In order to help someone do you also need to intervene in their lives?
There are two interesting aspects to this proposed guaranteed annual (or minimum) income (or basic universal income - or whatever the socialists are calling it this week) that seemed to intrigue people. While this is an interesting concept, the idea really has not been tried in order to prove whether it works or not. So-called "experiments" where handfuls of people are handed money really don't demonstrate how the entire concept would work. If applied on a nationwide basis, I believe it would merely serve to dilute the money supply and feed inflation and thus defeat itself in short order. But I've already gone over that before. To people who don't understand money, this seems like a swell idea. But that's the problem with people who don't understand money - they make poor choices in life.
The first interesting aspect of this guaranteed annual income concept is the complete and utter lack of a qualification or needs test. Almost every social welfare program out there has some sort of needs test associated with it. You cannot qualify for food stamps unless your income is below a certain level. You cannot qualify for ObamaCare subsidies unless your income is within a certain range as I noted before. You cannot qualify for Medicaid unless you are living below the poverty line. You cannot qualify for Section-8 housing, unless your income is below a certain level.
And sometimes these qualifications are not based on income, but on age or other criteria. You cannot qualify for Medicare until you're over 65. In some States, you cannot qualify for food stamps or Medicaid unless you hold at least a part-time job or are disabled.
Of course, in order to police these types of welfare systems, an army of people are needed to ensure that those who are not qualified are not applying for, or receiving, these benefits. As I noted before, it is possible - at least it was theoretically possible - for a millionaire to collect food stamps, so long as their income was below a certain level. As assets are often not counted in many of these programs - or were not counted in the past - it could be possible to be quite wealthy and still receive benefits.
Proponents of guaranteed annual income argue that since everyone receives the same amount of money regardless of income or wealth, huge cost savings could be achieved by eliminating fraud and abuse and thus there would be no need to police the system. However, no matter what kind of system you devise, there will be people who play the system rather than play by the rules. And the most obvious way to defeat guaranteed annual income is to try to set up multiple phony IDs and collect multiple checks under different names. Or, as is often the case today, you keep Grandma tied up in the basement and cash her social security check. Or people fail to report the death of loved ones so they can keep collecting their government benefits. The idea that the system would not require policing is a little overstated.
And this argument only succeeds if you eliminate all other forms of social welfare, as some propose, and replace it with this guaranteed annual income. Unless all other programs were eliminated, the cost savings in fraud prevention would not be realized. For someone collecting SNAP, a free Obamaphone, and Section-8 housing, as well as ADC and other benefits, this might amount to a huge pay cut. To someone collecting $1700 a month in Social Security, this might be a huge pay cut. The people who need this money the most would see huge cuts to their social benefits. The people who need it the least, would see a windfall. There is a reason we put a needs test on welfare programs.
The second interesting aspect of guaranteed annual income is the money is provided to everyone without any qualifications as to how it is to be used. Most assistance to the needy is directed to very specific needs. Food stamps, for example, or SNAP as it is now called, can only be used to buy food - and not prepared food items at that. The idea is that people should be using this money to buy food and not drugs or alcohol or bling rims for their car. And in that regard, not only is the government providing assistance to the poor, but is intervening in their lives, to a limited extent, by directing how they should spend their money.
And the reasons for this for many. Taxpayers would be outraged if they found out that people receiving food stamps were using it to buy liquor. Moreover, the type of people who are on assistance need guidance in their lives, as illustrated in my previous posting. People who fall down the economic ladder not only need monetary assistance, but guidance is to how to lead their lives - as evidenced by the fact they screwed up their lives so badly as to need assistance. Unfortunately, most people would prefer just to receive the money and not interference from others - this is basic human nature.
Again, when you try to intervene in people's lives and control how they spend their money, you have to police the system. People early on figured out ways to spoof food stamps by selling them on the black market. The government switched to the SNAP card, hoping that the electronic debit card would not only make it easier for the users, but reduce fraud. But people figured out ways to spoof this system, buying expensive food such as filet mignon and lobster and selling it to local restaurateurs in exchange for cash, which was then used to buy drugs.
People find ways to abuse any welfare system.
