Bankrupt Chicago Ponders Universal Basic Income, Obama Sings Hallelujah

Socialist fools are giving high fives and singing hallelujah as a Chicago alderman seeks a "free money" trial.

Chicago Alderman Ameya Pawar is worried about the future.

He is concerned that a coming wave of automation could put millions of people out of work and result in more extreme politics.

Pointing to investments in autonomous vehicles by companies like Tesla, Amazon, and Uber, Pawar observed that long-haul trucking jobs, historically a source of middle-class employment, may become obsolete. More people out of work means more political polarization, says Pawar.”We have to start talking about race and class and geography, but also start talking about the future of work as it relates to automation. All of this stuff is intertwined.”

Pawar thinks that one way to battle racial resentment is to address the economic precarity that politicians have used to stoke it. He has decided to endorse the universal basic income — an idea that has been picking up steam across the world.

The UBI is based on a simple premise: People don’t have enough money to provide for their essential needs, so why not just give them more?

Yes Indeed, Why Not?

How about the simple fact there is no such thing as "free money". It has to come from productive members of society via taxation or the printing press.

Fortunately, Chicago does not have a printing press, so it has to come from taxation. And taxation is driving away both businesses and high wage earners Fed up will Illinois stupidity. But reality does not stop socialist nutcases like Pawar.

Pawar's Pilot Program

Pawar recently introduced a pilot for a UBI program in Chicago. Under his program, $500 a month would be delivered to 1,000 Chicago families — no strings attached. Additionally, the proposal would modify the Earned Income Tax Credit program for the same 1,000 families, so they’d receive payments on a monthly basis instead at the end of the year — a process known as “smoothing” that enables families to integrate the tax credit into their monthly budgets.

It always starts out small, but it can never scale. Will $500 make a difference to those families? Yes, $6,000 would help a lot of people, but at what cost?

$6,000 * 1,000 = $6,000,000

Can Chicago Afford 6 Million?

It would be just a tiny part of Chicago's budget, but it would also be $6,000,000 wasted.

The obvious problem, but not to economically illiterate socialist fools, is how to scale it up.

Poverty Rate and Population

The Cook County Poverty Rate from the latest census is 16.7%.

The population in Cook County is 5.2 million.

Free Money Math

  • If we gave "free money" to everyone in Cook County the socialists would need to come up with $31.2 billion in additional taxes.
  • If we gave "free money" to only those in Cook County living in poverty (not even close to "universal"), the socialists would have to raise $5.2 billion.
  • Cook County is a super-set of Chicago, so for Chicago alone the numbers would be a bit lower. Then again, the tax base would be lower too.

Anyone who thinks this is a good idea has mush for brains.

Mush in Chicago

Obama Mush

Mush for Brains Disease Running Rampant

Clearly, the mush for brains disease is running rampant in Chicago.

For further discussion of the absurdity of universal basic income, please see More Give Everybody "Free Money" Idiocy

Mike "Mish" Shedlock

Comments
No. 1-25
Pater_Tenebrarum
Pater_Tenebrarum

No-one would even think of asking this "what then" question if we had an unhampered free market economy with minimal government. For example, the replacement of labor with machines is partly the direct result of minimum wage laws that make people whose labor productivity is below the minimum wage unemployable. Incidentally, this will direct investment of scarce resources into certain areas which it would not have been directed toward previously. Since these resources are finite, they are no longer available for other purposes. Hence we suffer a double whammy of impoverishment due to a single government intervention in the economy. But there isn't just a single such intervention - if we add up all the administrative laws and regulations in existence, they are nigh numberless - and they are estimated to cost the economy almost $3 trillion per year if memory serves - which I think underestimates the true cost, as it doesn't take sufficient account of the "unseen" knock-on effects such as the one mentioned above.

Casual_Observer
Casual_Observer

I would agree. The next level of innovation will be human replacements in biotech. At some point people will be rendered not necessary. What then ?

Casual_Observer
Casual_Observer
Carl_R
Carl_R said (edited): An important economic truth gets lost on the way to this concept. Our overall wealth as a country is determined by production, not by what we can spend. If you circulate more money, but it chases the same goods, you get inflation, not an increase in wealth. UBI does nothing to increase production, or the quantity of goods and services, but only serves to increase the money chasing those goods. Thus, it can't possibly increase our overall wealth. In fact, if people work less hard because they aren't needing to earn as much money, they will produce less, and our overall wealth and standard of living will fall, not rise. If you are going to try something like this, you need to design a progressive system, where people are rewarded more, the more they work. We know for a fact that the Laffer curve works. When we reduce the tax brackets on high income people, they produce more, and earn more. Why not try the same thing on low income people? Mish, long ago, posted this chart: http://1.bp.blogspot.com/-fPe2_5TbYrU/UMlkiOHBgyI/AAAAAAAATNM/sl1B_fWfUZw/s1600/Welfare%2BCliff.png Note that a person making $9,000 a year has more spendable income than a person making $60,000 a year. The welfare system is broken because it has become a roach motel. You can check in, but you can never check out. What is the chance of a person moving directly from a $9,000 a year job to a $75,000 a year job? Nil. If you want to fix the welfare system, and you want to raise the standard of living of the poor, you need to change the system into one that motivates everyone, rich or poor, to produce more. Try applying the Laffer curve to the ones that need it, and people will be surprised what happens.

The other reason people don't need to work as much is because the same dollar goes further b/c of globalization and trade. The side effect of this has been more people in the US being marginally employed or doing something well below their skill levels due to competing with a global not local labor force.

The real problem governments around the world have is that as the population continues to grow, automation will undo them. So not only are people around the world trying to compete with one another but also competing against machines. The question for governments becomes how do you quell the population and keep it productive. UBI doensn't fit in economics but then the issue becomes what to do people who are the long term unemployed. They are trying to re-enter the labor force but many have skills that are outdated. Bringing back the old economy won't work. The world has 7.5B people. When machines can do much of the work the biggest question for governments will be what to do with the largest chunk of this population.

Carl_R
Carl_R

An important economic truth gets lost on the way to this concept. Our overall wealth as a country is determined by production, not by what we can spend. If you circulate more money, but it chases the same goods, you get inflation, not an increase in wealth. UBI does nothing to increase production, or the quantity of goods and services, but only serves to increase the money chasing those goods. Thus, it can't possibly increase our overall wealth. In fact, if people work less hard because they aren't needing to earn as much money, they will produce less, and our overall wealth and standard of living will fall, not rise.

If you are going to try something like this, you need to design a progressive system, where people are rewarded more, the more they work. We know for a fact that the Laffer curve works. When we reduce the tax brackets on high income people, they produce more, and earn more. Why not try the same thing on low income people? Mish, long ago, posted this chart:

Note that a person making $9,000 a year has more spendable income than a person making $60,000 a year. The welfare system is broken because it has become a roach motel. You can check in, but you can never check out. What is the chance of a person moving directly from a $9,000 a year job to a $75,000 a year job? Nil.

If you want to fix the welfare system, and you want to raise the standard of living of the poor, you need to change the system into one that motivates everyone, rich or poor, to produce more. Try applying the Laffer curve to the ones that need it, and people will be surprised what happens.

Stories