End Poverty. Make Trillions. — Chapter 11: The Seed Money Act

I’ve spent my life thinking about how to help the poor because I lived and felt poverty. Still, like nearly everyone else in this country, I missed the answer that was right in front of me. The fact is, we can easily eradicate poverty today in the United States. There really is a silver bullet when it comes to poverty. The silver bullet is a seed money grant set at an amount that is equal to the federal poverty guidelines. Many current and past proposals share similarities with the Seed Money Act. I won’t be addressing those here, but I sincerely thank all the great minds that have shaped my thinking. I avoid referring to these individuals not out of disrespect or arrogance, but to allow readers to judge the Seed Money Act on its merits alone, rather than agreeing because someone brilliant once said something similar. In the following pages, I’ll explain just how drastically the Seed Money Act would change life for the poor and how our country will save trillions of dollars doing it. Once you’ve read this proposal, I hope you’ll join me in recommending that Congress should grant seed money to all American households in an amount that’s equal to the federal poverty guidelines. The amount of seed money should be adjusted each year to reflect updates to the federal

guidelines and must be the first step in the Congressional budgeting process. Other federal spending comes after ensuring everyone has a vote in our economic system and can purchase the basic human rights of food, clothing, shelter, and transportation. The Seed Money Act would be an unconditional, permanent, regular grant to every US household, set to an amount that’s equal to thefederal poverty guidelines.9 For example, for a single-person household in 2020, the amount would’ve been $1,063.33 per month.10 What I’m proposing is a socially and fiscally responsible way to abolish poverty and restore balance to the federal budget. The financial case I present for the Seed Money Act will generate phenomenal returns in today’s world. In a cash economy, poverty is the lack of money. Simply put, an unconditional seed money grant that meets the federal poverty guidelines ends poverty. A Brief Lesson in the History and Evolution of America’s Great Wealth Divide “Washington is not a place to live in. The rents are high, the food is bad, the dust is disgusting, and the morals are deplorable. Go West, young man, go West and grow up with the country.” —NEW YORK DAILY TRIBUNE, JULY 13, 1865 9 There’s debate around the appropriate metrics to determine the federal poverty guidelines. It’s worth investigating how to improve upon the current metrics. I’m arguing for a metric accounting for the cost of food, housing, clothing, and transportation. It’s important that this metric doesn’t vary by region. Therefore, I’ve selected the Federal Poverty Guidelines for the forty-eight contiguous states and the District of Columbia to use throughout this document. 10 The federal poverty guidelines are a measurement of the minimum amount of annual income that’s needed for individuals and families to pay for essentials, such as room and board, clothes, and transportation in the contiguous states. For a single person household, that income level is $12,760. According to the federal poverty guidelines, a family of three is eligible to receive $21,720.

CHAPTER 11: THE SEED MONEY ACT — | 131 America was built on the belief that without the weight of an oppressive government, and with access to an abundance of land, individuals can prosper.11 Poor Europeans risked their lives and their families’ lives to sail to a mysterious new world where they were promised a chance to build a better, free life. While they pursued that, peoples from the African continent contributed at a cost that’s hard to imagine. In an agrarian society, economic participation required land, and it would remain this way for centuries. Thomas Jefferson, in the Declaration of Independence, borrowed much from English philosopher John Locke, who argued in his 2nd Treatise of Government for the three unalienable rights of, “Life, Liberty, and the Pursuit of Property.” For the majority of American history, land redistribution was the cure for poverty. At the end of the Civil War, this land-centric view remained. Union General William T. Sherman promised African Americans forty acres of land and a mule because Black ministers convinced him it would be impossible for African Americans to prosper without a beginning source of wealth. Common sense prevailed, but not for long. President Andrew Johnson later reversed the order, and there were implications to this. We no longer live in an agrarian society. Nowadays, instead of land, money is power. We cannot simply head west, claim land, build a house with our bare hands, and operate a farm. We also don’t need people to do that in the modern economy. Through specialized labor, humans have advanced technology to the point where we can do things that would’ve been indistinguishable from magic merely a hundred years ago. Seed money is today’s equivalent of a land grant. It’s indeed a helping hand. The goal should be to give everyone a stable footing on the economic ladder. After that, let people compete. The Seed Money Act won’t create a utopian or equal society. For better or worse, massive wealth inequality almost certainly will remain. We’ll still need regulation to protect the environment, consumers, and other vulnerable interests, but the Act will finally end poverty in the US. It’ll give everyone a more 11 There were millions of people already in America when it was “discovered” by Christopher Columbus in 1492. These indigenous people were killed in the greatest genocide the world has seen.

realistic chance to gain wealth. As a bonus, we’ll also make trillions of dollars doing it. Benefits of the Seed Money Act The Seed Money Act provides a simple solution to a complex problem. The elegance of the Act is in its simplicity. I’m proposing we provide every American household with seed money grants equivalent to the federal poverty guidelines, which in 2020, as I’ve mentioned, was $1,063.33 a month for a single-person household. There should be no strings attached with no finite benefit period and no way to lose the benefit. This is a preferred equity stake in American prosperity for every citizen. To alleviate concerns that people might waste or lose their annual benefits all at once, I would recommend sending the check bi-weekly or monthly. That’s it. We don’t need to monitor what people are doing with their money. We don’t need a large bureaucratic system to distribute the money. While understanding the Seed Money Act itself is simple, understanding its benefits are less obvious. I’ve outlined just a few of them below. Housing Seed money can turn the homeless into homeowners. The Seed Money Act will eliminate absolute poverty and begin to end wealth poverty through homeownership. We’ve already decided as a country that homeownership is a part of the American dream. To facilitate this, we issue massive federal subsidies through the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). This is one of the largest wealth transfer programs the world has seen. The poor are systematically excluded from such programs when they’re given housing subsidies instead of cash for housing. Instead of

CHAPTER 11: THE SEED MONEY ACT — | 133 automatically passing government credits and subsidies to landlords through funding programs administered by the US Department of Housing and Urban Development (HUD), we must look at rolling some of the funding into seed money grants. This will create an opportunity for the formerly poor to purchase their own homes, if they so choose, as they could use the seed money to pay for a mortgage instead of rent. If the poor prefer to rent, let them rent, but let them do so in places that fit their needs rather than federally designated housing.12 The homelessness problem is a poverty problem. HUD Conducts an “Annual Homeless Assessment Report” to Congress. This report is a point-in-time assessment of individuals in the country living without shelter. In 2019, about five hundred sixty-eight thousand people in the US were ‘homeless.’ The majority of this ‘homeless’ population (sixty- three percent) actually lived in some shelter or transitional housing, but many of those shelters and transitory housing systems have strict rules and stipulations, so some people choose the streets instead. Even if people avoid shelters or all the long-term free housing is full, they’d still like to be near the soup kitchens, free clinics, and other lifelines. Homeless people go where there are resources for the extremely poor. These hubs are often in city centers, which in the past few decades have become very expensive places. Places like Skid Row in Los Angeles and the Tenderloin in San Francisco are where much of the free and subsidized housing in those cities exists. Many of the homeless encampments in our cities are located near these shelters, which are areas of concentrated services for the extremely poor. Though these hubs, unfortunately, don’t have enough resources to meet the demand at their sites. The resulting overflow of poverty can look ugly. For example, there are few restrooms available, so people go outside. Contrary to popular belief, many people living in homeless encampments are families with children and little to no income. This is the indignity we offer our poorest citizens; these are the only places they can afford to live. 12 There are plenty of rational financial arguments against homeownership. Give everyone that choice.

