American Prosperity and Stability Act¶

Policy Rationale¶

Published February 2026¶

Based on Rev 4.8 of the American Prosperity and Stability Act

Legislative Intent and Context¶

The American Prosperity and Stability Act (APSA), hereafter referred to as "the Act," addresses the fundamental instability at the heart of American economic life: the structural precarity that prevents most households from planning beyond the immediate future. Despite extraordinary national wealth, nearly half of American adults lack savings to cover three months of expenses. While most can handle a single emergency, they have no buffer against job loss, illness, or sustained disruption -- leaving them trapped in financial survival mode, unable to plan or invest in their futures. This is not a personal failing -- it is a design flaw in how prosperity is distributed in a modern economy.

The Act establishes the American Prosperity Stability Payment (APSP) -- a stable monthly income floor for every eligible adult -- funded by the American Prosperity Contribution (APC), a broad-based contribution on goods and services sold for domestic use. Together, they create a stability infrastructure analogous to Social Security, but operating during the working years when families are formed, careers are built, and futures are determined.

This is not redistribution. It is shared investment in the material conditions necessary for freedom, democratic citizenship, and human flourishing.

I. Rationale¶

1. Economic Precarity as Structural Problem¶

American economic policy has long assumed that growth alone ensures widespread prosperity. This assumption has failed. Productivity has grown. Corporate profits have grown. Yet household financial stability has eroded. The benefits of growth concentrate upward; the risks of daily economic life shift downward onto individuals and families.

When households lack the financial runway to weather setbacks, the future collapses into the present. People cannot plan, invest in education, relocate for opportunity, or start businesses. They survive rather than thrive. This precarity expresses itself politically as fear, resentment, and democratic fracture.

The APSP addresses precarity at its structural root: the absence of a stable income foundation.

2. Broad Coverage Prevents Stigma and Strengthens Political Durability¶

Means-tested programs create stigma, administrative burden, and political vulnerability. They divide the electorate into "taxpayers" and "beneficiaries" -- a division that invites backlash and retrenchment.

The APSP reaches approximately 90% of American adults -- everyone below the clean exit threshold of 10x the Federal Poverty Level (~$150,600). There is no application process beyond simplified filing. There are no eligibility hurdles, no intrusive verification procedures, no benefit cliffs that punish work or marriage.

Broad coverage creates a massive political constituency. Attacking the APSP means attacking most Americans. This is the logic that has protected Social Security for generations. The APSP extends that protection to working-age Americans.

The 90% threshold is structural armor. When nine in ten voters receive direct payments, dismantling the program becomes politically untenable regardless of which party controls Congress. The coverage expansion from 84% (Rev 4.5) to 90% (Rev 4.6) is not generosity for its own sake -- it is deliberate design to ensure long-term program stability.

3. Work Incentives Through Stability, Not Coercion¶

Traditional welfare programs phase out benefits sharply as income rises, creating effective marginal tax rates above 50% -- sometimes above 70%. This punishes work and traps households in poverty.

The APSP uses a smooth benefit adjustment that never creates cliffs or traps. As income rises, the income-adjusted stability payment tapers gradually using a concave (logarithmic) formula -- but never so steeply that working more leaves families worse off. The APSP ensures that additional earnings always improve household financial position.

Moreover, the APSP strengthens labor market outcomes by reducing desperation. When workers have a stable income foundation:

They can reject exploitative wages and conditions
They can invest in education and retraining
They can relocate for better opportunities
They can negotiate from a position of strength

This is not a reduction in labor supply. It is an improvement in labor market efficiency. Workers match to better jobs. Wages rise to reflect actual productivity rather than desperation. Businesses that rely on coercion rather than competitive wages must adapt or fail.

4. Macroeconomic Stabilization Through Automatic Demand Support¶

Recessions are driven by collapsing demand. When households lose income, they cut spending. Businesses respond by cutting investment and employment. This creates a downward spiral.

