Universal Basic Income: A Progressive Experiment That’s Doomed to Fail

Universal basic incomeIf the states are supposed to be laboratories for democracy, where new ideas that reflect regional attitudes can flourish, then cities are like micro-laboratories. Local governments can try out ideas that would never get statewide traction. Unfortunately, some California cities are more like laboratories run by Dr. Frankenstein, where frightening concepts are given life — and local residents have few other choices than to flee to other places.

Most conservatives are familiar with the goings-on in San Francisco, where stringent rent-control laws have — I know you’re surprised by this — led to the least affordable rents and most unaffordable home prices. Parts of the “City by the Bay” resemble an open-air cesspool, given the homeless problem caused by myriad public policies. It’s magnificently beautiful, though, so the city remains a magnet despite its officials’ best efforts to destroy it.

But what happens to a city that has few natural advantages, a less-desirable climate and nothing in particular to draw people to it? Apparently, Stockton — an historic San Joaquin Valley agricultural and port city 80 miles east of San Jose — is trying to cram every conceivable bad experiment into its 64.75 square miles. The latest idea is to offer a “universal basic income” to a few dozen residents to see what happens when you give people money for nothing.

KQED News pinpoints some of Stockton’s enduring problems: “Wage stagnation. Rising housing prices. Loss of middle-class jobs. The looming threat of automation.” We can add some others: A dreadful violent-crime problem, trash-strewn streets, a vacant downtown that could be a movie set for a third installment of Blade Runner, crumbling public services, overpaid public employees, high taxes, and a troubled city budget.

Mayor Michael Tubbs, an enthusiastic 27-year-old Democrat, has shown a keen interest in trying “new” things in the city. Last summer, for instance, he proposed paying people not to commit gun crimes, and now he’s working with some Bay Area entrepreneurs who are providing the funds to give some families $500 a month with no restrictions on how they spend the cash.

The Economic Security Project is backing the Stockton Experiment, based on its belief that “cash is an effective way” to rebuild the middle class and fight poverty. “Automation, globalization, and financialization are changing the nature of work, and these shifts require us to rethink how to create economic opportunity for all,” the group explains on its website.

Some conservatives have actually pitched a guaranteed-income concept. The thinking, advanced by Nobel laureate Milton Friedman, is to “replace the ragbag of specific welfare programs with a single comprehensive program of income supplements in cash  —  a negative income tax.” Such an idea, he added, “provides comprehensive reform which would do more efficiently and humanely what our present welfare system does so inefficiently and inhumanely.”

This is one of those cases where the concept makes a certain amount of sense in the philosophical realm, while being borderline crazy in the real world. If California ended its generous “ragbag” of welfare and support programs — programs that can provide more than $35,000 in benefits a year — then simply giving the recipients a cash payment could potentially reduce the size of the bureaucracy. It would presumably provide additional incentives to work, given that most of these programs are income-based and fade away if recipients work.

In the real world, it would expand government spending. Bureaucracies never go away. I recall the cost savings that would ensue after California sensibly decriminalized certain low-level crimes, yet there have been few budget reductions in various law-enforcement agencies. And chalk it up to human nature, but many Americans are not about to do anything productive if it’s easy enough to get a living wage while playing video games and downing six packs.

In a recent column, I argued that these funds aren’t enough to live on even in Stockton and also quoted a critic who said that a universal basic income would reduce incentives for work and self-reliance. The Stockton Record’s metro columnist criticized me for “a contradiction in this argument: $500 is not enough to live on but people who receive it will become lazy layabouts.”

It’s not actually a contradiction. Stockton’s plan isn’t enough to live on, so it will lead to endless calls by recipients for more money. A full-blown guaranteed income would indeed destroy whatever is left of the nation’s work ethic. Basically, 500 bucks would cause a little bit of sloth, while 50,000 bucks would cause a lot of it. It’s all a matter of degrees. But it’s hard to see what kind of experiment the city hopes to run if it’s only providing a pittance in income and isn’t ending other government programs.

