Chicago could Test Basic Income

Chicago’s city council might approve a very modest basic income test. A majority of council members back a basic income test proposal, Fox News reported.

The proposed program is very limited in scope; it would provide 1,000 families a $500 monthly stipend. That would cost around $500,000 a month or $6 million a year. That is not much for a government program, and hardly a “universal basic income (UBI).”

The program’s architect Alderman Ameya Pawar wants to modify the Earned Income Tax Credit (EIC) so families receive money each month, The Intercept reported. His hope is to provide a safety net for the working and middle classes.

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The Earned Income Tax Credit is a negative income tax payment some poor people get in lieu of a tax refund. Pawar’s basic idea is to change the way the EIC is distributed from a lump sum once a year to a monthly payment.

Chicago has been hard hit by income inequality and has long been plagued by an ineffective social services bureaucracy. Pawar claims that a majority of his city council colleagues support the plan.

Basic Income in Chicago

Pawar is a refreshing politician who seems to understand America’s ugly economic realities.

“Nearly 70 percent of Americans don’t have $1,000 in the bank for an emergency,” Pawar told The Intercept. “UBI could be an incredible benefit for people who are working and are having a tough time making ends meet or putting food on the table at the end of the month.”

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“It’s time to start thinking about direct cash transfers to people so that they can start making plans about how they’re going to get by,” Pawar said. Not surprisingly statements like that terrify social services bureaucrats.

Social Services Bureaucrats and Conservatives Team Up

The ugly alliance of “conservatives” and social services bureaucrats is already trashing Pawar’s plan.

An editorial in the supposedly conservative Investor’s Business Daily; a sort of poor man’s Wall Street Journal, branded the proposal “Money for Nothin” and a socialist pipedream. Interestingly, Pawar’s plan is based on an idea from a great conservative thinker — Milton Friedman’s “negative income tax.”

Laughingly, the conservative newspaper uses information supplied by Social Services bureaucrats and leftwing experts to attack the plan. The real fear being that basic income might eliminate large numbers of cushy jobs for folks with social work degrees.

A revealing statement was made by Heikki Hiilamo; identified as a professor of social policy at the University of Helsinki. Hiilamo made an attack on basic income that sounds ripped from a Rush Limbaugh radio script.

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“There is a problem with young people lacking secondary education, and reports of those guys not seeking work,” Hiilamo said. “There is a fear that with basic income they would just stay home and play computer games.”

Why are Conservatives so Afraid of Basic Income?

Like most flawed arguments the Investors Business Daily also appeals to “common sense.”

The editorial also points to federal studies from the 1970s, as disproving basic income. Conservatives are basing their arguments on data collected by leftwing social scientists — which is absurd.

One has to wonder what conservatives are afraid of. Social services bureaucrats’ opposition to basic income is easy to explain they are afraid of losing their jobs. The fear is that somebody at city hall; or in Congress, might ask “why do we need a department of social services if a simple cash transfer is helping the poor?”

Hiilamo’s opposition is easy to explain too, he or she teaches social workers for a living. Opposing basic income is job security for social services bureaucrats and academics.

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Conservative opposition to basic income is a little harder to explain. The most likely rationale is that an effective basic income would make a good case for wealth redistribution by confiscatory taxation.

“Conservative” journalists and politicians fear that because they get most of their funding from business interests that benefit from low income taxes. Higher income taxes might mean the rich would have less money to give to politicians or “conservative media outlets.”

Modern American conservatives would rather attack new ideas than take a chance their orthodoxies will be proved wrong. Nor are they willing to even question the assumptions of the hand that feeds them.

Can Chicago Afford Basic Income

Despite all its questionable hyperbole the Investor’s Business Daily asks one legitimate question: “how can Chicago afford Basic Income?”

Chicago ranked dead last (116th) in a Fiscal Health Index for American cities with a population of more than 200,000, The Fiscal Times noted. The Windy City scored just 25 out of 100 for financial health; which is horrendous for a community with such wealth generators as the Chicago Mercantile Exchange in town. One has to wonder how a city that cannot balance its books can pay for basic income.

Although Chicago’s poor fiscal health can be blamed partially on the jobs economy. Most of the city’s problems stem from $32.92 billion in unfunded pension obligations. Chicago taxpayers now pay $1.7 billion in pensions to former city workers.

That “something for nothing” obviously far exceeds the $6 million a year in basic income. It also signals why government employees are afraid of basic income.

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An obvious fear for employees’ unions is that money might get diverted from pensions to retired workers; that no longer live in Chicago, to basic income for voters who do. Expect to see government employees’ unions become major foes of basic income.

Note: Pawar’s plan may not affect the city budget because it redistributes federal tax credits the poor would get anyway. Interestingly enough this would take the EIC back to what President Richard M. Nixon (R-California) first imagined it as a basic income distributed through the tax system.

Income Inequality will make Political Polarization Far Worse

Pawar, a failed Democratic candidate for Illinois governor is also afraid of automation. He fears an ugly new era of income inequality that will make political polarization far worse.

”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,” Pawar said. He fears that growing income inequality generated and technological unemployment will make American politics more like those in India.

“You know, the British pit Hindus and Muslims against one another,” Pawar told The Intercept. “Pit people against one another based on class and geography and caste; this is no different, Chicago versus Downstate, Downstate versus Chicago, black, white, brown, against one another. All poor people fighting over scraps.”

Such divisive tactics were a staple of British colonialism and have become standard in modern Indian politics. One use of such divisions was to distract Indians from the blatant failure of British economic policies. Politicians like Prime Minister Narendra Modi now use divisions between Hindus and Muslims to win votes.

Americans need to start experimenting with Basic Income now if we do not want to end up like India. Hopefully, Alderman Ameya Pawar will seek higher office such as Congress and take his basic income ideas with him.

This story first appeared at Market Mad House where our focuses include Basic Income and all forms of market insanity.

Written by

Daniel G. Jennings is a writer who lives and works in Colorado. He is a lifelong history buff who is fascinated by stocks, politics, and cryptocurrency.

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