No strings attached entitlements for targeted groups is preview of something more permanent
By MARK LISHERON | Fall 2021
Officials in Milwaukee, Madison and Wausau are laying the groundwork for programs that would pay a monthly stipend, no strings attached, to low-income families.
Encouraged by the federal government’s direct payment of $870 billion in stimulus checks to Americans since the outbreak of COVID-19, they are among nearly five dozen local elected officials across the country, all of them Democrats, who have begun to experiment with adding a local welfare payment to the social safety net.
For the time being, these so-called guaranteed income pilot programs are being underwritten by private donations. Wausau Mayor Katie Rosenberg told the Badger Institute that her City Council agreed to support the pilot only if no tax dollars were involved.
However, the Milwaukee Common Council is likely to approve using $400,000 in federal tax money from the city’s American Rescue Plan Act (ARPA) allocation to fund its pilot. The goal as outlined by Mayors for a Guaranteed Income is to establish permanent programs, wherever the funding comes from, for stipends that are “unconditional, with no strings attached and no work requirements. A guaranteed income is meant to supplement, rather than replace, the existing social safety net and can be a tool for racial and gender equity.”
Unlike the three rounds of federal economic impact payments designed to offset the pandemic’s effects and the economic damage done by the government response, guaranteed income is designed to combat “rising income inequality,” “compounded by a growing racial wealth gap,” particularly for women in “low-paying occupations,” according to the group’s Statement of Principles page on its website.
And while much of the heavy lifting is being done locally, the aims of the nonprofit organizations behind the guaranteed income idea are more expansive.
“While the primary purpose is to help Madison families,” Mary Bottari, in charge of the pilot for Madison Mayor Satya Rhodes-Conway, said, “I’m committed to designing the program in a way that allows us to collect data that will make the case for a national program.”
Flush with money
Conservative and libertarian economists are appalled but not surprised, given the fact that American cities are awash in federal bailout money that many haven’t dreamed up ways to spend.
“These mayors feel flush with money to do things they wanted to do all along,” said Veronique de Rugy, senior research fellow at George Mason University’s Mercatus Center. “It’s just another way to shove money to a favored voter constituency. I think it’s really irresponsible.”
Madison and Wausau are among the dozens of cities sharing a $15 million donation from Twitter CEO Jack Dorsey and distributed through Mayors for a Guaranteed Income.
Madison has added another $300,000 in donations for the pilot from corporate stalwarts such as American Family Insurance and CUNA Mutual Group. Despite a request by the Badger Institute to ask Rhodes-Conway about the scope of the pilot and its timetable, Bottari issued only a statement that said, “We’re currently working to hire staff and finalize the research design so we can start enrolling participants in the program.”
Milwaukee Mayor Tom Barrett is a member of the group but so far has publicly supported neither a pilot proposal nor a request by Milwaukee Ald. Chantia Lewis that the city dedicate $400,000 in ARPA money to launch it.
Barrett’s spokesman, Jeff Fleming, described the mayor as very early in his research.
“I’m curious about the potential positive impacts of universal and guaranteed income programs,” Barrett said in an email response to written questions. “Certainly, there are individuals for whom such a program could be life-changing. At the same time, there are unanswered questions about what we can expect from a broadly structured program.”
When asked about his support for using ARPA tax money, Barrett said, “Guaranteed Income programs are being considered, but they have not been included in the first rounds of local funding allocations from the American Rescue Plan Act funds.”
Still, the Common Council’s Community and Economic Development Committee on July 14 approved Lewis’ request. Lewis has the votes to win final approval, but a Common Council vote on the issue was postponed after Lewis was charged with felony counts including defrauding campaign donors, falsifying campaign documents, embezzlement and misconduct in office.
Lewis is free on a $1,000 signature bond.
Dry run for taxpayer support
Milwaukee Ald. Mark Borkowski, a staunch fiscal conservative who has voted and will continue to vote against guaranteed income, said there aren’t enough votes on the council to stop it.
People have told Borkowski it’s federal money, “free money.” But it’s their tax money just the same, he said.
“This is a program with no work requirement. What happened to the work ethic?” Borkowski said. “There are going to be unintended consequences, and we’re going to be in a world of hurt. We’re trending in the wrong way.”
Lewis did not respond to a request by the Badger Institute to discuss her guaranteed income plan. However, in April 2020, a month after the first of $292 billion in CARES Act stimulus checks went out, Lewis issued a statement calling on her constituents to demand that Congress create a universal basic income payment of $2,000 a month to every American adult.