It is easy to spot an underlying reason that this idea is rearing its head again. Some thinkers, especially on the Left, argue that the burgeoning tech industry is creating a winner-take-all economy, and that eventually automation will replace too many low-level jobs. Apparently, they believe a large portion of Americans will be permanently unemployable and just need a stipend. This is nonsense. The tech industry is creating far more jobs and opportunities than it replaces even on the lower end, but that’s where some of the impetus is coming from.

Leave it to Californians to go down this road, when a simpler path is so much better. Note that our state has the highest poverty rate in the nation, according to the Census Bureau’s cost-of-living adjusted model. The reason is fairly clear, and it has nothing to do with the state’s refusal to be generous enough with its welfare payments.

Our current public policies have destroyed middle-class and manufacturing jobs through excessive regulation and high taxes. They’ve destroyed many low-income jobs by raising minimum wages and passing union-backed work rules. We’ve created an education system that graduates functional illiterates. The state’s slow-growth rules have driven up rents and housing prices, thus delegating lower-income people to squalor.

On the local level, Stockton went bankrupt in 2012 because of its misplaced priorities. For instance, it paid ridiculous compensation packages to public employees and “invested” public funds in showy redevelopment projects that remain surrounded by vacant buildings. Instead of reducing pension packages, as the federal bankruptcy judge allowed, the city raised taxes. So now Stockton has an even harder time drawing businesses.

Stockton is like many other California cities, only worse. It’s trying to show us what not to do. As a Stockton property owner and someone who really likes the city, I’m saddened by this kind of misbegotten experimentation.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the American Spectator

CA Food Stamp Recipients On The Rise

Daniellle BrownNot only is the number of Californians participating in the state’s federally funded food stamp program increasing, but the number of eligible recipients is decreasing, according to state and federal data.

California for years has lagged behind the rest of the country in terms of participation. Tied for 48th in 2013, only 66 percent of those eligible participated in the Supplemental Nutrition Assistance Program, called CalFresh in California.

The pool of Californians who are eligible for the program is shrinking. While the pool has increased from 6.36 million in 2010 to 6.98 million in 2014, it has decreased from a peak of 7.17 million in 2013, according to CalFresh estimates based on Census data.

“The good news in California is we’re going in the right direction on both lines,” said Kim McCoy Wade, chief of the CalFresh branch of the California Department of Social Services.

Outreach

For years, outreach methods, internal procedures and state policy kept the rate low, said Wade, adding the nature of California played a role too.

“We’re a very big, diverse, complicated state, so sometimes we move forward in one county and then have to take longer to move forward in another,” Wade said. “We’re not in Idaho, where you can change your call center process and all of the sudden the whole state is dramatically better.”

Wade said the state is studying whether a language/information barrier and a distrust of government among ethnic groups played a role in the low participation rates.

“We really think it’s time for a fresh look to see if immigrant communities are connecting to CalFresh, and if not, why not,” Wade said.

ACA impact

In recent years, the implementation of the Affordable Care Act hindered the process as well, in that the tsunami of new people entering the system took time to process, with so much of the state’s efforts aimed at sorting it all out. But as a result of the flood of people entering the system, CalFresh had better access to families to let them know their options.

“The Affordable Care Act was both the best thing that ever happened to low-income families in California and a real challenge,” Wade said.

Increased participation

In 2015, there was approximately 4.4 million people in the CalFresh program, receiving more than $7 billion in benefits annually. That’s compared to 2005, when there were about 2 million Californians receiving more than $2 billion in annual benefits.

Eligibility is for those less than 130 percent of the federal poverty line, which is an annual income of $24,300 for a family of four.

The average benefit is $142 per person per month, according to federal data.

Additional data can be found in a Public Policy Institute of California study published this month.

Originally published by CalWatchdog.com

Real Solution for Poverty is Economic Growth, Not Welfare State

PovertyIncome inequality is taking center stage as a high profile issue in both national and California politics this year.

An op-ed in Friday’s Washington Post by billionaire industrialist Charles Koch gained attention when he wrote there was one issue he agreed with Democratic Socialist and presidential candidate Bernie Sanders. (Sanders) “believes that we have a two-tiered society that increasingly dooms millions of our fellow citizens to lives of poverty and hopelessness… I agree with him.”

