The Chicago Resilient Families Initiative Task Force, sponsored by Mayor Rahm Emanuel has an asinine proposal on the books.
I picked this one up from ZeroHedge. My analysis follows.
The report is 50 pages long and you have to wade through 37 pages of sob stories, anecdotes and other sheer garbage, to get to the bottom line.
GUARANTEED INCOME PILOT
- Sample: The “sample” will be 1,000 low-income Chicagoans.
- Amount: Participants will receive $1,000 per month.
- Use of Funds: Use of the funds would be unconditional. Recipients can decide how the income can best meet their unique needs and goals.
- Duration: Participants will receive the disbursements for 1.5 years.
- Benefits: We want to ensure that the pilot does not make people who are most vulnerable worse off by preserving eligibility for existing benefits such as SNAP, child care assistance, and Medicaid.
- Cost: A minimum $12 million per year will be needed for the cash disbursements. An additional stipend for participation in interviews, ethnographic studies, and surveys can be provided to those who give consent. Operations cost to be determined.
Pilot 100% Guaranteed Success
The pilot will undoubtedly a success. How can it not be? If you give 1,000 poor people an additional $12,000 a year their lives are 100% sure to improve.
The Problem
It’s easy to improve the lives of 1,000 people by giving the free money no strings attached. The obvious problem is that it cannot possibly scale.
The population of Chicago is roughly 2.716 million. Give everyone 1,000 a month and that comes to $26.1 billion a year.
OK So let’s not give the money to everyone. It will no longer be “universal” income as discussed in the report, but something less.
Demographics
The Census dept has Chicago Demographics.
If we exclude those under the age of 18 and throw those over the age of 65 under the bus, then we can lop off 33.2% of the bill.
If we further restrict the “free money” handout to those at the poverty rate then only 12.4% of the population gets free money.
But we are seriously getting away from the concept of “universal” aren’t we?
Nonetheless, let’s start there. The cost would be a mere $3.2 billion.
Chicago Budget
The Chicago Tribune reports “The $8.9 billion 2019 package included no vote on new tax or fee hikes, music to the ears of the council members who will be up for re-election in February and don’t want to give opponents that cudgel as they try to defend their seats.”
Bottom Line
Even if we only give money to those at the poverty level, 12.4% of the population, light-years away from “universal income” the Chicago city budget would go up by a mere 36%.
Scalability
One of the goals of the “study” was to prove the plan is scalable.
Scrap the study as nonsensical.
Mike “Mish” Shedlock
I love these “do with it as you want” proposals coming from big govt. control freaks. Yeah, gifts are MEANT to be wasted and thrown away. Who wants a practical spatula for Christmas, and who would prefer a colorful Yankee Candle that smells like vanilla? The people getting this money have no intention of spending it on heating and milk for the kids. But lottery tickets? Welllll…..
A junkie’s dream.
MISH, They tried that in finland, but have just terminated the experience.
People were still out of the work force,…why bother getting up in the morning…
BUT they were much…happier…..
Give me 1000 $ per month, and you can have my job….
Mike
In a free market, increasing demand signals the need to increase supply. Automation drives down the supply of labor. This presents a moral question: What does society do with its surplus of labor?
Welfare, government employment, and drafting people into military service for war are some strategies of the past. The first two involve taxing/borrowing, which leads to a false signal to continue creating more labor. War is definitely not the answer to labor surplus.
The Chinese have used forced abortion, which completely flies in the face of a free society of the US. It has also lead to chosing to letting a son be born. The imbalance of males in leads to a testosterone filled, agressing society that we are witnessing spilling into the rest of the world.
I would like to propose a reproductive buyout. The poor have a tough time pulling themselves up. It gets even worse if the family has children. By offering money that can be used for college and surgically preventing births into poverty, the negative feedback of poverty can be reduced significantly. Poverty will never be eliminated since someone will always make bad personal decisions.
Automation doesn’t drive down the supply of labor. It drives down the demand for labor. But, if it still produces the same output, why not let those people that aren’t needed have their $1000, and let others that want more, take jobs, and make more?
“Automation drives down the supply of labor. “
You’re actually right about that, although based on the rest of your post, I suspect you were intending to write demand instead of supply… In which case, you would be wrong…..
Automation increases productive efficiency. Resulting in more value produced per hour of work. Hence more demand for each of those hours. It’s why labor demand is much, much higher in advanced economies than in third world ones.
As pertains to supply, the added productive efficiency afforded each worker as a result of more/better capital, will only partly be taken out in the form of higher earnings. With the rest going to increased amount of leisure. So yes, labor supply will drop as technology improves.
