The AESP is a self-sustaining program intended to provide guaranteed income security to all Americans, regardless of employment status or any other consideration. It would replace most existing social assistance programs, consolidating them under a new Economic Security Agency (ESA). The ESA would administer the AESP in the following manner:
At birth, a sum of money (hereafter referrered to as the PRINCIPAL) would be set aside for each American citizen (beneficiary) in a government-owned interest-bearing savings account. The government would retain ownership of the PRINCIPAL throughout the lifetime of the beneficiary. Through prudent investment in reliable securities, the amount would be sufficient to generate monthly INTEREST in the amount of $1 over the projected Federal poverty line by the time the beneficiary reaches age 18.
For example, if the projected Federal poverty line for an individual born in 2012 who will reach age 18 in 2030 were $1800 per month, then the amount of PRINCIPAL initially set aside in the ESA trust fund for the beneficiary at birth would be sufficient to generate this amount of monthly interest in the year 2030, assuming conservative interest rates.
The initial PRINCIPAL investment for each beneficiary would need to be made by the government and set aside in the ESA trust fund. In the short term, this would involve a significant cost to the government and would require an appropriation of funds. However, because the government retains ownership of the PRINCIPAL, it reverts back to the ESA trust fund upon the death of a beneficiary. The government does not lose the PRINCIPAL. It is recycled into the general ESA trust fund system.
In addition, although compound INTEREST will continue to accrue throughout the lifetime of the beneficiary, the beneficiary is NOT entitled to any interest over and above the flat monthly payment (adjusted yearly for cost of living) set at age 18. In other words, the beneficiary may never collect more INTEREST than $1 above the federal poverty level for any given year. The remainder of the compound INTEREST assigned to each beneficiary accrues directly to the general ESA trust fund, in order to allow the program to become self-sustaining over time.
In order to encourage beneficiaries to continue to pursue traditional employment if they so choose, they are not penalized for earning any amount lesser than or equal to the amount provided by the AESP. For example, if the monthly AESP amount is $1800 in the year 2030, then a beneficiary may earn up to $1800 in employment income without losing any AESP benefits.
Beyond this level, AESP benefits are reduced on a dollar-for-dollar basis when income is earned from employment. For example, if a beneficiary in the year 2030 earned $2700 per month from employment, then his or her AESP benefit would be reduced to $900 per month. If a beneficiary earned $3600 per month, then they would no longer recieve AESP benefits while employed.
In order to avoid an overwhelming initial cost, the AESP would not be implemented retroactively. Only persons born in America after the adoption of the AESP as law would have individual trust fund accounts and be entitled to benefits. Existing social service programs would continue to serve the current generations until they could be phased out over time. Eventually, as current generations leave the economy, all such programs would be replaced by the Economic Security Agency and the AESP.
In this manner, the initial cost of implementing the AESP could be kept relatively low. Additionally, as PRINCIPAL is recycled back into the ESA and compound INTEREST continues to accrue to the ESA over the lifetime of a beneficiary, the program would become self-sustaining and involve little or no net cost to the government.
The AESP is a way to implement a self-sustaining guaranteed minimum income for all Americans at little or no long-term cost to taxpayers. It guarantees economic security for every citizen, and stimulates the economy while allowing for greater flexibility in employment arrangements. It is a sane and rational proposal with numerous individual and social benefits.
For more information on the benefits of a guaranteed minimum income (such as the AESP proposes), please see "The Case For A Guaranteed Minimum Income."
To summarize, the AESP becomes cost-free after 42 years, and totally self-sustaining after 59 years, replacing Social Security and all other safety nets, as shown in the above proof.
© 2012 James Quirk