The reference to the agreed upon “two-tired society” caught my attention because of a speech the late congressman and Housing and Urban Development Secretary, Jack Kemp, gave to the Heritage Foundation over a quarter century ago. Kemp was addressing the argument put forth by former New York governor Mario Cuomo that America had created a society of two static classes– the rich and the poor. Kemp argued, rather, that America was divided into two economies.

“One economy – our mainstream economy – is democratic capitalist, market-oriented, entrepreneurial, and incentivized for working families whether in labor or management. … The irony is that the second economy was set up not out of malevolence, but out of a desire to help the poor, alleviate suffering, and provide a basic social safety net. But while the intentions were noble, the results led to a counterproductive economy. Instead of independence, it led to dependency.”

Government solutions to address poverty have been offered since President Lyndon Johnson declared his War on Poverty. Yet, over 50 years after the War on Poverty began — and with about $22 trillion spent — the poverty rate is about the same.

The issues of poverty and income inequality are expected to take a prominent place in this election year. As soon as Gov. Brown released his latest budget, advocates for more money for poverty programs started complaining and campaigning to expand poverty programs. An initiative has been filed to raise and spend more money on poverty issues.

The real solution for poverty and income inequality is economic growth. That was the message Kemp was offering a quarter-century ago and it is still the best answer today.

An essay by Professor John Cochrane at Stanford’s Hoover Institution lays out the powerful argument for promoting strong economic growth.

Cochrane shows the power of economic growth on individuals by demonstrating when the United States enjoyed 3.5 percent economic growth from 1950 to 2000, an individual’s income rose from $16,000 to $50,000 (measured in 2009 dollars.) Had the economy grown at 2 percent – about the growth rate the country has experienced since 2000 — the individual’s income would be $23,000, not $50,000. Quite a difference.

Economic growth not only provides hope for relieving poverty but also is the key to fortifying the sagging middle class.

While Cochrane’s numbers are national in scope, California policymakers must focus on ways to improve growth in one of the largest economies in the world. With the loss of manufacturing jobs, California’s middle class is in jeopardy. With one third of Californians relying on Medi-Cal and the state’s cost-of-living adjusted poverty level the highest in the nation, enhancements to poverty programs is not a long-term answer. The sooner pro-growth policies are put in place, the quicker people can climb out of poverty and boost the middle class.

This is not to say that government cannot have a role in helping the poor.

California recently joined about half the states in providing an Earned Income Tax Credit. An effort is being made to encourage those eligible to file their tax forms and secure the credit. The Earned Income Tax Credit is a positive program to encourage workers to stick with employment as they work on raising their standard of living.

In fact, in that aforementioned speech by Jack Kemp, he included the Earned Income Tax Credit as one part of the solution for lifting people out of poverty.

Kemp’s goal was to reestablish the link between effort and reward.

He said of the poor in his Heritage Foundation speech: “They don’t want lectures on income redistribution and capitalist exploitation, they want income and capitalism.

“They don’t want more government promises and egalitarian welfare schemes, they want to live in neighborhoods free from crime and drug abuse, with good jobs and opportunities to own property and homes; they want quality education so that they and their children can live better lives. They want what we all want – a chance to develop their talent, potential, and possibilities.”

Yet, in Sacramento we hear too much about the need for more and larger poverty programs and too little about encouraging and developing economic growth and incentivizing the link between effort and reward. Shortsighted solutions will not solve the deepening crisis of income inequality.

Developing strong models for economic growth would enhance other quality of life aspects that Californians expect. As Prof. Cochrane notes in his essay, “Only wealthy countries can afford environmental protection and advanced health care.”

The way to increase the wealth for all, to fortify the middle class, and to help take people out of poverty is to promote ideas for economic growth and good jobs. People will have the opportunity to rise — something across the ideological divide that all agree is the goal.