All of the above only fully applies to free societies, though. Extending the analysis to places like North Korea and the USA, isn’t nearly as straight forward.
Carl: “I’ll offer a radical alternative. First, eliminate the minimum wage, so that everyone can get a job, regardless of their skill level or ability. Second, supplement their income, but in order to receive the supplement, they have to have a job.”
Mish: Actually, point two is the basis of EIC Earned Income Credit – Republicans increased EIC.
I have never had any issue with the EIC. In fact, if they were to expand the EIC, and use it to replace all other “assistance” programs, they might possibly be able to create an economically rational system, unlike what we have now.
I’ll offer a radical alternative. First, eliminate the minimum wage, so that everyone can get a job, regardless of their skill level or ability. Second, supplement their income, but in order to receive the supplement, they have to have a job. This way everyone can find work, and everyone can benefit from the boost to self-esteem that having a job gives.
Everyone is born with a job. Several in fact. At a minimum, 2: Inhaling, AND exhaling. Beyond that, “having a job” or “not” is just exercises in arbitrary classification schemes by useless progressives.
Any two Chicagoans on the make, can trivially pay themselves something, while repeatedly selling eachother the same bag of weed back and forth. Then they both have a “real job,” and get to collect the income supplement.
In fact, that’s the primary job most Americans, particularly ones in Cities close to the money printers, like Chicago have already: Mindlessly selling decaying shacks back and forth, while collecting the income supplement from the Fed.
So free money to the poor for a change. Billionaires have been getting access to unlimited amounts at no cost for years and years. Good to see the democratization of free money
…And the cure for the evil posed by Nazism, is to gas everyone else as well, I presume….
“Chicago’s Bold Path to Fiscal Insanity”
They arrived at their destination some time ago. How long have city pensions been over generous and under funded?
A report was just issued on results of the Finnish experiment with universal income. For some reason they hoped it would result in more people willing to go to work. Surprise, surprise, that was not the result. The report I read did not make it clear if they are ready to abandon the idea, but at least they’re not going to expand it.
Problem is there’s a lot of people in the US that want free stuff. They can also vote. I don’t really think they’re going to debate rather it works or not. If you have zilch and someone offers you money and food every month it’s pretty clear who’s going to get the votes. $1000 a month might be the magic number to put down the bong and xbox controller and someone drag their ass to the polling station and install an entire legion of AOC candidates. The current environment will also help their cause. Trillions for wars, billionaires in the news constantly, a bunch of filthy rich politicians,i’d suggest AOC is much more of a threat than you realize. That could be a reason she’s in the news everyday .
“Nonsensical”? Didn’t they used to call it “nonsense on stilts”?
Cost: A minimum $12 million per year – That is probably true. Most likely it will be something like:
Cash disbursement ——- 12 million
Stipends ————————– 3 million
Administrative Cost ——- 100 million (Salary, Medical, Retirement and so on)
Salaried board of Directors —- 100 million
Lawyers to handle the resultant legal issues —- Only God knows
That’s the goal.
So what’s changed? Buying votes is a tradition in Chicago politics. I guess now they don’t have to use campaign funds.
Hayek was a fan of a guaranteed income in order order to insure a non-coercive relationship between job-seekers and job-providers. However, I’m not sure that folks in danger of losing their SNAP benefits qualify as job-seekers.
Economics does presuppose a certain level of rationality on behalf of all parties. When one is two seconds or less from outright dying from starvation or dehydration, that presumption starts becoming a little bit circumspect. It’s similar to why most legal systems, tend not to hold one strictly to the terms one agreed to in “offers one can’t refuse,” as Don Corleone put it.
If this goes through, it will open up some great investment opportunities. The drug trade in Chicago will go through the roof. Not sure if you want to stand on the street corner to capitalize in it?
That $8.9 billion could help fund Chicago’s public pensions. Perhaps that problem has already been solved. Strange, I haven’t heard of it lately.
There is no 8.9 billion. Just as there are no pensions sitting around anywhere. All that were, and are, just simple foils for getting people to look the other way. While useless progressives, and their sycophants, rob(bed) them.
Somebody has to do something about the ever increasing wealth gap. Chuck in AI, and the need to do something to rescue Society from some sort of explosion will becomeever more pressing, and ultimately unavoidable.
Chicago isn’t the first place to try this. I think the Finns have had a go too, but stopped the experiment. I’m not sure why they stopped it or how successful or unsuccessful their experiment was – perhaps we should find out.
However, the fact that administrations in different places and at different levels are trying this out is indicative of the underlying need to solve poverty gaps everywhere. I have often thought that quantitive easing was wrongly directed; money shouldn’t have been doled out to the banks, it should have been given to the general public – from lowest poverty level upwards. The banks would have go it all in the end. – They always do!!!
