Socialism Is Good for Capitalism

Homeless Can Be Good for Capitalism

What would you say if I claimed that Socialism could increase the number of customers for almost any business by 14 percent?  You would probably laugh. But read on and be surprised.

Most capitalists oppose socialism because of a belief that the role of government is to maximize the use of capital, while reducing the size and expense of government For example, corporations desire lower corporate taxes so that they may return greater profits to their share holders. Lower taxes means a reduced government and results in, "A lessor boot heel on the neck of every struggling businessperson."

Most businesses achieve higher profits by attracting more and more customers. One way to attract more customers is to advertise. Another way is to reduce customer cost by cutting manufacturing costs by moving manufacturing overseas, or by reducing the number of employees.

But what if there was a better way to increase the number of customers?  Consider that the homeless contribute nothing to the economy and are not customers, yet draw funds from local government, and lower the quality of life for all. Consider that the poor are supported by government expense which minimizes their use as customers.  Consider that the disabled contribute little to the economy, yet draw disability funds from government. And consider that when jobs are scarce, the laid off rely on unemployment payments, far less than the prior income, and of a limited duration.

A Minimum Income

One way is to streamline and thusly reduce the size of government would be to combine the homeless, the poor, the disabled, and the unemployed.  A simple way to achieve this unification is with a "minimum income" or a negative income tax.  A "minimum income" would be administered by the social security administration. A negative tax would be administered by the Treasury Department by way of Income Tax.

I prefer a minimum income because it is administered monthly rather than annually. In its simplest form, everyone with a  social security number will receive the minimum income.

For example, a homeless man on a "minimum income" would be able to rent an apartment, pay for utilities and food, and would be in a much better position to find a job. As potentially solvent customer, he and those like him would increase spending on manufactured goods.

For example, a single mother on a "minimum income" could afford an apartment, utilities and food, and could afford to find child care so she could find a job.  She and those like her would become better customers.

Note that "minimum income" is greatest when all other income is zero.  Then for every $100 that all other income increases, "minimum income" would reduce by $50. This gradual reduction means that when a person gets a job his or her total income ("minimum income" plus other income) will increase to be more than "minimum income" alone.  It is important that minimum income not be cut off suddenly at some level, but rather tapers off so that the poor are encouraged to find employment and better their situations.

As other income increases, "minimum income" decreases at half the rate.

For example, if the minimum income was $1,000 per month, it would reduce to zero when the individual's other income reached $1,900. If a person on disability received $900 per month from the state, they would also receive $550 "minimum income." But if "minimum income" was the law, that same disabled person would receive $0 disability payment, and instead receive $1,000 "minimum income."

But if a state wanted to provide a disability payment over $1,000, they would be free to augment the "minimum income" but that augmentation would become other income and would reduce the "minimum income." For example, if a person qualified for $1,500 per month in disability, the state could pay an extra $500. $500 extra income would reduce the "minimum income" to $750, resulting in a net total disability income of $1,250.

For "minimum income" to work, it would need to be tax exempt. It must also belong to the individual and couldn't be given away, could not be used to settle a law suit nor any other property settlement, and couldn't be garnished or taken by any government nor by any corporation nor any company nor any private individual.  It could not be used to guaranty a loan, because the bank could not take it.

As you can imagine this "minimum income" could only benefit the poor directly. The population of the US is about 380 million, so if the poor represent only 14% of the population, then only 47 million people would be receive this "minimum income."

But what about dependent children of those receiving "minimum income"?  I propose that up to the age 18, such dependent children would receive 1/4 of the "minimum income" those funds to be administered by the legal guardian or parent.

And what about Social Security? It would not change, except that the minimum social security payment per month could never be less than the "minimum income."

How would we pay for the "minimum income"? One way would be to increase the social security tax rate from 6.2% to 7.2%, and to remove the wage ceiling of $132.900 at which social security taxes are cut off.

A 14% increase in the number of customers is nothing to sneeze at.  Would it be worth the cost? It depends on if the increase is permanent and can be counted on by the nation's businesses. If so, budgeting based on such a permanent fixed increase in the customer size will benefit all businesses here and abroad.

Naturally one would not want to implement a "minimum income" all at once. Instead, perhaps at the state level, one could introduce the concept using the disabled as a test, or the homeless as a test. And then track those people to see if the effect is as predicted.

Also note that $1,000 per month was a purely arbitrary guess for a "minimum income". Also note that the $50 drop in "minimum wage" per $100 increase in other income, was also a purely arbitrary guess.  Greater or lessor amounts would have to be decided by those actually implementing this or a similar proposal.