Originally published by Fox and Hounds Daily

Why Food Stamps Usage Is Up Despite Poverty Being Down

SNAPFood stamp use has increased nearly 300 percent nationwide since 2014, despite a drop in the poverty rate, according to a report released Wednesday by The Foundation for Government Accountability.

“Even though poverty rates are declining, the number of people receiving food stamps continues to climb,” the report detailed. “Food stamp spending is growing ten times as fast as federal revenues.”

According to their report – ”Restoring Work Requirements Will Help Solve the Food Stamp Crisis” — the problem results from less restrictive eligibility requirements.

The United States Department of Agriculture is the main agency in charge of the Supplemental Nutrition Assistance Program. According to its own findings, SNAP has increased from 17 million participants in 2000 to nearly 47 million in 2014. Concurrently, work requirements were waived in many states.

“Federal law generally limits food stamp eligibility for non-disabled childless adults to just three months out of any three-year period unless they meet specified work requirements,” the report also noted. “These work requirements have become irrelevant in recent years, however, as states have been given waivers to exempt able-bodied adults from federal work requirements.”

The Obama administration had granted working requirement waivers to 40 states and partial waivers to another six states. As a result more states are providing food stamp benefits to more adults who don’t work despite not having physical disabilities preventing them from doing so.

“By 2013, a record-high 4.9 million able-bodied, childless adults were receiving food stamps,” the report continued. “Federal spending on food stamps for able-bodied adults skyrocketed to more than $10 billion in 2013, up from just $462 million in 2000.”

The size of the program alone has prompted concern among among many lawmakers. Some on the state and federal level have tried reforming the program by getting work requirements back or adding additional eligibility requirements. In July, the administration for Wisconsin Gov. Scott Walker sued the USDA after the agency informed the state it could not drug-test those on food stamps. Walker is currently running for the Republican nomination for president.

“The way forward for states could not be more simple or clear,” the report concluded. “Governors should decline to renew the federal waivers that have eliminated work requirements for able-bodied childless adults on food stamps.”

Follow Connor on Twitter

Originally published by the Daily Caller News Foundation

Would You Use Welfare Money To Buy Pot?

Scared of federal intervention, lawmakers in Colorado are working on a bill to prevent welfare users from accessing cash at ATM machines in marijuana shops.

The policy of restricting access to certain ATMs already holds for liquor stores, casinos and guns ships, The Associated Press reports. Republican state Sen. Vicki Marble is worried that the federal government might aggressively interfere in Colorado if there’s any hint that welfare users are spending their benefits on drugs.

The nascent pot industry has been plagued with rumors that low-income users with electronic benefits cards (EBTs) jumped on the opportunity to load up on marijuana. National Review Online found that over a six-month period ending in January 2014, welfare recipients withdrew $23,608.53 dollars at marijuana dispensaries. How much of that total was spent at marijuana shops is unknown.

The bill, set to be introduced in the state Senate next week, failed to pass last year. Opponents argued that since marijuana shops tend to concentrate in low-income areas, those ATMs provide a valuable and necessary service for people without a bank account. As state Sen. Irene Aguilar stated, “I’m not comfortable limiting that access until I’m certain we’ve done that due diligence to make sure people can access their benefits when they need to.”

Washington state has already gone ahead and prohibited the use of EBTs in marijuana dispensaries as far back as 2012, though only for those under 18 years of age. Now, at the start of 2015, Colorado Democrats have thrown their support behind Marble’s legislation.

“I don’t think a strip club or a liquor store wants to be out of compliance, and neither does a dispensary,” Democratic Rep. Dan Pabon from Denver said. In 2014, Republican Sen. Jeff Sessions of Alabama tried to move a step further by suggesting that Congress set a national standard for EBT use in marijuana shops, but the attempt stalled. (RELATED: After Senator’s Investigation, ‘No Welfare for Weed’ Bill Passes House)

In anticipation of possible trouble, many Colorado dispensaries have already cut off EBT cards from their ATMs. Industry groups have remained mostly agnostic on the issue.

Follow Jonah Bennett on Twitter

Originally published by the Daily Caller News Foundation