And again, people are outraged when they see such receipts, as reported on Snopes, showing someone with a SNAP card buying steak and lobster. While you could limit their choices to buying only food, you can't tell them what kind of food to buy. If you're going to intervene in someone's life, it gets to be a tedious task. Do we limit SNAP purchases only to organic vegetables?
Other benefits which are directed as to how they are to be used are easier to control. It's a lot harder to abuse Medicare and Medicaid and somehow cash out on these benefits and spend the money, although there have been incidents of fraud in both programs, where crooked doctors or nursing homes bill for non-existent services. Again, the system has to be policed, which requires additional expense.
Other programs such as Section-8 housing, which have both a needs test and are directed to a specific benefit, can also be abused. I chronicled before how some landlords use the Section-8 program to get a free house from the government by padding out the rent charged and then expecting no co-payment from the tenant. The tenant destroys the house over time, and the landlord does no maintenance. Over time, the mortgage has been paid off by the government, and the landlord then rehabs the house inexpensively and flips it for a tidy profit. The program intended to help the poor find housing ends up helping slumlords make a profit.
Again, this guaranteed annual income concept is intriguing because it doesn't intervene in the lives of the recipients. People are just handed $1,000 a month and told to do whatever they want to with it. They can use the money to try to start a business, buy a new car, help pay down the mortgage on their house, invest in a 401(k), buy food and clothes for their children, or by drugs and alcohol for themselves. They could set the money on fire or give it to charity or just spend it all on fast food. There are no strings attached.
Some people argue that such a system would improve the lives of everyone involved. People would pull themselves up from poverty with this additional income every month. But I disagree. What the poor need is to make better choices in their lives, not just more money to make poor choices with. If we handed $1,000 a month to everybody in this country, people such as myself would use it to pay living expenses, while leaving my investments intact, or if I was younger, I would put it into a 401(k) and live off of my wage income. Having learned hard lessons about money, I would invest it wisely. It would be just a windfall for me.
The poor, as you might expect, would make poor choices with this money. They're either go out to the car dealer immediately and sign up for as much car as they could buy for $1,000 a month, or take it down to the bling rim store and rent a set of rims for the existing hoop-de that they are driving.
And no doubt many would go into debt, using their guaranteed annual income stream to borrow. We are already seeing a problem with people with defined benefit pensions and structured settlements being encouraged to borrow money against these future income streams. You see the ads all the time on cable television for this, which is one reason I stopped watching cable television. There are sob stories galore of retired military people who borrow tens of thousands of dollars, guaranteeing their military pension in return. They receive a one-time lump-sum payment, but then forgo years of their pension monies, which leaves them destitute and hungry. They make poor choices because they've been living in the lap of Uncle Sugar for so long, that they don't understand how to handle money. It is no different that the new recruit spending his first Army paycheck at one of the used car dealers that lie within walking distance of the main gate of the base.
And therein lies the problem. When people are used to getting a steady handout, they don't understand how money works. Like I said before, the most dangerous thing for the salaryman is getting that regular paycheck and then parsing it out to various loan payments such as mortgage, car, student loans, credit cards, and whatever. Once you get into the habit of receiving money in a steady stream of little chunks, you forget how to handle money or never learn.
Our current existing patchwork of overlapping benefit programs for the poor and needy are very inefficient, but they are predicated on a needs test and also provide some level of intervention in the lives of the recipients. We give money for housing that can only be used for housing, and money for food that should only be used for food. However, the government doesn't intervene much further into the lives of people, by trying to help them up the economic ladder.
Indeed, this was tried, and people resented it. As I tried to illustrate in my previous posting, attempts to help the poor people by giving them money can often backfire, as they often might use the money in ways that you might think are detrimental to their own lives. What is most helpful to them is some sort of guidance on how to use and spend money and save it. But often these ideas are met with resistance. We saw a similar effect, as I reported in an earlier posting, in the movie Reversal of Fortune, where a hundred thousand dollars was given to a homeless person who quickly spent it in short order buying cars for himself and his friends as well as drinks for everyone at his favorite bar. The movie producers tried to steer him into saving the money or using it to improve his life, be he would have none of it.