The APSP is a powerful automatic stabilizer. Because APSP payments are funded by the APC -- which is proportional to economic activity -- the system naturally absorbs shocks:

In recessions, APC revenue declines, but automatic benefit adjustments rise as incomes fall
In expansions, APC revenue rises, funding the system as household incomes recover

The Stability Buffer -- a reserve fund built during good times -- ensures that APSP payments never decline during downturns. This prevents procyclical cuts that worsen recessions.

Stable household income creates stable consumer demand. Stable demand enables rational business planning. Rational planning supports employment stability. This feedback loop reinforces economic resilience.

State governments face chronic revenue instability. Sales taxes collapse during recessions precisely when demand for public services rises. Income taxes are similarly volatile. This forces states into procyclical budget cuts -- laying off teachers, delaying infrastructure, and cutting services when they are most needed.

The Act directs 20% of APC revenue to states through a pure population-share formula. At full implementation, this provides approximately $312 billion annually -- substantial resources distributed transparently based on the number of residents each state serves. This allocation:

Provides stable revenue across business cycles
Enables predictable resources for long-term planning
Uses a completely transparent formula (population share) that every state can verify
Creates democratic accountability at the state level for allocation decisions

II. Benefit Structure Rationale¶

The Two-Component Design¶

The APSP uses a two-component structure: a baseline payment ($200/month) plus an income-adjusted stability payment (up to $428/month). This design serves distinct purposes:

The baseline payment creates broad political constituency:

At $200/month ($2,400/year), the baseline is large enough to be meaningful to recipients across income levels
It ensures the program is genuinely nationwide -- visible to middle-income voters, not just the poor
It alone covers typical APC contribution burden for households earning up to ~$50,000
It establishes political durability similar to Social Security's universal structure

The income-adjusted stability payment concentrates additional support where need is greatest:

Maximum $428/month ($5,130/year) at zero income
Uses logarithmic taper that protects middle-income recipients from steep phase-out rates
Phases out completely at stability exit threshold (7x FPL, ~$105,420)
Ensures deep poverty receives substantially more than middle-income recipients

Combined maximum benefit of $628/month ($7,530/year) -- anchored at 50% of the Federal Poverty Level -- provides meaningful support for those with no other income while remaining below levels that would substantially replace work income.

The Minimum Payment Guarantee¶

The Act establishes a flat $200/month baseline for all recipients below the clean exit threshold. There is no taper -- everyone who qualifies receives at least $200/month.

This design:

Eliminates complexity: No calculations needed for baseline-only recipients
Creates clear messaging: "Everyone who qualifies gets at least $200/month"
Enables broader coverage: Extends payments to 90% of adults with simple administration
Maintains clean exit: Benefits end entirely at 10x FPL, avoiding gradual phase-out confusion

Why $200 Baseline? Why Not Higher?¶

The $200/month baseline (Rev 4.6) represents an increase from the $150/month baseline (Rev 4.5). This change:

Provides cleaner messaging: "$200/month guaranteed" is more memorable than "$150/month"
Strengthens middle-income stake: Working families receive more tangible benefit
Uses available surplus: The 80/20 split created excess surplus that could fund enhanced benefits
Preserves deep poverty protection: Maximum benefit remains anchored at $7,530 (50% FPL)

The tradeoff is a reduction in stability_max from $478/month to $428/month -- meaning the additional support concentrated on lowest incomes is slightly reduced. This is acceptable because:

Zero-income recipients still receive the same maximum ($628/month)
The shift strengthens the political coalition defending the program
Broader coverage (90% vs 84%) provides structural durability

III. Coverage Expansion Rationale¶

Why Expand from 8x FPL to 10x FPL?¶

Rev 4.5 set the clean exit threshold at 8x FPL (~$120,480), covering approximately 84% of American adults. Rev 4.6 expands this to 10x FPL (~$150,600), covering approximately 90%.

This expansion serves several purposes:

Political durability: When nine in ten voters receive payments, the program becomes structurally defended. A future Congress hostile to anti-poverty measures would still face the reality that 90% of their constituents benefit directly.

Coalition breadth: Professionals earning $130,000 now receive the $200/month baseline payment. This expands the constituency beyond "poor people" to include suburban swing voters.