The Seed Money Act will eradicate these extreme poverty centers, but it won’t stop gentrification. In a market economy where scarce resources are auctioned off to the highest bidder, only the wealthiest citizens can live wherever they want. Not everyone will experience the luxury of living in the most expensive parts of the country, and some will be displaced from neighborhoods they’ve called home for generations. This is an unfortunate cost of capitalism. Sadly, I have yet to come across a perfect way to split limited resources, but with seed money set to the federal poverty guidelines, everyone will have enough money to purchase food, clothing, shelter, and transportation in the US. That’s a much better version of capitalism and a much better solution to the housing challenges we face in our cities today. Without question, we’ll find savings opportunities within HUD if we implement the Seed Money Act. We should take the time to decide which aspects of HUD to keep once we end poverty. As I explain in the following pages, the financial case for the Seed Money Act is significantly enhanced by reducing spending on any redundant and inefficient poverty alleviation programs. But the financial case reaches far beyond these cost reductions. Food The Seed Money Act will eliminate bureaucracy and provide more stable and efficient access to food for the poor. We must debate rolling our Supplemental Nutrition Assistance Program (SNAP) into the Act. SNAP is a great example of how direct cash transfers allow the market to solve social problems. Unlike housing, we don’t have an entirely different class of grocery stores or a separate food supply chain for the poor. New grocery stores don’t have to set aside an allocation of food for the poor. Instead, we give people money in the form of a debit card. They use it to buy the groceries they see fit, wherever they want. The problem with SNAP is its bureaucracy and uncertainty.

CHAPTER 11: THE SEED MONEY ACT — | 135 We know everyone needs food. We know poverty exists. Through seed money, we can skip all the paperwork and give everyone enough money to buy food. For a family living around the poverty line, this means no more scrambling to apply for SNAP benefits when someone loses a job. A safety net should be there when you fall. A safety net isn’t effective if it requires you to fill out an application while you’re falling through the air. Seed money means no more worrying about losing your SNAP benefits when you get a new job, something that ultimately discourages the poor from working. Rolling SNAP into the Seed Money Act is also more efficient and gives families more financial freedom. If a family manages to save money on food in our current approach, they must either forfeit the extra benefit or illegally sell their excess credit, typically at a discount. Not everyone wants or needs the same amount of food. With seed money, no one’s penalized for being a frugal shopper. If you’re frugal with your spending on essentials, then you’ll have extra money to do with as you please. That’s an American solution. Economic Development The Seed Money Act provides a better solution for economic development. We already know we can rebuild devastated societies by providing them with infusions of capital. The Marshall Plan, which was developed for Europe after World War II, demonstrated this. Under that plan, the US transferred over $13 billion in economic recovery programs to European economies that had been devastated by the war. While international assistance in a context like this made sense, domestic cash assistance for people who desperately need it would be even more financially prudent. American citizens supported by these cash transfers will be empowered and funded to bolster and build new local economies. And once they gain wealth through commerce, they’d then pay taxes back into our own system. I think we can agree it wouldn’t be wise to start a business selling

goods and services to people that have no money. Even if it was a great idea and it filled a need, if the people who’d benefit from your idea didn’t have any money, you’d have no customers. In 2019, there were thirty-four million Americans living in similar conditions to how I grew up. That works out to about ten and a half percent of all Americans. That’s a huge market segment, but it’s also highly unstable. Poor people’s disposable income is often unpredictable, and they suffer from many other well-known burdens of poverty. With the Seed Money Act, the poorest Americans become a new consumer demographic with guaranteed financial stability, representing a total market of at least $260 billion.13 That’s a slightly larger market than Sweden or Hong Kong. For entrepreneurs, this kind of massive, stable market is a dream come true. Businesses will have the chance to do well by doing good, and the formerly poor will finally have a say in what goods and services they want. There’ll also be opportunities to generate wealth from within the poorest communities. Entrepreneurs are best at serving customers they know and understand. The poor will be best suited to entrepreneurial endeavors that serve the needs of this $260 billion market segment. Business owners coming from poor backgrounds are also sure to create meaningful products for other Americans with higher incomes or people living outside of the US. That’s how you grow an economy. As soon as this happens, individuals will pay taxes on their earned income, and fewer Americans will be near the poverty line. The true cost of the Seed Money Act will continue decreasing. If we give people seed money, they have the power to shape society through their purchases, just like everyone else in a capitalist society does. The poor are disenfranchised from voting with their wallets because they’re not allowed to purchase goods for themselves. Instead of money, we give them things. We treat the poor like children, assuming they wouldn’t know what to do with the money we’d give them. The Seed 13 128,451,000 US households x 10.5% poverty rate x ($17,240 + $21,720 / 2) federal poverty guidelines for average household size (~2.5) = $262,733,675,400 (rounding)

CHAPTER 11: THE SEED MONEY ACT — | 137 Money Act will correct this. I look forward to seeing what new businesses and technologies emerge in our rural and urban poor communities, and beyond, when people finally have a little money to spend and invest. Some may have a problem with businesses generating a profit by selling to the poor. I don’t. Capitalism allows consumers to determine what they want and lets businesses compete to provide those goods. With seed money, I’d be happy to see businesses becoming profitable by offering goods and services that our lowest earners decide adds value to their lives. This doesn’t only apply to for-profit entities. The Act makes it easier for non-profit businesses to compete against for-profit businesses by providing goods and services to the formerly poor. Instead of begging for funding from donors, businesses that are not profit-driven would only need to create a meaningful product for the lowest earners. Their potential customer base would be a large and stable market. If you operate as efficiently as a for-profit institution, because of tax benefits, you should be able to offer that product for a reduced price if you choose not to take a profit. Otherwise, you can offer those goods for the same price as for-profit organizations and pay your employees more. I’m excited to see which organizational models and corporate structures (for-profit, not-for-profit, co-op, B-Corp., etc.) are best able to win in low-income markets when there’s a little seed money involved. In true American fashion, I hope the best competitor wins. Foundations and philanthropists will continue to invest in novel solutions for problems that affect the poorest people. They can then implement those programs as services paid for by the lowest earners. It’s something foundations are already trying to do via their social impact investing and social enterprise building efforts. Human Rights and Dignity Seed money offers a better solution for human rights and dignity.

The Seed Money Act guarantees provisions for the basic human rights of food, clothing, shelter, and transportation. This will end the use of basic goods and services as motivation to work. We’ll still work to satisfy our wants, but everyone will do so with the peace of mind that our basic needs are covered. This approach builds on capitalism’s strengths. Previous economic systems, including feudalism and slavery, relied on the belief that people don’t want to work and must be forced to do so. We now know for a fact that this is false. The pursuit of wealth provides sufficient motivation. Most working Americans already live above the federal poverty guidelines and many of the wealthiest individuals in society are known for their extreme work habits (i.e., physicians, lawyers, scientists, business executives, and government officials). Prior systems misunderstood human nature and focused their efforts on coercion. Capitalism shows that it’s the carrot that truly motivates rather than the stick. We all know this. Capitalism is a more productive economic system without forced labor. This is because individuals with the ability to reap the benefits from their own labor tend to work harder and more efficiently. When an individual is denied the human essentials of food, clothing, shelter, and transportation, they’re no longer working to reap the benefits of their work. They’re working to survive and existing in a state of servitude. We don’t have to deny people basic goods and services for capitalism to work. I’m suggesting we support our Declaration of Independence, which affirms, “all men are created equal and independent, that from that equal creation they derive rights inherent and inalienable, among which are the preservation of life and liberty and the pursuit of happiness.” The US has independent legislative, executive, and judicial branches to ensure a separation of powers. We vote for our leaders using a one- vote-per-person system that prevents a tyrant from gaining too much control of the country. We intentionally designed a decentralized legal system, but we haven’t done the same with our financial system. We don’t ensure each American has a vote in capitalism.

