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Another Idiotic “Free Money” Proposal, This One From Chicago Mayor Rahm Emanuel

Summary:
The economic lunatics are out in force, each upping the scheme previously proposed. 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 ,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

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The economic lunatics are out in force, each upping the scheme previously proposed.

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

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

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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