Messaging clarity: "Nine in ten Americans receive payments" is a powerful political frame. Even those above the threshold benefit from state investments funded by their ~$931/year.

Fiscal availability: The 80/20 split (Rev 4.5) created excess surplus. Rather than accumulate reserves or return surplus to states, expanding coverage uses available resources to strengthen the program.

IV. APC Rate and Revenue Rationale¶

Why Reduce from 13.25% to 12%?¶

The 13.25% rate (Rev 4.5) was calibrated for the 74/26 federal/state split. When the split changed to 80/20, this created substantial excess surplus (~$281B) beyond program needs.

Rather than accumulate unnecessary reserves, Rev 4.6 reduces the APC rate to 12%. This:

Eliminates excess surplus: Federal revenue (~$1.25T) now matches program needs with appropriate buffer
Reduces contribution burden: Every American pays less than under Rev 4.5
Improves political positioning: 12% is below most European VAT rates, eliminating "higher than Europe" attack line
Creates cleaner number: 12% is easier to communicate than 13.25%

The 12% rate still generates sufficient revenue for full program operation, bridge payback, and buffer contributions.

Phase-In Rate Adjustment¶

The phase-in schedule adjusts proportionally:

Phase	Rev 4.5	Rev 4.6	Ratio
Launch	7%	6%	50% of full
Expansion	10%	9%	75% of full
Full	13.25%	12%	100%

This maintains consistent scaling while reducing burden at every phase.

V-X. Integrated System, State Partnership, and Eligibility Design¶

Content in Sections V through X addresses the integrated system architecture, state partnership framework, and eligibility design principles. These sections remain unchanged from Rev 4.5 and cover topics including the relationship between the Act and companion legislation (APNA, SOCA), state partnership incentives, eligibility determination procedures, and administrative design principles.

XI. Bridge Period Funding Rationale¶

The Core Problem: Fiscal Chicken-and-Egg¶

The APSP requires APC revenue. The APC requires time to implement. People in precarity cannot wait.

This creates a fundamental timing problem: the program cannot reach people until it has funding, but the funding cannot reach full scale until the program is operational. Traditional approaches would delay benefits until revenue infrastructure is complete -- potentially 18-24 months of nothing while the APC ramps up.

The Solution: Hybrid Bridge Funding¶

The Bridge Period funding mechanism solves this problem through a three-component hybrid:

Component	Share	Rationale
Bounded Deficit (40%)	Treasury borrowing capped at $400B	Enables immediate funding without unlimited fiscal exposure
Bridge Taxes (30%)	Progressive income/corporate taxes	Creates immediate progressive revenue; demonstrates fiscal seriousness
APC Pre-Collection (30%)	Early APC at 3-4%	Builds APC infrastructure while generating revenue

Why Not 100% Deficit?¶

Pure deficit financing would invite fiscal criticism and undermine political credibility. The bounded deficit component ($400B cap) provides necessary flexibility while demonstrating that the Act is not simply "printing money." The statutory payback requirement ensures that Bridge Period borrowing is investment, not permanent expansion.

Why Not 100% Upfront Taxation?¶

Pure taxation before benefits would delay delivery and create political opposition. The bridge tax component provides immediate progressive revenue while the full system builds -- but does not delay benefits until taxes accumulate.

Why Progressive Bridge Taxes?¶

The bridge taxes fall primarily on high-income individuals and profitable corporations -- those most able to contribute during transition and those who will ultimately bear the smallest net burden under the full APC/APSP system. This is equitable: those who can most afford to fund the transition do so.

Why Automatic Sunset?¶

Bridge taxes terminate automatically upon Bridge Period certification. No Congressional action required to end them. This prevents "temporary" taxes from becoming permanent fixtures and demonstrates good-faith commitment to fiscal discipline.

Comparison to Prior Federal Interventions¶

Program	Duration	Total Cost	Funding	Payback
COVID Economic Impact Payments	~13 months	~$931B	100% deficit	None
APSP Bridge Period	~24 months	~$900B	Hybrid	Statutory requirement

The APSP Bridge Period is comparable in scale to proven federal interventions -- but with superior fiscal architecture. This is not emergency spending without an exit. It is investment in infrastructure that pays for itself.