Without obsessing over the economic merits of this solution to a possible not current problem (Do these particular people need the $1000 at this time? Do they need it more than someone else?), the bigger picture is certainly worth looking at.
As with everything economic, issues happen at inflection points, the margins so to speak. So, with this entire issue, you have the old school capitalists saying the same thing they’ve always said. If you are poor, get off your ass and get a job, be productive, etc. And, at this moment in time (low unemployment), maybe they are correct. BUT, at other times, and, in the future, quite possibly more, there simply will not be a job to be had. Then comes the question.
When free market capitalism does not provide enough jobs to employ those in society that want/need them, what do you do? Does society tell those without employment, pull yourself up? but, there are no jobs. Does society tell them, “lower your price, until you get employed!”, but, there are no jobs. Does government sit on it’s hands and say, “We can’t help, let the free market rule!”. Hmmm, what happens then. With all of the AI automation about to get revved up, the idea of our free market capitalist system not providing enough jobs for our society is completely possible. And, governments better start thinking about solutions to this problem, before it get’s out of hand, or there will be revolution in the streets.
Means testing is racist. Or some such nonsense.
As for your inflection point hypothesis, that’s the whole point of having savings, charity and a strong family unit. They exist so you aren’t devastated when (not if) life goes sour. This isn’t a new concept. Unfortunately demographics in the late 19th and early 20th century brought a lot of people who volunteered to leave their lives behind and start over. And because there was a combination of a North American climate disaster and European war they hadn’t built up a suitable savings, so they instead turned to the state for help. In the short term it worked, so of course the answer to all need in the 20th century was to have the state take care of it. Now the state has consumed any wealth families might have collected, and mothballed charity, there’s nothing left to fall back on.
What is this ‘savings’ thing of which you speak?
savings noun sav·ings | \ ˈsā-viŋs: Rarely seen these days, at one time it was the primary path to wealth. Many a grandmother stored pin money in the oven, only to be discovered by the children when they decide to bake a frozen pizza while fighting over who gets the ugly furniture. This often led to a comedic destruction of any other potential hiding space in search of more of the elusive substance. Savings were put on the endangered species list during the Nixon administration. These days it is extremely rare to see savings in real life, although it can still sometimes be referred to in fictions and mythical government programs.
Free people, hence the markets and other relations they establish among themselves, will always provide enough jobs to employ anyone capable of creating any economic surplus at all. Free people have always done that. If there is an economic surplus on offer, however small, someone is willing to pay for it. It’s definitional. Doesn’t change with the weather, nor the hype. Nor the propaganda of those intending to benefit politically by pretending it does.
In technologically and resource starved places of the past, and still somewhere current, the surplus that anyone could produce, even in a free society, could very possibly not add up to equal the cost of the raw calories and shelter he needed for not starving/freezing to death. Which is just another way of saying that in a place barren or hardscrabble enough, a population sufficiently devoid of any technology, may just end up starving even if left free.
But as technology progresses, the amount of wealth, ultimately convertible into raw calories, that can be produced by each and any person, increases. Fairly quickly to the level where pretty much anyone not born entirely paralyzed, can produce enough surplus to afford 3000 calories a day, should he put his mind to it. And every year, technology continues to march forward. Making starvation, then lack of shelter, then lack of some basic safety (think bear proof door), then lack of exposure to freak natural catastrophes ( stored food and water…) more and more of a feature of the distant past.
AT NO POINT, does technology suddenly start making getting by more difficult again. It always improves efficiency of production. Hence always improves the number of calories available for any given effort. The only exception being, when it is employed specifically for destruction, as in nuking the world. And also, in the limit case of simply too small a planet for a given population size.
The above only refers to free people, free relations and free markets, of course. Once two neighbors can “vote”/conspire to keep the third guy homeless in Fairbanks in the winter in order to keep the “poppeti vaijue” that the Fed robbed others of to hand to them from “going doooown,” all bets are off. But that’s just stating the obvious; that it is indeed possible to steal enough from someone that he is left starving. It has nothing to do with any supposed “failure” of “free market capitalism,” nor free anything.
Just to be clear, in a free market, unemployment can’t exist except in the short run because supply will equalize with demand. We have unemployment because we have deliberately chosen to have it. When you force a price on a commodity to be higher than the rate that balances the market, you get more supply, and less demand, resulting in a surplus. If the commodity is labor, we give that surplus it’s own special name, “unemployment”.