CHAPTER 11: THE SEED MONEY ACT — | 139 I’m not advocating giving each American an equal voice in the market economy. Nor am I proposing a limit on how much economic power any single individual or entity can accumulate.14 I’m simply proposing that every American have some voice when it comes to finances and recommend that each American have a guaranteed minimum influence on capitalism equal to the federal poverty guidelines. This preserves our current economic system while eliminating poverty and market exclusion. We get to keep the carrot of limitless wealth, but we remove the stick of hunger, homelessness, and poverty. The Universal Declaration of Human Rights was adopted by the United Nations to guarantee the rights and freedoms of all human beings. Unfortunately, human rights have largely gone unfunded. Just as the law is intended to protect our civil rights, we need the Seed Money Act to protect our economic rights. It’s impossible for an individual to participate in a capitalist society without any money. Just like democracy, if capitalism is to be for the people and by the people, then people must have some guaranteed money. That money needs to come in the form of stable, government-guaranteed, seed money grants set at the federal poverty guidelines. This should happen before any other budgeting because our human rights take precedence over all other needs. Luckily, we can easily afford to do this, and it’s a gross oversight that we have yet to finally end human forced labor. Let Americans work for their interests or for wealth, not to survive. We don’t want a society where desperation is a motivator for work. This country is one of the wealthiest the world has ever seen. We must end the use of basic provisions of food, shelter, clothing, and transportation as a means of exploitation. Crime Reduction The Seed Money Act provides a better solution for reducing crime. The poor are at a higher risk of being incarcerated. “Incarcerated 14 This is a worthwhile topic to debate but is not necessary to successfully implement the Seed Money Act. For this reason, it will not be discussed here.

people of all gender, race, and ethnicity groups earned substantially less prior to their incarceration than their non-incarcerated counterparts of similar ages,” according to the Bureau of Justice Statistics. As sociologists Sarah Lageson and Christopher Uggen attest, “most crime is economic behavior—almost ninty percent of the serious offenses reported in the USA each year concern remunerative crimes.”15 A lot of crime is committed because people are poor.16 Particularly for adults, those released from jails and prisons are more likely to be arrested again if they’re unable to secure an income. Employers can legally refuse to employ someone for having committed a previous crime in the US, even if a person has completed their sentence for that crime.17 Unfair targeting aside, if the multitude of evidence suggests that many adults commit crime because they’re poor and seeking money, the Seed Money Act has the potential to solve a significant portion of our country’s crime problem. People don’t have to commit crime to survive when their basic needs are met through seed money. An individual attempting to re-enter society after being incarcerated doesn’t need to return to a life of crime in order to sustain themselves if they’re receiving grants sufficient to cover their costs for shelter, clothing, food, and transportation. Of course, there will still be crime, but we can eliminate crime that specifically results from the desperation of poverty. For these reasons, it’s essential that seed money grants aren’t withheld from citizens because of a criminal conviction.18 When someone leaves jail or prison, seed money will play a major role in helping that person re-enter society. 15 This figure ignores the numerous crimes, such as sexual assault, that often go unreported. 16 The poor are also policed differently than the rest of society. An adequate analysis of this is beyond the scope of this book. 17 Addressing this problem, and the larger issues of mass incarceration, the rights of former convicts and the US judicial system are also beyond the scope of this book. 18 What would happen if we allowed those incarcerated to keep their seed money? They could then use their seed money to pay for goods and services while incarcerated. They could use that money for job training, legal defenses, improvements to their living conditions, and reduce the likelihood they’d end up back in jail or prison.

CHAPTER 11: THE SEED MONEY ACT — | 141 Emergency Relief The Seed Money Act provides a better solution for emergency relief. Below, I’ll highlight a few emergency scenarios where seed money works: • During a recession, businesses won’t make capital expenditures and banks won’t lend. Seed money works to put money into the hands of the people without waste. • Autonomous trucks and cars are fully released and millions of Americans are out of work all at once. Seed money will be there to support these unemployed workers while they find individual solutions to get themselves back to work. • Another global pandemic occurs, and we have to shut down the economy. The poor must choose between going to work and risking death or staying home and risking financial ruin. Seed money works to give them a true choice in the matter. • Due to excessive fiscal stimulation through decades of low interest rates, asset prices reach bubble status, and national debt reaches all-time highs. The government can’t raise interest rates at risk of destroying the economy. Seed money works to provide direct stimulus to the people while we allow interest rates to float freely. Assets return to a reasonable level, and the economy continues because we can provide temporary extra seed money to consumers. Elimination of the Welfare Trap Unlike our current welfare system, the Seed Money Act doesn’t incentivize remaining on welfare. The welfare trap, or welfare cliff, is a well-studied phenomenon. Consider the following illustrative example from Illinois’s Policy: A single mom has the most resources available to her family when she

works full time at a wage of $8.25 to $12 an hour. Disturbingly, taking a pay increase to $18 an hour can leave her with about one-third fewer total resources (net income and government benefits). To make work ‘pay’ again, she’d need an hourly wage of $38 to mitigate the impact of lost benefits and higher taxes. We currently have generous welfare programs that provide many in- kind donations to the poor—meaning we give things, not money. These services are given and restricted based on income. As a person makes more money, they lose services. These kinds of welfare programs discourage the poor from earning more when they’re close to the program income cut- offs. This is a waste of money and counterproductive. The Seed Money Act eliminates the trap. Everyone receives seed money grants regardless of how much they earn. Once an individual earns income, they’re taxed on that income, but the seed money grant remains the same. For every extra dollar you earn, you’ll be taxed, but you’ll always make more than you would have if your income didn’t increase. Everyone will be motivated to focus on what they can gain through work rather than what they stand to lose from making more income. We don’t want to keep the poor impoverished. That costs too much in terms of dollars and social instability. We want poorer people to earn more and pay taxes like the rest of us. The Act makes sure we’re all aligned in this goal. Minimum Wage The Seed Money Act is good for business. We don’t have to eliminate the minimum wage in order to fund the Act, but it does make the minimum wage unnecessary. The minimum wage is a form of income redistribution also intended to prevent the exploitation of workers. The assumption is that companies would offer a lower salary if the minimum wage wasn’t mandated. The debate is then whether this increased salary redistributes income to lower earners from business owners (i.e., shareholders’ profits) or if it redistributes from

CHAPTER 11: THE SEED MONEY ACT — | 143 some lower earners to others by reducing the number of low-wage jobs available. Regardless of which combination of these answers is true, the minimum wage is a redistribution of wealth. Once we have seed money grants equal to the federal poverty guidelines, the minimum wage is no longer relevant. It’ll be impossible for businesses to exploit Americans through work in relation to poverty. If everyone has an income that guarantees their access to food, clothing, shelter, and transportation, their needs are covered. What remains is what that person wants. There’s no need to determine how much someone needs to be paid to receive what they want. That’s the entire point of the market economy. There are two sides to a contract. We may find that, once their basic needs are met, workers willn’t want to work extremely difficult jobs that pay very little. Those employers will either need to improve working conditions or pay people more if they want to fill those positions. Therefore, wages will be set based on what employees believe is appropriate compensation for the work. That’s how most Americans will think about their salaries because they won’t be concerned with being homeless or starving to death. They’ll find the best combination of wages, mission, work environment, benefits, etc., available to them given their skill sets. The lowest earners in our society deserve this same basic freedom. After seed money secures basic needs, wages can be free to fluctuate with supply and demand. It’s extremely problematic if we advocate keeping poverty so someone will take the least desirable, very low-paying jobs. We don’t have a shortage of food, shelter, clothing, and transportation. If we assume no one would fill certain jobs if their basic human rights were secure, then we’re intentionally depriving millions of Americans of those things so some will be forced to work undesirable jobs for very low wages. This is servitude. We have already agreed to end slavery in this country. Survival should not be a motivator for work in a free society. We’ll still need government involvement in employment. We’ve done much in this country to provide safe work environments for employees.