By February 2021, Lewis told WUWM that she had shifted her focus exclusively to Milwaukee. “We would select, randomly select, a total of 50 households throughout the city,” she said in an interview. “So, this is 25 lower-income folks and then 25 working family households. We would provide them with a monthly stipend for 18 months. So, it’s a $500 18-month program where they would be handheld and walked through because the goal is to bring them into a more comfortable space that they can provide for their families a lot more.”
Rosenberg said she was anxious to set up a pilot program for Wausau, but even though it had private funding, some business owners in town complained that this was just another socialist program.
“I wasn’t concerned about the issue of another government program because the council made it clear nobody was interested without the seed money,” Rosenberg said.
An added, not replacement, entitlement
Mayors for a Guaranteed Income so far has received almost entirely admiring and uncritical coverage from the legacy media. Many of the stories are misleading because they use the terms guaranteed income and universal basic income interchangeably and claim this latest local welfare pitch has bipartisan support, said William Lee, chief economist for the fiscally conservative Milken Institute.
Universal basic income, as its name suggests, was conceived as a way of giving all Americans base income as championed by libertarian economist and Nobel laureate Milton Friedman — who saw it as a direct, transparent social program that would replace the perverse bureaucratic tangle that is the social safety net.
Mayors for a Guaranteed Income have no intention of replacing or dismantling anything, Lee said. He finds it particularly rich that the seed money for these pilot programs is coming out of the pockets of Silicon Valley tech titans who like the idea of experimenting with ways to reduce income inequality — at relatively little cost to them.
“If someone offers you a chance to increase entitlement spending at no cost to you, you’d be insane not to take the money,” Lee said. “It would be very different for those mayors to create this targeted entitlement and say, ‘Now, the rest of you are going to have to pay for it.’ ”
Michael Tanner, a social welfare policy specialist with the libertarian Cato Institute, said there is very little hard evidence that giving low-income people cash with no restrictions on spending or no work requirement achieves any of the goals of its supporters.
Progressive, socialist trials
Advocates lean almost entirely on the preliminary results of an unabashedly positive study by two social work professors of a pilot launched in 2018 in Stockton, California.
In 2018, Democrat Michael Tubbs, the first black mayor of Stockton, won a $1 million grant from philanthropist Carol Tolan through the progressive nonprofit Economic Security Project for its initial experiment with guaranteed income. For 18 months, 125 low-income Stockton families received $500 a month.
Tubbs extended the program for another six months, still drawing on private funds. But the threat that eventually the program would become a taxpayer burden became a key issue in his November 2020 reelection bid. Tubbs did not outlast his guaranteed income program.
A study released by the American Enterprise Institute in February strongly suggests that giving a monthly stipend to men who have been out of the labor force for an extended period of time will only provide added comfort to their idle days.
The study of self-reports to the Bureau of Labor Statistics from 10,000 adults living on the current social services welter paints a picture of “anomie, alienation, or even despair in the daily lives of men entirely free from work in America today.”
Nicholas Eberstadt, the Henry Wendt Chair in Political Economy at AEI and co-author of the study, said the mayors considering guaranteed income programs would do well to take his research as a warning.
“I think you would like to see what you’re paying for already and ask yourself, ‘Do you want to pay for more of this?’ ” Eberstadt said. “Is this something you want to subsidize?”
The evidence suggests that some governments are saying yes. Last month, California became the first state in the country to offer a taxpayer-supported guaranteed income, $35 million a year for checks of up to $1,000 a month based on a variety of needs prioritized by the state government.
The New Mexico legislature is considering taking a $400 monthly Mayors for a Guaranteed Income pilot program for Santa Fe statewide. The estimated annual cost for what is a true universal basic income is $800 million.
And in May, Spain’s socialist government approved a guaranteed income of between $540 and $1,287 a month, depending on numbers of children and employment status, to 850,000 families. To help offset the $3.5 billion annual bill, Spain will tax digital companies and stock transactions.
Eberstadt wonders, a bit pessimistically, whether the direct checks to Americans during the pandemic, in effect an $870 billion pilot program for universal basic income, has changed the attitude of Americans toward redistribution of wealth.
Americans put up with stimulus checks because they came from a government that shut down their economy and took away millions of their jobs, Lee said. Taxpayers are going to think very differently when their mayors try to take money out of their pockets and give it to their neighbors, he said.
Mark Lisheron is managing editor of Diggings. Permission to reprint is granted as long as the author and Badger Institute are properly cited.