By a margin of 77 to 23 percent, Swiss voters rejected a referendum on Sunday that aimed for nothing less than an economic revolution. In advancing their "basic income" initiative, advocates proposed to send a monthly check of $2500 to every adult resident of the country (plus an extra $625 for each child). Once assured a decent minimum, residents would be free to decide how to divide their time between money-making and the other good things of life. The proposal had obvious attractions in a time of widespread economic anxieties. Nevertheless, the voters rejected the case for a "basic income" as utopian -- once they learned that its budgetary cost amounted to 35 percent of the country's GDP.
Swiss activists saw their initiative as a catalyst energizing similar movements throughout the world. But American observers will be tempted to interpret the voting outcome as a cautionary tale for followers of Bernie Sanders. While calls for revolution may mobilize mass enthusiasm, public support will dissipate once voters recognize that big ideas carry huge economic costs. Rather than encourage false hopes, serious politicians should emphasize that the path to progress lies in incremental reforms of existing programs.
We dissent from this downbeat conclusion. The problem with "basic income" is not that it is a big idea, but the wrong idea. There is another way forward that can and should sustain broad democratic support for economic justice.
Our proposal is deeply rooted in the American experience. During the Founding era, revolutionaries like Thomas Paine insisted that it was not enough to win independence from England, but that citizens should also be guaranteed economic independence as they started out in adult life. Remarkably enough for his time and place, he extended his argument to women as well as men -- and proposed that each American be provided an economic stake of 15 pounds to realize their individual potential.
We have adapted Paine's vision of a stakeholder society to the realities of twenty-first century life. The average cost of a four year college degree is about $100,000. Granting each high school graduate a $100,000 stake will not only allow them to enter the workforce without crippling debt. It will also prevent many low-income students from dropping out of college when they can't find the funds to continue. While America used to lead the world in college graduates, we only rank 19th out of the 28 OECD countries, with 39 percent gaining a four-year degree. Stakeholding will allow us to reclaim leadership.
It also has a big advantage over Bernie Sanders' proposal for free college tuition. Stakeholding also provides economic dignity for the millions of Americans who don't aim for a college degree. They can use their money to learn a trade or start a small business -- as well as to provide a cushion when they lose a job or suffer a personal setback. The prospect of a stake will also provide a powerful incentive to stay in high school and graduate. (Drop-outs will only obtain an annual interest payment from their $100,000, but won't get access to the principal.)
All these gains can be purchased at a morally acceptable cost. About 4.5 million Americans would qualify for the stake each year. Their grants could be financed by an annual wealth tax of two percent on families owning more than a million dollars in assets. The tax would hit the top six percent of the population, mostly older Americans who have succeeded in life -- though the top one percent would pay by far the largest share of the total.
This is only right. The United States was built by citizens of all sorts -- school-teachers and cotton-pickers no less than stock-brokers and entrepreneurs. We are calling for a new social contract between generations, in which market-winners in one generation recognize an obligation to the children of fellow citizens who have made very real -- if poorly paid -- contributions to our country.
Over the course of American history, the principle of citizenship inheritance has been expressed in different forms -- from homesteading to the G.I. Bill. But during the past decade, stakeholding has been gaining ground in America. In her 2008 presidential campaign, Hillary Clinton proposed that each child should receive a stake of $5,000 at birth in the form of a "baby bond" which would yield more than $10,000 by the time he or she could cash it in as a young adult.
Now is the time for her to build on this earlier initiative. The Treasury could provide each newborn with a $75,000 "baby bond," which would grow to $100,000 in 21 years at a conservative 1.5% interest rate. A wealth tax financing this program would be even more progressive than the one involving immediate pay-outs. Only the top three percent of families, owning more than two million dollars, would have to pay the annual two percent levy. All our calculations, by the way, are based on very conservative assumptions, using the most recent data collected by the Federal Reserve.
Our key point is political, not technocratic. If Hillary Clinton wants to mobilize Sanders' supporters for the November election, she should simply build on her past record and call on Americans to construct a stakeholder society.
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Bruce Ackerman and Anne Alstott are law professors at Yale and authors of The Stakeholder Society.