And that right there is the problem. Our concept of personal freedom is predicated on our ability to make choices - even bad choices - and deal with the consequences. In the early part of the last century, people decided that the government should tell individuals what to do, by outlawing alcohol. The entire system backfired, as people didn't obey the law or respect the law and continued to drink. We saw the same thing in the latter half of the twentieth century, with regard to marijuana use. You can tell someone that alcohol and marijuana are bad for them, but they'll continue to do it regardless of your advice. People have their own ideas of what is best for them.
It's only when someone realizes internally that they're having a problem and need to change their lives, that they will turn their life around. And again, this is why I say I don't give advice. Because advice could be taken the wrong way and then the adviser blamed for the poor outcome. And people love to do this, which is why they seek out advice so they can put the blame on someone else when things don't work out the way they wanted. It is a form of passive-aggression.
On the other hand, if you really want to change your life, and you make the decision to do so, you have to deal with the consequences, good or bad. You have to take responsibility for your own actions. If you want to be an alcoholic drug-addicted bum and live under a bridge, that's fine with me, just don't live under a bridge near me. And don't come whining to me when the police roust you out of from under that bridge. You have to live with the consequences of your decisions, good or bad.
The problem with intervention, is that it sounds attractive for other people. It was very popular 1990s to stage interventions for people with drug problems, and this was often something that benefited the intervenor or more than the intervened. Change has to come from within, not from without. But moreover, you can argue that anyone's life could stand intervention or a life coach or something to that extent. No doubt someone would look at my life and finances and argue that I'm doing everything wrong and should make better choices with my money, my life, my health, or my future. The problem is, I have other ideas about this.
And there are some today who think this is a swell idea - our friends the Socialist Democrats. No doubt Ms. AOC would tell me to give up eating meat, flying on airplanes, driving a pickup truck, owning a gun, or even a garbage disposal. They could argue - legitimately, in their own minds, at least - that my life would be "improved" if only they ran it. It is odd, to me, anyway, that these same Socialist Democrats want to limit our freedom of choices, while at the same time promoting a program that hands out money with no strings attached. Likely if it were ever implemented, a lot of strings would be attached, rather quickly.
Once we start to go down this road, it's only a matter of time before the government is making major life decisions for us. And as the prohibition of both alcohol and marijuana has demonstrated, these techniques of controlling human behavior don't work, and backfire horribly.
Of course this leads to the question, then what do you do? How do you help people who are poor if you don't intervene in their lives or give them lots of free money? And I'm not sure there's any sort of easy answer for this. As Jesus said, "the poor will always be with us." And a lot of people have misinterpreted this to mean something else, but I believe it means that there will always be people who will wallow to the lowest level or just simply not understand how the world works and make very horrible choices in life.
So you either have to live with this and accept it, or accept some level of intervention in the people's lives at a level that would be considered totalitarian. Or perhaps, as we do today in America, there is some middle-ground, where people who are truly in need are given help - but with certain caveats. The work requirement, for example, for some social benefits, encourages people to find at least a part-time job, so they can feel they contribute to society. It also provides a steady stream of low-wage labor for Walmart, among others. One of the largest benefactors of our welfare system today are low-wage employers. We are not handing out money to the poor, but subsidizing, indirectly, low-wage employers. Pretty interesting little system we devised, no?
Of course, there may be another way. As I noted before, I've seen these ads on cable television where they offer people cash in return for a structured settlement. These are lousy deals and really should be outlawed - or at least not advertised. Similarly, payday loans and check cashing stores and other shitty deals aimed at the poor, shouldn't be so heavily hyped.
Or put another way, perhaps sound deals and bargains and basic economic literacy should be promoted. The television blares 24/7 with lousy deals and rip-offs, but common sense doesn't have its own channel. Maybe if financial literacy was at least advertised, people would have a better chance at choosing it. And that is, in my mind, why the middle class in America is "shrinking" - not because of layoffs, automation, or China, but because middle-class people today are taking on shitty deals their parents would have turned their noses up at. The television pounds into their head that they should lease a new SUV and send out for a pizza. And they do it. The 1%'ers didn't take away our money, we gave it to them, with our blubbering thanks, in exchange for shiny trinkets and unhealthy food.
But financial literacy is not something that could be forced on the people, and indeed if you tried to force people to behave in a financially responsible manner they would reject it all the more.