, you establish a huge principal before you ever become a “moocher.”

Expected Criticism: We spend very little on infrastructure today. Even if there were a National Infrastructure Bank (there isn’t yet), it might have a hard time finding a home for hundreds of billions of dollars every year. We couldn’t build enough new schools, levees, bridges, roads, and power plants to keep up with the supply of investment funds.

Answer: Yes, our nation’s infrastructure is crumbling—and failing to maintain it is costing us more than $120 billion a year in damage control. The NEA estimates that it would cost more than $400 billion just to bring our schools out of their current state of disrepair. So there are ample opportunities just in repair and replacement of existing infrastructure. However, the nation is also facing an existential crisis in terms of needing a smarter energy grid and sustainable energy independence. In parallel with these positive strides, it’s likely we will need to make substantial “defensive” investments to protect ourselves from the effects of climate change. How much will it cost to protect New York from flooding or going underwater? All that work could be financed by the NIB under this program. Perhaps a significant portion of the NIB’s investments in the first 100 years can help states finance renewable energy upgrades, make a smarter electrical grid, achieve greater energy independence, and protect ourselves from natural disasters until we can stabilize the climate.

Expected Criticism: The investment capacity of the NIB will drive down interest rates on municipal bonds significantly, decreasing the compounding effectiveness of the NIB.

Answer: We could  have the NIB get first dibs on all municipal bonds, with all bonds returning a minimum of 5%. Only if the NIB passed on the bond would the bond be made available to other investors (become marketable). This would set a floor on the interest rate municipalities pay on loans for infrastructure. What if interest rates in the marketplace are lower than 5%? Won’t states complain they’re paying too much? Under this program, states know that ALL those interest payments directly return to their citizens in a variety of forms that ultimately boost state revenues. It’s a benevolent circle. If interest rates in the market are higher than 5%, then the NIB should make market rates, or the Fed discount rate, on the loan.

Expected Criticism: Is this a Ponzi scheme?

Answer: A Ponzi scheme is a fraudulent investment operation that pays bogus “returns” to its investors from the money paid by new recruits, rather than from actual returns on an investment (in other words, it’s somewhat similar to the way Social Security is currently funded). In many ways, what is proposed here is the opposite of a Ponzi scheme. Here we make actual investments that have very modest returns, and those returns don’t depend on money from younger people keeping older people afloat. It’s the inverse of that: The success of older generations supports newer generations until they, in turn, pass the increasingly valuable baton to the younger generation.

Expected Criticism: By having a National Infrastructure Bank, you’d just be creating another means for corporate cronyism.

Answer: The NIB would be forbidden from making any direct investment in private industry (same as the SSA today), so it couldn’t be bribed to direct dollars to private industry. Today, when investors buy municipal bonds, they have no influence over how states spend on infrastructure. States would direct their infrastructure investments as they do now. Whatever cronyism exists today, the system proposed here wouldn’t add to it. The existence or threat of cronyism in infrastructure spending (like who gets the contracts) is a separate issue handled at the state level.

Expected Criticism: You’re just taking money away from private industry.

Answer: While the NIB would make no direct investments in private enterprises, private industry would still benefit. States use private contractors on infrastructure projects (such contractors are private companies that specialize in building schools, highways, etc.). Also, individuals can spend their interest income and retirement income any way they choose; such spending will benefit the entire economy.

Expected Criticism: The economy is way too complicated to predict. It’s difficult to say what the full impact would be.

Answer: The key here is making the system self-sustaining so that, in three generations, Treasury is making few to no additional deposits for the establishment of new accounts. We need to figure out how this looks 80 years from now, then work back from there to find a way to get to that end goal and make it work. I’ve taken my best shot at laying it all out here but, as I freely admit, I’m just a humorist. That’s also why I recommend War-Gaming this idea—see below. It’s also worth noting that, in the near future, people may live much longer than they currently do, and what I’ve outlined here would be able to handle that change better than the current Social Security program.

Expected Criticism: This would create massive inflation, pumping hundreds of billions of dollars into the economy.