We should continue to do so. I’m only suggesting we evaluate the necessity of and consider removing minimum wage laws if we have the Seed Money Act in place. Unemployment The Seed Money Act provides a better solution for unemployment. Federal-state unemployment insurance provides unemployment benefits Americans receive temporarily when they lose their jobs. This is largely funded by employers through taxes. It’s designed to prevent workers from falling into poverty when they lose their jobs. It’s also designed to stimulate the economy during downturns when large portions of the population simultaneously lose their jobs. Spending on unemployment varies meaningfully from year to year but can be as low as $45 billion in some years and has exceeded $150 billion in others.19 I’m excluding COVID-19 pandemic-related years. Unfortunately, most unemployed people are typically not eligible for unemployment benefits. Anyone who leaves their job voluntarily, previously self-employed workers, gig workers, and students traditionally can’t apply for unemployment insurance benefits. Minimum earnings requirements mean that the poorest members of society are also not eligible for unemployment insurance benefits. With the Seed Money Act, we can eliminate the billions of dollars wasted on fraud and the redundancies of the federal-state unemployment insurance benefit. These savings aren’t a necessary part of the financial case to generate trillions of dollars in returns, but by replacing the role of unemployment, we can take that tax revenue and shift it elsewhere, potentially bringing down the cost of the Act. Each state sets its limits to unemployment benefits in a given year. For most states, the total allowable benefit (excluding emergency scenarios such as the COVID-19 19 Unemployment benefits are counted as income. We cannot, therefore, subtract these from our cost of implementing the Seed Money Act. But we can streamline the unemployment program to bring down its costs. The major improvements here are around ease of administration, inclusion in benefits, fraud elimination, and stability.

CHAPTER 11: THE SEED MONEY ACT — | 145 pandemic) is below the amount of our proposed seed money grant. Therefore, if an individual loses their job, the seed money would more than cover those benefits and prevent them from falling into poverty with no extra waste or bureaucracy. We can potentially argue that we should set aside extra benefits for some, but seed money would largely serve the current role of unemployment insurance. Labor markets could be places where people experiment to discover the best way they can contribute to society. Without seed money, people must work in jobs and shifts that don’t always make sense when others could have filled those same jobs and shifts. As a motivator for work, the threat of poverty is neither ideal in the short term nor the long term. Unemployment insurance is a quick-fix solution for what seed money offers: a more dignified and more dynamic way for labor to participate in a market economy. As the past century has shown it’s difficult to control economic cycles from the top down. The Federal Open Market Committee (FOMC) is a branch of the Federal Reserve System tasked with managing our nation’s interest rates and money supply. The reason the FOMC has this responsibility is because it’s expected to manage unemployment. Twelve members sit on this Committee and make the monetary policy decisions for our country. This is too difficult a task for any central group of people to oversee. We should instead allow the market to manage itself. For example, when we enter economic recessions, we see high rates of unemployment, which means consumers have less money. The economy further slows because when consumers don’t have money to spend, companies don’t have revenue. If companies don’t have revenue, they’ll have to cut more jobs leading to a reflexive effect. With a seed money grant system in place, the government can apply stimulus directly to people by temporarily increasing grant amounts. The government could directly stimulate demand and not have to worry about cumbersome federal relief programs for companies. If consumers have the money they typically have, they can easily shift their purchases to those businesses that remain. We wouldn’t need to bail out companies

because we’d instead bail out consumers. This would be an extremely efficient and equitable way to manage the money supply. Workforce Training The Seed Money Act provides a better solution for workforce training. With seed money that’s sufficient to provide the basic essentials, workers are supported while they develop the skills needed to enter or re-enter the workforce. Wealthier individuals are often willing to accept a lower wage early in their careers because they value the training they’ll receive on the job. Many of the most valuable work experiences are offered through unpaid internships. Medical residents, post-doctoral researchers, and interns across industries are all paid well below what individuals of these levels of education would typically demand in the employment market. They choose to forgo immediate wealth for the prospects of greater long-term earning potential. The poor can’t do this because forgoing income would mean being unable to afford essential goods. The Seed Money Act eliminates this disadvantage for the poor. Lastly, as we mentioned in the Economic Development section, the Act also promises to create new job opportunities for the lowest income earners by allowing them to serve one another with their own businesses. Seed money serves as a regular, direct stimulus to the poorest neighborhoods. By giving grants directly to the poor, we can avoid the incredible waste due to the rampant fraud that occurs when we wait for stimulus to trickle down. The Seed Money Act Will Provide Financial Stability Stable cash flows are the hallmark of a great business, and investors will gladly pay more for a business with consistent earnings. It’s easier to add debt, or leverage, to businesses, significantly increasing returns, and it’s easier to invest back into a business that’s supported by products generating stable income. What makes sense for the enterprise often makes sense for the

CHAPTER 11: THE SEED MONEY ACT — | 147 individual.20 While one-off donations can be helpful to the poor, they don’t provide stability since future income remains unpredictable. Regardless of your income level, getting a lump sum of cash can be daunting and difficult to manage. With that in mind, we make the logical misstep of assuming we shouldn’t give any money to the poor. Instead, we should give the poor money in a stable, gradual form. If we do this, they’ll never be poor again. If you give someone a fish today, they may starve in a month. But if you give them recurring seed money, I assure you they’ll eat just fine in a modern market economy. The Demonstrated Value of Direct Cash Transfers Those with wealth have always known the value of direct cash transfers and have benefitted from them for decades. The US already has a massive wealth transfer system. It just so happens the wealth transfer system is largely familial. The system is called inheritance. In 2020, Americans are expected to receive $765 billion in gifts and bequests, which is about four percent of all income. Nobody asks what these individuals will buy with their inheritance. No one’s concerned about whether they’ll go out and purchase the essential goods of shelter, food, clothing, and transportation. Those with wealth have been given fish for centuries, and somehow, they’re still doing just fine. As a society, we’ve decided this ability to transfer wealth and its associated income is so valuable and important that we provide Americans with a tax break on inherited income. This income is taxed at a rate that is less than fifteen percent—that’s significantly less than the typical tax rate on income earned through work and savings. Congress collected an estimated $16 billion in estate and gift taxes in 20 As with social security income, I’d recommend protecting seed money grants from garnishment to prevent predatory lending. Seed money would be protected to ensure recipients keep their basic freedoms while still gaining access to debt markets. Access to loans and increased liquidity are key for wealth creation.

2020. That’s an effective tax rate of two percent. If we believe unearned seed money is good for rich kids, then why is it bad for poor kids? It’s not. Wealthy families understand the massive head start an inheritance provides. Everyone could use a little seed money to boost their chances of success and to become contributing members of society. Supporting Data There’s plenty of data to support the Seed Money Act. We already have plenty of supporting data on the impact of poverty. There are over one thousand eight hundred published articles in the PubMed database linked to poverty. We know what poverty is, what it does to people, what it does to society, what its opportunity cost is, and how much we spend fighting it. We’ve also run several pilot programs on unconditional cash transfers which have yielded positive results. There appear to be no appreciable labor market impacts of these dividends; however, dividend and negative income tax recipients do appear to consume more during the month the dividend is disbursed, children of recipients have better educational outcomes, and recipients experience substantial positive mental and physical health impacts. — Mayors for a Guaranteed Income Two unconditional international cash transfer programs in Finland and Ontario, Canada were terminated early due to political changes, and while we can’t reach statistically significant conclusions from these interventions, we do know, “[i]nitial snapshot data from SEED show that individuals receiving the benefit are overwhelmingly spending the money on food and merchandise, and only two percent are unemployed and not looking for work.” Self-preservation is a fundamental trait of humanity. These pilots ultimately prove the hypothesis that poor people want to survive, and that money helps them do that. We don’t get it right all the time, and there are self-destructive behaviors in the biological kingdom, but for the most part, humans are trying to survive. Most of us do what we think

CHAPTER 11: THE SEED MONEY ACT — | 149 is best with the resources available. This belief is central to the ethos of capitalism. If an individual living in a single-person household with $12,760 a year in seed money refuses to care for themselves, then that person is likely in the midst of a mental health crisis. Typically, we place individuals with self-destructive behaviors in involuntary detention in mental health facilities. It’s rare but it does happen. We’ll have to care for these individuals, some of them for life, as we should be doing already. Poverty is damaging to people in numerous ways, and the data suggest seed money is an effective way to eliminate poverty without disturbing labor markets. Let the Poor Decide What the Poor Need What would you buy with your $1,063.33 a month? What would you invest in? How would that change your life? How would that change over time? I don’t know how you’ll answer those questions. There are more than one hundred twenty-eight million households in the US with different financial profiles, living in different geographies, valuing different things. There’s no government institution, or individual, capable of telling every American how they should spend their money to achieve prosperity. This notion is the very reason we’ve adopted capitalism and free markets. The government can regulate markets but never have we, as a people, argued for the government to have broad control over our purchases.21 Yet, this is exactly what we do to the poor. By making much of government aid in-kind contributions—for example, they give you a free apartment instead of giving you money to purchase your own housing— the government is telling the poor what they can and will spend their money on. We must stop patronizing the poor. Leave it to American 21 This was a legal argument against the Affordable Care Act. The tax penalty for the individual mandate has since been removed. The point is not to debate the legality of Obamacare but to highlight that Americans tend to push against government mandates on purchases. We should be pushing back on government control of our social benefit spending.