Minimum wage laws are enacted routinely because they are believed to be in the public interest. They raise wage rates for higher wage rate employees by eliminating low-end competition. They raise profits for big business by making it harder for small businesses to compete. They benefit low end employees who are able to find a job. They hurt small businesses, and those at the low end that can no longer find a job. In the end, they are neither inherently good, nor bad, but rather just a wealth transfer, hurting small business, helping big business, and hurting low-end labor, and helping more skilled labor.
I was going to say that that is the dumbest statement I’ve ever read, but, I suppose in some utopian free market, in fantasyland, it could be true that unemployment CANT exist….
That being said, in the real world, it not only can, but, does. There are not only business cycles, but, once again, with the coming wave of automation in sectors such as driving, as well as white collar work where AI will take over a multitude of paper pushing and deciision making processes currently providing jobs for humans, less that full employment will be an issue for the population.
Now, you may have a point, in that when the automation takes place, society will be provided for without the use of so much human input, therefore, the price of everything should go down and then, the price of human input can go down as well, and still be able to afford to live.
I just wonder from your statement above, how long this “short run” will be in this case.
Given that you have never lived in a situation without a minimum wage, it’s difficult to imagine, but suppose you offered to work for $.01 an hour, don’t you think you could find someone willing to pay that, to say, wash their car, or sweep their sidewalk? Of course you could. Now, equally true, you wouldn’t take a job for $.01, if you could find one for $.10, and you wouldn’t take $.10 if you could find one for $1.00. You’d take the highest pay you could find, but at some price, you absolutely could find work.
In the absence of a minimum wage, what would happen is that the price of labor would fall, and as it did, some people would be unwilling to work, and thus the supply would fall, and some employers would increase staffing, increasing the demand, until equilibrium was reached. It works that way for every commodity, and labor works the same way. Yes, in the short run, you can have labor shortages, or labor surpluses (unemployment), but it is self correcting.
If you go back to the 18th century, you don’t find any unemployment, except in depressions. Even then, you could find work, if you tried. My great grandfather moved 500 miles to paint the black on pots during the depression of 1892. Why did he move? There was a short term disruption locally, and he moved back a year later, when things were back in equilibrium. (Oh, and yes, there were depressions during the years with the gold standard, and yes, they were more severe than the recent ones. That’s why Williams Jennings Bryan complained that workers were being crucified on a “Cross of Gold”).
As for automation, one of the key things minimum wage laws do is to provide a huge benefit to the makers of automation equipment. Automation will come sooner or later, but a high minimum wage makes it come sooner. For example, suppose that today you can buy a machine for $50,000 that will replace a person. If that person makes $10,000/year, there is no way you are going to do that. If the person makes $50,000/year, it’s a no brainer, of course you are going to it. In between those points, the choice is murkier. If they push minimum wage to $15, expect a boom in kiosks in fast food restaurants and automated cooking equipment. Conversely, if minimum wage fell to $3, it would push that kind of automation out into the future.
As far as allowing wage rates to go below the current minimum wage, note that it opens the job market for unskilled workers, and for handicapped. Those people are currently excluded from jobs because they can’t produce enough economic benefit for an employer to justify being paid minimum wage, so they become the chronic unemployed. Note that I don’t support allowing these people to live in starvation. Rather, I support expanding the EIC so that the wages they receive are supplemented, and they can live on them.
Great. We don’t live in that world anymore. And, if I was hungry, and someone had a job offering me $0.01 per hour, and food cost me and my family $1000.00 a month, I wouldn’t take that job. I would go out and rob someone. As would many of these people who were inconvenienced by this “temporary” situation of unemployment. My personal belief, at that point is that “society” would decide to find a way for myself and those in my shoes to have a way to survive, rather than live with the anarchy and chaos that this “temporary” hunger would entail.
But, I could be wrong…
Note that I have proposed that if the best you can find is $.01/hr, your wage would be supplemented, so that you could live on even that. However, in addition to the supplement, people would also have the feeling of value and purpose that comes with having a job.
No, we don’t live in that world. Instead we live in a world where 4-10% of the people can’t have jobs, and instead we mail them a check for doing nothing. Instead of a job, they have no dignity, and no purpose. To keep them from feeling like a useless dependent, we tell them they are entitled to it, but that still dosn’t give them a purpose. Nothing leads to anarchy, chaos, and crime more than lacking a purpose. The idle mind is the devil’s workshop is an old saying that comes to mind.
The low water mark of my three year tenure in Chicago was arriving at the Palatine Northwest train station one bitterly cold winter morning to discover the railroad workers had gone on a surprise strike. It’s been 40 years now and I’ve never missed a chance to express my hatred and disgust with every thing Chicago because of that strike. It epitomizes Chicago and it’s politics to this day: hurray for me and screw you, sucker. Chicago is a dead horse…finally, and smart Illinois Indians are getting off in increasing numbers. Rahm’s latest antics to fund the deadbeats should accelerate the emmigration.