XII. Income Measurement Design Rationale¶

Content in this section addresses the AGI anchor for income measurement and the annual calculation principle. These design choices remain unchanged from Rev 4.5.

The core decisions are: (1) anchoring APSP eligibility to Adjusted Gross Income as defined under the Internal Revenue Code, which inherits existing tax infrastructure and eliminates edge case confusion; and (2) using annual calculation based on prior-year AGI with no mid-year adjustments, which eliminates overpayments, clawbacks, verification bureaucracy, and gaming opportunities.

XIII. Program Interaction Design Rationale¶

Content in this section addresses the permanent disregard for SSI and TANF recipients and the treatment of gradually-adjusting programs (SNAP, Medicaid, Section 8 Housing, LIHEAP). These design choices remain unchanged from Rev 4.5.

The core decisions are: (1) permanent statutory disregard preventing APSP from being counted as income for SSI or TANF eligibility, which prevents the most vulnerable populations from becoming day-one losers; and (2) no disregard for gradually-adjusting programs, which are designed to handle income variations without creating cliff effects.

XIV. Rapid Deployment Design Rationale¶

Content in this section addresses the speed imperative, Day 1 accrual principle, and staggered enrollment architecture. These design choices remain unchanged from Rev 4.5.

The core decisions are: (1) benefits accrue from the date of enactment regardless of when delivery infrastructure reaches each individual; (2) staggered enrollment prioritizes populations with existing administrative connections (tax filers with direct deposit within 90 days, SSA beneficiaries within 90 days, remaining eligible adults within 12 months); and (3) accrued benefits are held in trust and delivered retroactively upon enrollment completion.

Content in this section addresses the pure population share formula, transparency requirements, enforcement ladder, and democratic accountability framework. The analytical framework remains unchanged from Rev 4.5.

Updated figures reflect the Rev 4.6 rate reduction: state share is approximately $312 billion annually at the 12% APC rate, with per-capita allocation of approximately $931.

XVI. Parameter Recalibration Rationale (Rev 4.5 to 4.6)¶

The Problem: Excess Surplus¶

Rev 4.5's shift from 74/26 to 80/20 federal/state split increased federal revenue by ~$130B while reducing state allocation. Combined with the existing 13.25% rate, this created approximately $281B in annual surplus beyond APSP payment obligations -- far more than needed for bridge payback and buffer contributions.

Design Options Considered¶

Option	Description	Evaluation
Accumulate reserves	Build larger Stability Buffer	Unnecessary; 12-month target adequate
Return to states	Increase state share	Undermines simplicity of 80/20 split
Reduce rate	Lower APC burden	Reduces attack surface; benefits all
Expand coverage	Higher clean exit threshold	Strengthens political durability
Increase baseline	Higher guaranteed floor	Strengthens middle-class stake

Chosen Approach: Multiple Improvements¶

Rev 4.6 uses the available surplus for multiple simultaneous improvements:

Rate reduction (13.25% to 12%): Lower burden, cleaner number, below European VATs
Coverage expansion (84% to 90%): Structural armor through broader constituency
Baseline increase ($150 to $200): Cleaner messaging, stronger middle-class stake

This approach delivers better outcomes for recipients while reducing the APC rate -- a rare policy design opportunity.

Trade-offs Accepted¶

State share reduced: ~$344B to ~$312B (~$105/person reduction)
Stability_max reduced: $478 to $428/month (offset by baseline increase)
Fiscal cushion reduced: ~$294B surplus to ~$102B surplus

These trade-offs are acceptable because:

State reduction is modest (~10%) and states still receive substantial resources
Zero-income recipients receive identical maximum benefit ($7,530)
$102B surplus remains adequate for bridge payback (~$67B/year) plus buffer
The improvements in coverage and baseline provide greater political durability than larger cushion

Summary: Better Program, Lower Rate¶

Rev 4.6 demonstrates that careful parameter calibration can improve outcomes while reducing costs. The result is a program that:

Reaches more people (90% vs 84%)
Provides higher guaranteed floor ($200 vs $150)
Costs contributors less (12% vs 13.25%)
Maintains identical deep poverty support ($7,530 maximum)
Retains adequate fiscal reserves (~$102B surplus)

This is not compromise -- it is optimization.