adults to figure out which basket of essential goods they need to purchase and at what price. Americans are creative people. An ‘extreme couponer’ can bring a $300 grocery bill down to $10 while the do-it-yourself crowd can apparently make anything at home these days. On the other hand, on an episode of The Ellen Show, Bill Gates thought that a bag of pizza rolls cost $22. While it provided good comic entertainment, it underscores the point that we are letting the wealthy solve a problem they don’t understand. If Mr. Gates wants to return his wealth to the less fortunate, it would be best for him to give most of it directly in the form of seed money. The poor have spent their entire lives making a dollar out of fifteen cents, so who better to manage money that’s intended to help them? Whether they live in Appalachia, Indianapolis, Los Angeles, or Erie, I trust the poor will know how to shop for what they need. The Seed Money Act is an Affordable Solution We have more than enough money to end poverty. Let’s begin with an exercise to help explain how much a society could theoretically spend on redistribution. To answer this, we add together all the income American households reported on their taxes and divide it across the number of households. The result is called the ‘mean,’ or average household income. In 2019, the average household income in the US was $98,088. If we wanted to, we could offer Americans seed money in the amount of $98,088 through tax redistribution. Of course, that would mean no other government spending and a lot of frustrated people, but that’s just our theoretical upper limit. I’m not recommending we equally split all the money we earn in this country. At an equal income distribution, we’ve gone far past removing the stick of poverty and have now lost the carrot of wealth. There would be nothing an individual could do to increase their income. There would still be many other motivators for work (e.g., purpose, helping others,

CHAPTER 11: THE SEED MONEY ACT — | 151 pride, curiosity, health, status, etc.), but no financial incentive. As demonstrated, we can theoretically create an income baseline and set it either at the average household income or any value below it. We then must ask ourselves what do we want to spend? How poor should the poorest Americans be? If society wants to eradicate poverty, as we’ve so often declared, we should provide grants at the federal poverty guidelines. By setting the income baseline to the federal poverty line, we arrive at the simplest, cheapest way to eliminate all poverty in our society. This seed money is enough for every household to avoid poverty. For the average-sized American household in 2019 (calculated at two and a half people), the federal poverty guidelines are about $19,120. That’s about twenty percent of what we could afford at our upper limit, and it assumes we’re giving everyone this full amount. There would still be massive income inequality between executives and workers, doctors, and janitors. We’d be left with all that capitalism has to offer, but with no poverty. Some may advocate for higher seed money amounts, but I won’t. I just want to get rid of absolute poverty, along with its devastating effects on people, and the associated costs to society. The aim here isn’t addressing relative poverty or income disparities. Having gone from the bottom to the top end of the income ladder, I can attest that having money isn’t everything—but not having it is. The Cost Eliminating poverty will cost us an additional $200 billion each year. The previous analysis showed we can afford the Seed Money Act. Let’s now look at how much ending poverty in the US would actually cost, given the resulting drop in our current social safety net spending. Luckily, the US census already does some of this analysis for us. It calculates how many households are below the poverty line and by how much. If we multiply the total number of households below the poverty line with the average deficit per family, we get a more precise estimate of

the cost of getting everyone in America to the poverty line. That number is approximately $155 billion.22 I’ve rounded up to $200 billion to lessen the marginal tax rate on the poor, but that’s it. That’s how much it would cost us to end poverty in the US. Let me try to put that number in perspective.23 In 2019, the American government collected $3.5 trillion in taxes. The largest single discretionary spend is for the military. In fiscal year 2019, we spent $732 billion on the military, which is approximately twenty-one percent of the total US tax revenue for 2019. That was more than the military budgets of China, India, Russia, Saudi Arabia, France, Germany, the United Kingdom, Japan, South Korea, and Brazil combined. We spend $182 billion a year on mass incarceration through prisons, jails, policing, and our legal system. That’s five point two percent of taxes collected in 2019. It is worth noting that Americans earning less than one hundred fifty percent of the federal poverty guidelines are fifteen times more likely to be charged with a felony relative to those earning above that level. I hypothesize that using those funds to provide the poor with seed money will be a better use of tax dollars than incarceration for much of the country’s population. The additional cost to end poverty is equal to four point four percent of the total US tax revenue for 2019. We hopefully now agree that, on a national scale, this isn’t much money to end poverty. 22 To get to this figure, we multiply total population for all primary families living below the poverty threshold (6,554,000) with average deficit ($10,668) and add that to the product of unrelated individuals living below the poverty threshold (11,300,000) with average deficit ($7,375). (6,554,000 x $10,668 + 11,300,000 x $7,375 = $153,255,572,000. I round up to $155 billion. Estimates are for 2019. 23 Jeff Bezos, as of January 2021, was worth $181.5 billion. In 2019, there were 34 million Americans living below the poverty threshold. If Mr. Bezos decided to bring everyone out of poverty for a year, he’d still have $26.5 billion left the following year. He’d also have a pretty sizable tax deduction to carry forward. Apple, the maker of the iPhone and more, had $195.57 billion in cash on hand as of the first quarter of 2021. This isn’t intended as a criticism of Mr. Bezos or Apple. The goal is to help you contextualize how inexpensive this $155 billion price tag is relative to the wealth in the United States.

CHAPTER 11: THE SEED MONEY ACT — | 153 The American government has recently shown it can quickly step up to provide economic stimulus during the coronavirus pandemic. As of March 7th, 2021, Congress had already approved an initial spending of $3.92 trillion, along with another $1.9 trillion, bringing the total US stimulus to $5.82 trillion.24 If the cost of the Seed Money Act is $200 billion a year, we could’ve covered the cost of eliminating poverty for nearly thirty years with the current COVID-19 stimulus appropriations. If we put that $5.82 trillion into a poverty fund earning interest, we would need a real return of only three point four percent to fund poverty eradication in the US forever. If we were to provide seed money grants equal to the federal poverty guidelines to every American household, using 2019 figures, without offsetting any of it with a tax adjustment for those making above the poverty line, the bill would balloon to $2.3 trillion. Note, this is absolutely not the right way to provide seed money grants, as it’s extremely wasteful.25 The $5.82 trillion we spent on COVID-19 stimulus would still be enough to pay for two and a half years of seed money for the entire country, with no one working a single day. Why will we take back seed money grants in taxes from those solidly above the federal poverty guidelines? Before we calculate the return on this investment, we first need to clarify why most Americans will see no net change in their income with this $200 billion investment. It’s because we’ll adjust the tax rates so the seed money is deducted from the wages of Americans living well above the poverty line. Their incomes won’t increase, but they’ll have a true safety net. They’ll always have their seed money grants, set equal to the federal poverty guidelines, when they fall on hard times. That would be 24 This analysis is intended to show that we, as a country, can afford to take action when faced with an emergency. As the COVID-19 pandemic has shown us, poverty is an emergency. This isn’t a recommendation for how we could improve our response to the pandemic. 25 The point of the Seed Money Act is to invest in the poorest Americans. We’re not aiming to give people like me more money. It would be a waste to provide individuals well-above the federal poverty guidelines with seed money grants and not offset that through an income tax.

their right as a US citizen. With the Seed Money Act, Society Has a Baseline Level of Economic Dignity While this could make a major difference in people’s lives, the required changes to the tax code are rather simple and easily implemented. Let’s use two examples to clarify. Person A If Person A makes $40,125 in 2020, they’d pay $4,617.50 in federal taxes. This means, before any state tax, Person A brings home $35,507.50. Under the Seed Money Act (set at $12,760 a year), that person would receive a check for $1,063.33 each month throughout the year. That money wouldn’t be taxed. They’d also earn their salary as before. Person A earns well above the federal poverty guidelines, so we’re not looking to boost their income. We can therefore adjust their tax rate so they still bring home $35,507.50 when their seed money is included. Since they received $12,760 in seed money grants, their salary can be taxed at a higher rate, taking it down to $22,747.50. Together with the seed money grants, their after-tax income would remain the same ($12,760 + $22,747.50 = $35,507.50). This person would see no change in their total take home pay. What would change for Person A is, if they ever lost their job, fell ill, needed to take an emergency leave from work, retired, etc., they’d still keep their $12,760 a year grant. They would never fall below the poverty line. That’s their right and guarantee as an American citizen. There would be nothing to apply for, no associated shame or guilt, and no process. They’d receive this seed money and would always receive it.