The difficulty that the millenials had in the 1990s finding jobs of any real kind may have been the turning point where we finally say: the machines have become smart enough and competent enough to start taking lots of jobs away from humans (kiosks in McDonalds, semi trucks driving themselves, etc). IF that is indeed true, we better start finding some way to pacify the adult population by giving them $1000/month or whatever so they can at least get basic housing and food. Not doing this could result in REAL civic unrest. The basic income model also reduces disability, food stamps, housing assistance, etc., as well as has universal health care, etc. There may have been a time when the rich could have said “we’re just not THAT rich enough to pay for this.” That is no longer true. We have the money for interstellar vacations, Mars colonies, Teslas, $150 million condos … please.
I agree with the universal healthcare idea, but the basic income idea should be a non starter. There has always been the fear of automation and technology displacing humans but throughout history the economy has evolved by creating new higher skilled higher paying jobs. The govt can facilitate this evolution by encouraging this but to give out free stuff is ridiculous. I live in Mi and the high school graduation rate in Detroit is less than 20%. No worries though, the female population just reproduces indiscriminately and gets more and more for each illegitimate offspring. Do the math on that and see where it winds up. The way to overcome the fear of labor replacement is to demand personal responsibility, work and education ethic. If you pay people not to be productive you will get more of the same. Detroit went bankrupt but despite the restructuring I see to many obstacle for it to become a viable desirable place to live.
A “citizen salary”, not of X whatevers every year, but a simple percentage of last year’s tax collections divided by number of citizens, and none of which can be commandeered by any legal nor other process whatsoever, make an awful lot of sense in any country wealthy enough for it to make a practical difference. Doubly so in nominal “democracies.”
But it does so specifically because it helps provide a buffer against the current situation; of a million idiotic programs supposedly aimed at “helping the poor”, “helping homeowners”, “helping the old” blah, blah. None of which will ever amount to anything but enriching and empowering the bureaucrats, politicians and lawyers that inevitably end up as utterly arbitrary gatekeepers to the programs, in order for them to not go bankrupt the first day of their existence.
If instead you took half of collected taxes every year, spit it up and divided it up, 100% evenly without any possibility for bias, among all citizens, you could put and end to the “starving in the streets without bailouts” nonsense once and for all. There’d be a significant (measured in terms of raw digestible calories, gallons of clean water and pounds of insulated and weatherproof building material it could buy) cushion available for anyone. So noone would be starving unless they chose to. Nor freezing, since any population intelligent enough to keep up with the above so far, would have long since gotten rid of the kind of land use and zoning regs that keep cost of living space higher than it’s base construction cost.
And, being a percentage of taxes collected, it’s sustainable and self correcting by definition. And in no way, shape nor form dependent of debasement driven theft for funding, hence again compatible with the kind of monetary systems which are acceptable for reasonably intelligent people, not just dumb dupes.
If you only give money to those “at the poverty level” (another exercise in abject arbitrariness, which is all any progressive has ever been capable of indulging in….), the number of people “at the poverty level” will continue to increase until it includes almost everyone shy of the filthy rich.
Those of us with the aptitude (rare and getting rarer, apparently) to reason with number systems more complicated than 1-2-many, quickly realize there is no “poverty level.” Just as there is no “unemployment rate.” No “the poor.” No “the workers” nor “the capitalists.” Nor anything else, of the sort of mindless and brain dead arbitrary classifications than underpins all of progressivism. Specifically no “the experts,” “authorities” nor “the scientists.”
Instead, all there is in the real world, is gradations, and continuous, marginal relations. If being “poor” gains an additional advantage compared to yesterday, more people will, at the margin, become “poor.” Tell enough dumb and uncritical people that something called “science” is “better” than something else called “religion,; because, like, Galileo was less wrong about something highly visible than the Pope way back when; and you end up with every idiot (or almost all, everything being gradations and all….) on creation claiming their inevitably dumb nonsense is “based on science.” Tell the yahoos that Googlers are smart, and that much of Google’s algos are more deeply “data driven” than what was previously common, and every idiot out there is falling over themselves claiming their dumb utterings are now “data driven.” Etc, etc.
The news is getting weirder by the day. I need to stick my head in the sand.
Welcome! You’ll like it here; it’s much quieter.
Keeping one’s head in the sand tends to over-expose a certain part of one’s anatomy to excessive abuse by one’s betters.