I came across a tweet yesterday from one Doug Boneparth suggesting that rather than do Universal Basic Income (you know, the $1,000 a month for everyone no questions asked) the government take that and invest it into the S&P 500 in everyone's name with the caveat that they can't touch it for 15 years.
Leftist anti-investing Twitter did not take too kindly to this suggestion. To be fair, it doesn't really work as a response to the more immediate and pressing concerns (or maybe it does, I'll get to that a bit later.) In the long term, though, this (much like ForeverDonor, a site that we still need to figure out how to revive) could be a real game changer.
One of the biggest criticisms in regards to investing is that the gains in the market are only felt by a few people. Even if you are a small time investor (like I am) you don't see the sort of gains that those at the top see. This gets everybody in so that the rising tide would lift all boats in a much more noticeable way.
As far as combating wealth/income inequality, this would go a long way towards achieving the goal. It would also drastically speed up the timetable for eliminating poverty.
There are some things that require clarification. I'm guessing that the money would go into some kind of index fund or ETF (like Vanguard's VOO for example). I guess the money could be allocated to all of the individual companies, but that seems like it would require a lot more work and effort. On the other hand, going the latter route would make for more dividend payout dates.
Yeah, oddly enough, neither side brought up the passive income that this would generate. Now, VOO does pay a quarterly dividend, and $1,000 a month into that would generate quite a bit of momentum. It would create the rising income floor that UBI advocates always say that they want to create. What's really cool, though, is that the government expense doesn't budge. Even if it stays at $1,000 a month, the person's dividend income would still go up due to more shares being possessed. Add in dividend increases and possible dividend reinvestment and good night, Irene.
I'm not sure whether DRIP would be the way to go here. On the one hand, it compounds the compounding effect, on the other hand, people do need the cash now. What would be really cool was if you had the option to do both and ration it out as you needed it. 50/50 would be the most obvious way to go, but different people have different financial needs, so maybe somebody takes those dividends and puts it towards another expense, who knows?
As with any massive government expenditure, one must point out that the government is beyond broke. Seriously, that is one of the worst balance sheets in the history of time. One can't be faulted for raising the legitimate question of how this gets paid for. On the other hand, the government seems happy to pump large quantities of money into the market already, so we might as well see some tangible benefit to that. It beats hearing about multi-trillion dollar stimulus bills that seem to wear off two days later.
Here's another cool thing to take into account. In order to become a millionaire in 15 years, you need to invest $2,850 a month into the market. This does a third of the work for you. More millionaires means more funding for the things and less reliance on government. Again, it generates tax revenue whilst decreasing financial obligations. It's win/win.
Better yet, when something big does come up, people'll be better equipped to deal with it. This would set us up to get ahead of things as opposed to being on our back foot all the time.
People scoffed at the idea, but I don't think it should be so quickly dismissed. There's a lot to like here. I might actually have to go and amend my budget surplus amendment to incorporate this into the equation because it's winning me over the more I think about it.