CHAPTER 11: THE SEED MONEY ACT — | 155 Person B: If Person B makes $5,000 and files their taxes as an individual in 2020, they’re paying $500 in federal taxes. Before any state tax, that person brings home $4,500. Under the Seed Money Act, set at $12,760 a year, that person would receive a grant for $1,063.33 each month throughout the year that wouldn’t be taxed. They’d also earn their salary as before. Person B would be guaranteed to earn at least $12,760 a year. We’d tax their $5,000 income at a higher rate, while still increasing their take home pay significantly. If we set their tax rate equal to that of Person A, Person B would receive a take home pay of $2,834.58 + $12,760 = $15,594.58.26 In addition, they would never fall below the poverty line. That’s their right and guarantee as an American citizen. They’d also have nothing to apply for, no associated shame or guilt, and no process. They’d receive this seed money and would always receive it. How to Make Trillions of Dollars by Implementing the Seed Money Act We’ll make trillions of dollars by implementing the Seed Money Act. Two calculations explain how we can make accomplish that by getting rid of poverty. For the first calculation, we must consider how much money poverty costs us each year. This is referred to as the economic cost of poverty. Through the Act, we can eliminate this cost as the poor would be able to buy their essential needs to escape the financial effects of poverty. 26 Note the estimated deficit for this individual is $12,760 - $5,000 = $7,760. The actual increase in take home pay for this person was $12,760 - ($5,000 x ($22,747.50/$40,125)) = $9,925.42. There are multiple ways to adjust for the discrepancy that’ll occur with very low earners. We can raise the lower tax brackets across the board, because, the poor are being taxed at very low relative total percentages, including their seed money grants. It would also be fine for these lower brackets to even exceed the percentages of higher brackets for the same reason. We could also just increase the total cost of the program by twenty to thirty percent if we didn’t mind pushing the poorest earners beyond the federal poverty guidelines. As we’ll soon see, the return on investment for the Seed Money Act is more than sufficient to handle this increase in total program cost.

Therefore, by making the seed money investments, we increase the total wealth in our country by the amount of the economic cost of poverty itself. Estimates for the economic cost of childhood poverty alone are over $1 trillion per year.27 In addition, an estimated one hundred seventy-two thousand people a year die from individual and area-related poverty. I’ll leave putting a dollar value on a human life to others. The financial case for the Seed Money Act is nothing short of miraculous, given how wasteful we are with our current spending. We would need to spend $200 billion every year, as discussed, to eliminate the $1 trillion cost of childhood poverty. That’s an extra $800 billion annual increase in the total wealth in America; an astounding four hundred percent return on our $200 billion investment.28 Over a decade, that’s an over $8 trillion cash return. In comparison, the average annual stock market return since 1929 has been nine point six percent. If you don’t believe the economic cost of childhood poverty is $1 trillion, let’s assume for a moment the actual cost is a quarter of that (i.e., instead of $1 trillion, we say the economic cost of childhood poverty is $250 billion). The math still works. In that case, the Seed Money Act would still lead to a twenty-five percent annual return on capital, or $50 billion each year. In a decade, that comes to $500 billion, which is half a trillion dollars. Keep in mind, we’ve reduced the assumed economic cost of childhood poverty by seventy-five percent, and we haven’t factored in the economic cost of adult poverty. These financial returns are staggering. Let’s also pause to factor in the social value of saving one hundred seventy- 27 “These costs are clustered around the loss of economic productivity, increased health and crime costs, and increased costs as a result of child homelessness and maltreatment. In addition, it’s estimated that for every dollar spent on reducing childhood poverty, the country would save at least seven dollars with respect to the economic costs of poverty.” —Estimating the Economic Cost of Childhood Poverty in the United States, National Association of Social Workers Press, Social work Research, Volume 42, Issue 2, June 2018, Pages 73-83 28 Because of these astronomical returns, I won’t spend much time debating potential adjustments to the $200 billion costs of the Seed Money Act. We can double the cost of the program to $400 billion and the ten-year returns are still several trillions of dollars.

CHAPTER 11: THE SEED MONEY ACT — | 157 two thousand lives and moving over thirty million people out of poverty. Our second calculation is how much money can we save by solving poverty directly through seed money grants, rather than trying to treat the symptoms of poverty through in-kind donations (e.g., our social welfare programs). We currently have a social safety net for the poor. We indirectly give the poor $600 billion a year in healthcare through Medicaid and the Children’s Health Insurance Program (CHIP). We spend $380 billion a year on social welfare programs. Combined, that’s a little under $1 trillion a year in actual spending. Yet we still have poverty. Having low income leads to significantly worse health outcomes, which we’re paying $1 trillion a year for as a society. We know for a fact money solves poverty, but we’re using our social safety net to treat the symptoms instead of the disease. I want to stress that the price tag to eliminate poverty, given the expected returns, is so very low that we don’t need to cut current programs. However, I find it irresponsible to not engage with the incredible savings opportunities if we were to improve the efficiency and effectiveness of our social welfare programs by using seed money to eliminate poverty directly. In 2019, we spent $242 billion on Earned Income Tax Credits, HUD, SNAP, the Temporary Assistance for Needy Families Program (TANF), and school meal subsidies. If we replaced these programs with seed money, we’d spend $200 billion to save this $242 billion. That means an extra $42 billion each year. Over a decade, that comes out to $420 billion. That’s a return on investment of twenty-one percent each year. Note that we are not touching any of our healthcare spending and are leaving several programs in place that we may also be able to reduce. Let’s look at an extreme case where every person under the federal poverty guidelines lost their jobs. In this scenario, the cost of the Seed Money Act is now $242.4 billion.29 This means that all the poor today 29 If we go back to our example of looking at the average American household in 2019 of two and a half people, and we consider that there were about one hundred twenty million American households, with a ten and a half percent poverty rate, and a

now don’t work at all. That number is equal to the total spent in 2019 of Earned Income Tax Credits, HUD, SNAP, TANF, and school meal subsidies. In this scenario, where absolutely no one who’s currently poor earned any income whatsoever, we could still pay for the additional cost of the Act by eliminating these (now redundant) programs. As explained, we’ll make $800 billion each year by eliminating the economic costs of poverty and would make an additional $42 billion a year from eliminating some social welfare programs. Combined, we would make $842 billion each year. Over a decade, that is $8.42 trillion dollars. As a bonus, we also save one hundred seventy-two thousand lives each year, and thirty million people no longer have to experience poverty. The numbers are mind-blowing, but they are true. By providing seed money grants equal to the federal poverty guidelines, we’ll make trillions of dollars. Few investments, if any, provide anywhere near this level of return. The decision to have an expensive social welfare system that doesn’t eradicate poverty is a financial disaster for our country. Still don’t believe the numbers? Luckily, I partnered with a non- partisan think tank to develop an economic model around this concept.30 Anyone can test out these assumptions for themselves at policyengine.org. Poverty is a Bi-Partisan Problem with a Bi-Partisan Solution “When you ain’t got nothing, you got nothing to lose.” —BOB DYLAN The riots that happened on both the left and the right in America during the coronavirus pandemic indicate the cracks occurring in our federal poverty guidelines of $19,120 for this family, then the absolute most it should cost to bring this entire population out of poverty, assuming not a single person is making even one dollar, would be: 120,756,048 x 10.5% x $19,120 = $242.4 billion. 30 https://endpovertymaketrillions.medium.com/economic-modeling-of-how- to-end-poverty-in-the-united-states-while-saving-taxpayers-trillions-of-1679b751d0c0

