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How the ‘tech titans' can save Social Security
The Wall Street Journal reports that several of 'Silicon Valley's elite' believe the artificial intelligence boom will generate massive wealth even as it displaces millions of workers, leaving them unemployed. Their solution to this unemployment crisis is to use the newly generated wealth from AI to provide a universal basic income for everyone.
It's a terrible idea for several reasons. But it could be tweaked to address a huge public policy problem: funding Social Security.
The idea of a universal basic income has been around for decades. While proposals vary, the basic plan is a taxpayer-funded redistribution scheme: providing everyone with a designated amount of money — usually between $500 to $1,000 per month — with no strings or work attached.
Wall Street Journal reporter Josh Reich notes that Twitter co-founder Jack Dorsey and Facebook co-founder Chris Hughes have used their own money to set up limited universal basic income, or UBI, pilot programs to see if they work. And they aren't alone. Stanford University's Basic Income Lab tracks UBI programs around the world. While most are in the U.S. and created at the state or local level, there are several in other countries. Some are funded by donations; others are taxpayer funded.
Reich says OpenAI CEO Sam Altman is a UBI proponent and funded an experiment in 2016 that gave $1,000 a month to low-income individuals for three years. Elon Musk has talked about 'universal high income,' and boasted that AI 'will automate most production and the public can share in the revenue.' And tech entrepreneur Andrew Yang proposed a $1,000 a month UBI program as part of his failed Democratic presidential campaign in 2020.
What's different now is that some tech titans 'see a future flush with wealth generated by artificial intelligence.' And 'that revenue can be shared under a massive wealth-redistribution system.'
It's not clear how AI-created wealth could be redistributed. Wealth is usually created by a company or an individual, who owns the wealth. To redistribute that wealth, the owner has to voluntarily donate it or the government must take it. Even if AI were to dramatically boost federal revenues, the federal government currently has a $37 trillion debt and a $1.9 trillion 2025 budget deficit that need to be reduced.
And there are other problems. UBI programs have a dubious record, as a recent National Bureau of Economic Research paper demonstrates. The funds aren't enough to reduce income inequality, especially since participants tend to work fewer hours. Even many center-left organizations oppose them.
Finland tried a pilot UBI project for two years. About 2,000 unemployed Finns received the equivalent of $634 per month. The hope was the money would encourage the unemployed to find a job. The BBC asks, 'Did it help unemployed people in Finland find jobs, as the centre-right Finnish government had hoped? No, not really.'
However, if untold riches flow from AI advancements — and that's a very big 'if' — as some tech titans seem to think, there is a way that money could help both individuals and the country.
Instead of handing people a monthly check, establish something like a special individual retirement account for everyone. The individual could not take out any funds until retirement age — say 60 or 65. Individuals would have limited, broad-based investment options to prevent speculation.
Workers would continue to pay their current payroll taxes to Social Security. They wouldn't be funding this new type of IRA because the money would come instead from the tech titans' predicted AI revenue.
At retirement, an individual could then choose between standard Social Security and their AI-funded retirement accounts. If enough money has been deposited and appreciated in these accounts over the years, retirees might choose it over standard Social Security. Plus, they would have ownership rights, meaning any money left over would be passed on in their estate.
Retirees who choose their special private retirement account would forfeit their claim on traditional Social Security, leaving fewer retirees relying on Social Security's underfunded financial position. Those who choose traditional Social Security would forfeit their special account.
Unlike a universal basic income, the special account would be more like a universal basic retirement program. Because people would not have access to their universal basic retirement funds until retirement, there would be no economic incentive to reduce work. And it wouldn't be a new entitlement, because retirees would choose between traditional Social Security or their private retirement option.
Although AI will surely make a lot of money for some people, it is unlikely to produce the flood of revenue some tech billionaires anticipate. That said, if AI does produce massive wealth, using it to improve retirement and save Social Security is a much better and more workable option than a universal basic income.
