Frank photo

Social Contract

Who is Frank?

While I have no specific credentials to wave, I have been thinking about this for some time. My career is done. Now I want to use my remaining time and abilities to help make a better society for my grandchildren, my community, and everyone else. I want to stimulate intelligent people to think, research, and dialog, with the objective of improving our society in the United States. Others will need to tackle the rest of the world. If all you have to offer is ideological posturing, then yours is not the kind of participation I'm looking for.

Introduction

Once any animal group realizes that life need not be a zero-sum game, they begin to form society. They make moral decisions. We are all better off if we agree not to wantonly murder one another, so we make that law and enforce it. Then we can cooperate to gain efficiencies of division of labor. We agree on how do divide the fruits of our labors. The men hunt, the women cook, and everyone eats. That's a social contract. We make the system even more efficient and flexible with a medium of exchange (money) and economics. We erect formal systems to organize all this (government).

The social contract of the United States has been evolving haphazardly in the absence of rational, informed dialog. We can do better. This page reflects my thoughts on how our social contract might be formalized and improved. We have chosen a degree of compassion toward our least fortunate members, but have pursued it with piecemeal, uncoordinated efforts, in fits and starts. We have implemented welfare, but with bureaucracy and perverse incentives. We have forced hospital emergency rooms to treat anyone, regardless of ability to pay, but without funding that mandate. We refuse to admit that we are approaching our utopian dream where out machines do all our work for us. Thus we do not yet recognize the inherent weakness of the financial model of pay-for-work in a world requiring much less work to produce the goods we need and want. We cherish the efficiency and motivational benefits of a capitalistic economic system, but have failed to adequately regulate that system. The result is extreme income inequity.

Here I will develop a conceptual prototype of a new social contract, using principles of Social Democracy. To reject it out of hand with emotional cries of Socialism is unproductive and misleading. Pure Capitalism and pure Socialism are indeed ineffective in their ideal forms. A workable economic system, governance system, and social contract need aspects of both, and more. Fighting for Common Ground by Olympia Snowe demonstrates how societal success has resulted from business-government cooperation. I intend this to be a framework for discussion, not a final, polished solution. I want discussion about how to make this solution better, and also alternative solutions which might do better.

Income Inequity

Income inequity is far more extreme in the US than anywhere else in the developed world. It is widely recognized, and is becoming a destabilizing factor in our society. The root cause is an imbalance of power. Those who control industry possess the power to concentrate an excessive share of the wealth of productivity to themselves, and away from the broad body of workers. We have developed a few tools to help balance power, such as unions, minimum wages, workplace safety/quality law. Each introduces its own distortions.

For this subject, I recommend reading Capital in the Twenty-First Century, by Thomas Piketty. If you're overwhelmed by its size, consider reading just the introduction, parts 1 and 4, and the conclusion. That's about 215 pages. The book is readable by a general audience, but it contains the details, background, and references needed by a scholarly audience. You can get the point by skimming the details. But look at the details for a point if you need to be persuaded. Check it out from a library. Santa Clara County library has 18 copies, with 12 available now. They also have an audiobook version, though the graphs are important.

I request that you consider the merit of his idea of a global tax on capital on its own. Considerations of practical implemention are a separate topic.

Universal Basic Income (UBI)

I propose a Universal Basic Income (UBI) as one component of a social contract. The key component would be an unconditional government stipend to every adult US citizen. It would be sufficient for the basic necessities of life. This alone would enable a new industry to efficiently meet the basic needs of all citizens at the lowest cost. I build/buy a facility like a residence hotel and commit to meet the needs of each resident in return for direct deposit of that stipend. That steady, reliable income stream removes the primary roadblock to such a facility. Legislated minimum standards plus competition produce efficiency and value.

In The Social Animal, David Brooks cites, "US spending on antipoverty programs is enough to pay each person in poverty $15,000 a year." By another estimate, the US spends $20,610 for each of the 46.5 million Americans in poverty. The bulk of the funding for a UBI can come from replacing the 126 federal poverty programs and the countless state and local programs.

Making it universal removes one of the worst perverse incentives. This way, you are never penalized for working by having your 'benefits' reduced. Eliminating its impact on those who don't need it could be done with a minimal adjustment to income tax rates.

This 538 article provides an excellent overview. From that article, "The U.S. government spends nearly $1 trillion across dozens of separate programs at the state and federal level. That's $3,106/person/year over the US population, or about $25,000 per person in poverty."

When I suggest a UBI as one component of a social contract, I mean to suggest inclusion of other topics such as immigration policy and perverse incentives to reproduce, since they could interact strongly with a UBI. A society offering a universal citizen stipend needs to be careful about whom it allows to become citizens. It's even worse if you make it a universal resident stipend. Similarly, some historic welfare policies encouraged non-contributing women to bear more children just to gain more benefits. Society does not benefit from that. If you want a UBI for your children, then pay toward it.

Funding

How should our society fund its social contract? Two sample candidates are taxing resource extraction and taxing financial transactions. We have a finite but large supply of energy and material in oil, gas, and coal. We squander them because we don't have to pay for them. We just pay to extract them. The annual value of oil and gas alone is over $2000 per US adult. To whom should that value accrue?

Think back on the introductory paradigm. We cooperate on the hunt and we all eat. We (the US, and increasingly, the world) cooperate on all of our enterprises. We should all share the benefit. We do, but I think we can do a better job at the allocation. I suggest some guiding principles:

  1. Meet the basic needs of all citizens in the most efficient, economical, practical, and compassionate ways possible.
  2. Retain incentives for people to contribute.
  3. Retain the principle that a person is entitled to benefit from the fruits of his own labor.
  4. Practice informed, rational dialog on how we as a society choose to balance these competing criteria.

Healthcare

We chose incorporating some forms of healthcare by creating programs like Medicare and MediCal. We slipped sideways into including other kinds of healthcare into our social contract. We required hospital emergency rooms to treat anyone, regardless of ability to pay. That was an unfunded mandate, triggering an avalanche of distortions in our healthcare system. Efforts at systematic reform have been stymied by players wielding undue influence and power: the medical, pharmaceutical, and insurance industries, and the Party of No. Objections to the mechanism which has proved most successful (single-payer universal healthcare) are primarily ideological, not rational, and not well informed. Perhaps my bias is showing a little here. But we seem incapable of designing and negotiating a good solution, taking the best of what others have done, and avoiding the worst.

Governance

Humans have governed themselves in myriad ways over the course of our history. The successful ones have always been hybrids of various ideas and philosophies.