CHAPTER 11: THE SEED MONEY ACT — | 159 nation’s foundation. In an article published in “The Economist” in September 2018 titled “Can inequality only be fixed by war, revolution or plague?” Stanford professor Walter Scheidel is referenced saying, “Throughout history, economic inequality has only been rectified by one of the ‘Four Horsemen of Leveling’: warfare, revolution, state collapse, and plague.” Governments and businesses alike understand the dangers of an idle, impoverished class. President Lyndon B. Johnson launched a War on Poverty, aimed to mitigate this risk. In his January 1964 State of the Union Address, the president declared: “This administration today, here and now, declares unconditional war on poverty in America. I urge this Congress and all Americans to join with me in that effort. It will not be a short or easy struggle, no single weapon or strategy will suffice, but we shall not rest until that war is won. The richest Nation on earth can afford to win it. We cannot afford to lose it. One thousand dollars invested in salvaging an unemployable youth today can return $40,000 or more in his lifetime.” Even President Johnson was missing the key answer there. We actually do have a single weapon that can end this unconditional war on poverty. The mathematical and practical solution to end poverty for a wealthy nation is to provide seed money grants to all households set to an amount that’s equal to the federal poverty guidelines. By adjusting taxes enough to offset the seed money received by those not living in poverty, the price tag of this program becomes manageably low. In the case of the US, we’ve shown here that the incremental cost is $200 billion. That’s as close to a silver bullet as imaginable for winning a war that we “cannot afford to lose.” Add to that the trillions of dollars we’ll save in doing so, and it’s hard to envision a political party that would be against ending poverty right now. Poverty is a bi-partisan problem. The Brookings Institute found that in 2016, of the forty-eight million Americans living in poverty,

twenty-five million of our nation’s poor lived in districts represented by Republicans, while twenty-three million lived in districts represented by Democrats. Fans of either party should be disappointed with these results. Poverty is not an inevitability. We don’t need to have poverty in this country. By coming together and realizing that we’re throwing away trillions of dollars by not ending poverty, we can declare victory in this war and make a lot of money doing it. I hope the rich and poor, the left and right, can all see the clear benefit of this solution. Allow me to share some simple numbers to give you an idea of how wealth is distributed in this country. Americans are generous people, and I believe they want to see positive change. In 2019, American individuals, bequests, foundations, and corporations gave an estimated $450 billion to US charities. Of that, eight percent came from individuals, foundations gave fifteen percent, and corporations chipped in five percent. The money we collectively give as individuals is more than enough to provide the seed money grants. While the amount of money that gets donated to charity each year by the private sector is heartening, I stress it’s not the best way to end poverty. We need the federal government to provide the seed money in order to simplify the program and maximize the returns.31 But if we can’t get them to act soon enough, then giving directly to the poor, in the form of a grant, is a great start. The top point zero one percent (0.01%) of income-earning households in the US have over eleven percent of all wealth in America. 31 Rollouts of programs can be difficult. If we start with a single community, that’s fine, but it introduces new complexities. If everyone, in all states, receives the benefit at once, that limits the chance for market distortions. If only one state, town, city, zip code receives seed money grants, the risk of that state having an outsized economic burden with others moving to the area to receive the benefit are high. We see this already with homelessness in California. In a country where people can freely move from state to state, we need this to be a national program. When not everyone receives seed money, we must also be careful to protect the identity of those receiving the grants, so they’re not overwhelmed with requests to support others.

CHAPTER 11: THE SEED MONEY ACT — | 161 These are individuals earning at least $7.5 million a year in income. That’s approximately twelve thousand households earning more than twenty percent of all US income. But at these levels of wealth, it’s less about income and more about actual wealth. The US total amount of wealth is about $106 trillion. Eleven percent of that is $11.66 trillion. That’s $11.66 trillion being shared between only twelve thousand households. For these top income-earners, the $200 billion needed to end poverty in America represents a mere one point seven percent of their total wealth. The wealthiest people in our country—that top point zero one percent (0.01%) of income-earning households—don’t even know how much money they have to the nearest one or two percent. As oil tycoon Nelson Bunker Hunt said, “People who know how much they’re worth aren’t usually worth that much.” The bottom ten percent of Americans (about thirty-three million people) all have negative net worth. Meaning their liabilities are greater than their assets—in other words, these people owe more than they own. US foundations funded by the wealthy gave $75 billion 2019. These tax-exempt institutions are required by law to give away five percent of their endowments each year. American foundations currently have over $1 trillion in assets. With endowments well into the billions of dollars, many individual foundations could commit to providing seed money grants, guaranteed over a lifetime, to the poorest American households. For this to work, it’s essential that: • The grants at least bring the family to the federal poverty guidelines. Best case, provide seed money grants at the federal poverty guidelines to the poorest families in the country, ignoring what little income they currently receive. • The foundations commit to fund households for a lifetime. We want to incentivize people to further raise themselves away from the poverty line. We can’t take away the benefit if that person is successful. Instead, allow volunteers to donate some of their seed money to more needy families if they so choose.32 32 This is another key reason why the federal government is best suited to

• The focus is on communities with concentrated extreme poverty. By alleviating poverty clusters, we can reap community-level benefits. • There are no stipulations. We can ask people to share stories of how the grants have changed their lives, but we shouldn’t try to control or monitor how they spend the money. There shouldn’t be any way to lose the benefit.33 Individuals with more modest incomes can contribute as well. Any group of individuals can come together in-person or via online platforms to collectively commit to providing a poor household with seed money grants meeting the above criteria. The group can be whatever size that is necessary and any individual contribution counts. Why We Haven’t Already Eliminated Poverty If the social and financial benefits are so obvious, why haven’t we done it already? Let me try to explain. Poverty is a concept that evolves as a society economically and technologically progresses. In a hunter-gatherer society where any trading is done through bartering, there’s limited opportunity for relative poverty. Most food items would be shared, as there are limits to what the group can preserve and bring along with them. Everyone, more or less, eats together. Shelter would remain rudimentary as people roam. Clothing would be kept simple as people need to travel lightly. Transportation would consist primarily of walking (domesticated animals would be introduced later as the society evolved). For extreme inequality to emerge, a society must implement any seed money program. They have the ability to tax income. We as individuals cannot. As an individual earns income, the federal government can tax that individual sufficiently to offset the cost of the seed money program for those above the poverty line, while avoiding a regressive tax scheme. This is the best way to avoid the welfare trap, while keeping the cost of the Seed Money Act at a manageable amount. 33 If foundations are looking for an interesting way to evaluate the effectiveness of the program, I would recommend comparing the grants within the seed money program to the cost of giving in-kind contributions, including the overhead costs of both approaches.

CHAPTER 11: THE SEED MONEY ACT — | 163 progress to an agrarian form. For most of human history, there weren’t many of us, and our population density was low, so providing shelter for everyone was simpler. Once settled into an agrarian society, humans suddenly had more food, but it was of much lower quality and less variety than in their hunter- gatherer days. People began to specialize their skills, and eventually, not everyone had the time or ability to hunt, gather, or make their own clothing. Add in the ability to store food (e.g., grain), and we have the ideal scenario to create poverty. Some kind of economic system is necessary to determine who gets what goods in a specialized economy. If some people aren’t regularly distributed sufficient food or clothing, they’ll die or live in constant trauma. The rest of the people within the society, however, will survive. This is income disparity. During the first few millennia of human agrarian society, we hadn’t mastered farming as we have today. Food, therefore, was a scarce good at times, and it had to be divided by some system of distribution. Those who didn’t get food were, by definition, the poor. Crop yields were unpredictable and horrible famines occurred. Sometimes famines wiped out everyone, but usually it only wiped out the poor. The poor didn’t tend to take death by starvation lightly, so hunger was often a precursor to war and revolution. Ancient societies understood the risks of having poverty amongst them and created laws to rectify this social imbalance. The giving of alms is a central tenet of several world religions, including Christianity, Judaism, Islam, and Hinduism. In Christianity, a tithe, meaning a tenth, is to be given to the church as an offering, either as agriculture or coin. The church is then tasked with distributing that wealth back to the poorest members of society. In Islam, after prayer, the second most important of the five pillars is the Zakat. The Zakat is a mandatory two and a half percent annual donation to the poor based on disposable income. Throughout human history, we’ve worked to redistribute wealth at varying levels. Social safety nets are nothing new.