Revision History¶

Revision 4.8 (Current) - Renamed file from APSA-Rev-4-7-Policy-Rationale.md to policy-rationale.md per APAI Document Production Standards Rev 1.6 Section 1.1 - Updated reference line to APSA Rev 4.8 - No changes to policy substance, design rationale, or analytical content

Revision 4.7 - Aligned document structure to APAI Document Production Standards Rev 1.5 - Updated header from legislative-text format to supporting document format (Published date, reference line) - Changed subtitle from "Policy Rationale and Commentary" to "Policy Rationale" per Section 2.3 naming - Promoted major section headings from H3 to H2 per heading hierarchy standards (H2 for major sections, H3 for subsections) - Moved Revision History from top of document to end per Section 1.3 - Removed "Prepared by" block from header; attribution moved to standard footer - Applied self-reference conventions per Section 1.7 (established "the Act" after first use) - Expanded placeholder sections (V-X, XII-XV) with brief summaries of covered content for reader orientation - Replaced arrow notation in Section XVI with spelled-out ranges for encoding safety - No changes to policy substance, design rationale, or analytical content

Revision 4.6 - Updated to reflect APSA Rev 4.6 statutory changes - Revised Section II (Benefit Structure): Baseline updated from $150/mo to $200/mo; stability_max updated from $478/mo to $428/mo; clarified flat baseline with minimum payment guarantee - Revised Section III (Coverage): Clean exit expanded from 8x FPL to 10x FPL; coverage expanded from 84% to 90%; added political durability rationale - Revised Section IV (APC Rate and Revenue): Rate reduced from 13.25% to 12%; updated revenue projections; added rate positioning rationale - Revised Section VII (State Revenue Sharing): Updated state share from ~$344B to ~$312B; updated per-capita from ~$1,036 to ~$931 - Added Section XVI: Parameter Recalibration Rationale (comprehensive explanation of Rev 4.5 to 4.6 changes)

Revision 4.5 - Updated to reflect APSA Rev 4.5 statutory changes - Revised Section I.5 (Federal-State Revenue Sharing for Fiscal Stability): State share updated from 26% to 20%; removed sales tax replacement framing; added transparency and accountability rationale - Revised Section IV (Revenue Allocation and Calibration): Updated from 74/26 to 80/20 split; added rationale for pure population distribution and transparency requirements - Added Section XV: State Revenue Sharing Design Rationale (transparency, enforcement, democratic accountability) - Updated Section VII to reflect new state share percentage and rationale

Revision 4.4 - Removed Contributor Report discussion from benefit structure rationale - Rationale: Individual APC contributions cannot be accurately attributed; a report claiming individual amounts would present estimates as facts. Clean exit at 8x FPL now simply means no payment.

Revision 4.3 - Updated to reflect APSA Rev 4.0-4.3 design choices - Added Section XI: Bridge Period Funding Rationale - Added Section XII: Income Measurement Design Rationale (AGI anchor, annual calculation) - Added Section XIII: Program Interaction Design Rationale (SSI/TANF permanent disregard) - Added Section XIV: Rapid Deployment Design Rationale - Updated Section VI to reflect AEPA consolidation into APSA - Updated Section IX to reflect current implementation architecture

Revision 3.0 - Renamed Act from "American Prosperity Dividend Act (APDA)" to "American Prosperity and Stability Act (APSA)" - Renamed payment from "American Prosperity Dividend (APD)" to "American Prosperity Stability Payment (APSP)" - Expanded rationale document to incorporate technical details from distribution modeling and benefit structure design - Corrected economic precarity framing to use accurate data

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Prepared by Albert Ramos for The American Policy Architecture Institute