Answer: It could actually prove to be less inflationary over time than current forms of spending. There’s no doubt this program would have an impact on inflation, especially in the first years, but the impact would be mitigated by several factors over a long period of time and, eventually, be less inflationary than the current system. Today we spend nearly $725 billion a year on Social Security. By following the plan here, in 80 years we would no longer have that expense. Today, the U.S. has about four million births annually—a very low population growth rate. If accounts were financed at the $200,000 level beginning today, that would mean Treasury depositing $800 billion in the NIB in the first year. While that money would go to the NIB where it could never be withdrawn by individuals, it would eventually make its way into the economy via infrastructure project spending and the domestic hiring needed to complete those projects (say goodbye to high unemployment). However, any and all interest income generated by the accounts wouldn’t reach the hands of citizens for at least 18 years, giving time to put any needed deinflationary adjustments in place to achieve the end goal: long-term, sustainable financial security for all citizens that supports the overall health of our economy and promotes prosperity. It should also be said that the way money now gets into our financial system (from the Treasury to the private banks and eventually to average citizens) minimizes the effects of inflation for those at the top of the money supply chain and maximizes them for everyone else (over 95% of the population). The system proposed here would help offset that inequity by having some of the money entering the economy go first to citizens, rather than private banks.

Expected Criticism: What about those of us born before this goes into effect? How is this fair to us? 

Answer: I don’t yet have a solution for this. You can’t easily make up for not having the power of compound interest on your side for your entire life. We could explore a package of things like increasing earned-income tax breaks for us, blah blah. Or maybe things sunset for us the way they are and we get to brag about how we were the last to endure the old economic barbarism and live to tell the tale, walking uphill in the snow both ways.

Expected Criticism: You say that when someone dies, all the money they’ve contributed to the account, plus any interest that money has accrued, gets transferred to the accounts of the person’s heirs or next of kin. What if the heirs or next of kin are older people born before this program was started?

Answer: This is one of many questions about how things get handled during the transitional decades. In this case, when the heirs or next of kin were born before the establishment of the accounts, any funds beyond the principal could simply be sent to them as a check. Post-transition, keeping the money within the NIB accounts is about limiting inflation and keeping people’s accounts growing. In any case, you must remember that no one ever gets less out of these accounts than they put in. There is no scenario where that happens.

WHAT NOW?

Given the current state of our Congress, where a law supported by 90% of the public cannot pass, a completely undemocratic body (the Senate) routinely subverts democracy, and more than half of the politicians benefit from making our government fail so they can angrily blame it for failing while honking their clown noses, I have zero expectation that my Big Idea will move forward today. Luckily, I’m not writing this strictly for today. Ideas are like DNA, and my hope is to see this idea (or some evolution of it based on the War-Gaming described here) succeed over time.

BRING ON THE WAR GAMES

Have you been scouring this for flaws? Great! We need you. Remember the movie War Games? This idea needs to be War-Gamed.

War-Gaming is a great way to identify flaws in an idea like this, and a lot of fun. Here’s how it would work if we did it in person: We’d get a bunch of canny referees (people with strong economics backgrounds who can maintain a semblance of neutrality) to decide the outcome of yearly decisions made by the NIB and other relevant players. The players would take a variety of roles in the game: NIB board members, citizens from different economic backgrounds, municipalities, investment bankers, crime lords, politicians, etc.. The players make decisions and/or try to game the system. The referees would decide the outcomes on a yearly basis until, after a few hours, the group had moved through a 100-year cycle of annual decisions and results to see what emerges and evolves. After the first run-through, we’d adjust the rules and try it again, with a different set of referees (Keynesians, Chicago-school types, etc.). We’d do this as many times as possible.

Now, nobody does anything in person anymore, right? So maybe instead of that—or in addition to that—we create an online platform for War-Gaming this—and provide rewards for truly inventive ways to subvert or shore up the NIB.

BRING ON YOU

As of this writing, I’ve sent this idea to one think tank and posted it here. Please feel free to share this post with any influencers you know, and on your own social networks.

Do you have any other ideas for improving what I’ve proposed? Please feel free to contact me using the contact form here.