When the major item an individual needed to overcome poverty was food, it made sense to give that person a choice of food. In Judaism, Pe’ah refers to the corner of a field that must be left unharvested so the poor could come and collect their share—the poor were free to collect what they needed. Over time, people improved their ability to produce food. We now waste a third of all food produced for human consumption or one point three billion tonnes. Food is no longer a scarce resource. We have plenty. This is key to answering the question, “Why haven’t we done this before?” We haven’t always had enough food to go around, but we do now and have for quite some time. We also have plenty of space and empty homes we can improve, especially when, through modern technology, workers don’t necessarily need to live where they work. In the US, we produce eighty pounds of clothing waste per person each year. We’re even wasteful with transport, grossly underutilizing and under-funding public transportation and other cheap, clean ways to get around. We’re no longer struggling to produce enough essential goods for everyone, yet there are still Americans who don’t have enough food, clothing, shelter, or transportation because we don’t share. Our problem is resource distribution, and we’ve seen it’s very easy to address. As digitally managed money becomes more prominent in a society, more wealth disparity can emerge. There’s a limit to how much grain one person can store. There’s also a limit to how much physical gold or coins someone can safely protect and move around. But there’s no limit to how much wealth an individual can accumulate in a modern economy that largely transacts through digital payments and paper currency. If we add to that the modern complexities of urbanization and the associated importance of transportation, most of the population having moved on from farming, and few people specializing in making their own clothing, the modern world is ripe for poverty. This may seem somewhat paradoxical, given the extreme wealth advantages modern society has over a hunter-gatherer society, but it’s distribution that matters with poverty. In the defense of modern humanity, many strong systems of poverty

CHAPTER 11: THE SEED MONEY ACT — | 165 alleviation have been proposed and implemented. Sir Thomas More, Thomas Paine, Milton Friedman, and Dr. Martin Luther King Jr. have all recommended some form of direct wealth redistribution. In the US, we already have components of both a negative income tax and unconditional cash transfer.34 In America, direct cash transfer programs now make up forty-three percent of the $380 billion we spend on our social safety net programs. The Earned Income Tax Credit (EITC) is a negative tax. TANF is a temporary direct cash transfer to the poor. Supplemental Security Income (SSI) is a partial income paid to low-income individuals who are disabled, blind, or senior citizens.35 It took decades of legislation to install these programs and bring our social safety net spending to a point where the US society is ready for the Seed Money Act. We can do better and eliminate poverty altogether without a single government program. Could we have eliminated poverty in the past? I believe so, but given the progress we’ve made as a society, it’s never been easier or more profitable to end poverty than it is now. We’ve fully moved to a monetized economy, and we must accept that money is how we transact. This is a good and efficient thing. In a modern economy, money is the most effective and obvious way to eliminate poverty. We already calculate what we believe it costs to have all the basic essentials in this country. We already send Americans direct checks, and even direct deposits into their banks or phones. We have the markets to buy whatever we need. We even have the internet to allow people to see what rent prices are in real-time all over the country. We’re finally technologically advanced enough to be able to easily implement the Seed Money Act to completely eradicate poverty in the US. 34 A negative income tax is one that directly transfers taxes taken from the wealthier members of society and gives to the poorer members of society. The poorest pay no taxes and receive an extra income benefit from the government at the end of the year. This type of wealth transfer happens retroactively. 35 SSI does count as income in the US. Therefore, our calculations on the cost to eliminate poverty assume that SSI remains. SSI spending would not be available to reduce the overall cost of the Seed Money Act.

Given our massive spending on inefficiently solving this problem, and the well-proven economic consequences of poverty, we’ll actually make trillions of dollars in the first decade of this transition alone. We just need to take that final mental leap and realize that seed money is astronomically cheaper to provide than our current patchwork of bureaucratic programs. This is not charity. It is common sense. Who Decides the Needs of the Poor? For many, the concept of seed money can still feel radical. Some Americans may ask, “Will people actually spend their money on what they need?” To answer this question, we first must ask ourselves, who knows what the poor need? We can use the federal poverty guidelines to approximate how much an essential basket of goods would cost, but as we all know as shoppers, everyone has their own tastes. Some would rather have a bigger home and eat cheaply. Some would rather buy used clothing and spend their extra money to dine out at a restaurant on occasion. All of this is fine. We must ask ourselves, if the poor can’t decide what they need, then who can? People will absolutely make some purchases they’ll regret. Who hasn’t? If we’re worried about our abilities to responsibly spend seed money grants, then we might want to include personal finance and household management courses in our school curricula. Having many wealthy friends and colleagues and being an asset manager for many ultra-high-net-worth clients, I can assure you we all need help managing our finances. We all make “‘dumb’ purchases sometimes, spend more than we make, fail to understand the risks associated with debt, and make poor investments. We could all benefit from learning how to better manage our money, not just the poor. Others may ask, “Won’t everyone stop working if they get seed money grants?” They should also ask themselves, or ask any average American, “Do you want to live at the poverty line?” Most United States households already earn well above the federal poverty guidelines. Do you see people

CHAPTER 11: THE SEED MONEY ACT — | 167 retiring from their careers once they hit that milestone? No. Human wants are infinite, and we live in a society that has access to a seemingly endless choice of goods and services—if you have the money. Beyond money, people actually like to work, and they want meaning in their lives. Contrary to popular belief, the poor don’t want to sit around and do nothing their entire lives. We all have wants beyond the essentials. We all want to feel needed and provide a useful service to society. Finally, we must call out the concerns around the Seed Money Act. My main concerns about seed money are moral and social ones, many of which are feelings of unease rather than clear lines of argument. And even the clear lines of argument are concerns about things which might go wrong rather than strong reasons against its implementation. • This may go over budget. If people suddenly don’t have to work for a minimum wage to live, wouldn’t the cost of their labor rise and be passed on to people across the board, thereby lifting the cost of basic necessities and the cost to eradicate poverty? • How do we improve on the federal poverty guidelines so they’re actually representative of what’s truly needed to stay out of poverty? • Should we include the cost of the internet and a cell phone? I don’t have the answers here. We’ll have to find them together as a society. The way I see it, we’ve already seen the government spending trillions of dollars on infrastructure and bailing out corporations. Why not just spend $200 billion to completely end poverty? We don’t need to do any more studies to figure this out. I’ve written several academic papers about poverty and have read hundreds of others. Whatever study you look at, when you consider the outcomes, whether they’re related to health, incarceration, or mental health, if you’re poor, you’re going to have a much worse outcome. And if we already know being poor leads to really crappy outcomes, why do

we need to do any more research or field testing or put any more ‘time’ into figuring out that giving people money changes their outcomes for the better? If there’s a silver lining to be found amidst the fallout of the global COVID pandemic, it’s that we’ve learned we don’t have to accept the status quo. The pandemic has both highlighted and exacerbated many social justice issues that still exist in our country, but it’s also presented us with an opportunity to get involved in creating a more compassionate and egalitarian society. We live in such an incredible country full of so much possibility. What I’m asking is that we explore the possibility of ‘now.’ We have an opportunity to end poverty and save our economy trillions of dollars. We have nothing to lose and so much to gain. Let’s not be ruled by fear, greed, hatred, or prejudice any longer. The time to do this is now.