Tags: rashida tlaib | tax credit | inflation

Rashida Tlaib's Free Money Plan Is a Bad Idea on Steroids

Rashida Tlaib's Free Money Plan Is a Bad Idea on Steroids
U.S. Representative Rashida Tlaib, Democrat of Michigan, during a House Committee on Financial Services hearing on Capitol Hill in Washington, D.C., May 22, 2019. (Saul Loeb/AFP/Getty Images)

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Tuesday, 18 June 2019 11:42 AM Current | Bio | Archive

There seems to be no end to the bad idea factory called Democratic Socialism. We’ve heard about free education for all, we’ve heard about free healthcare for everyone, we’ve heard about just printing money to pay for everything, and we’ve even heard about taxing the rich into oblivion.

Now comes the latest plan competing to be the worst idea ever: pay people not to work.

Yes, first year Michigan congresswoman Rashida Tlaib has released a plan to give every family earning less than $100,000 per year $6,000 dollars, and every single person earning under $50,000 a check for $3,000. No strings attached, no requirement to earn anything, or even look for a job, or go to school — you just get a check! It’s understood that in Democratic Socialist circles the popular game is to outdo one another with unworkable bad policy proposals, and this one may just win the grand prize.

Let’s start with the cost. There are roughly 90 million households in the United States that have incomes below the proposed threshold. Multiplying that by $6,000 gets us to about $540 billion — let’s say, half a trillion dollars. To put some perspective on that number, it would increase the annual deficit by about 50%. That’s no small increase.

But, assuming it even could be paid for somehow, there is another economic issue to be considered. The creation of this amount of money in the economy without any corresponding increase in production will all be accounted for by inflation. Basically, the gains in spendable cash in households from this give-away will all be consumed by higher prices.

It’s a zero sum game if there’s no corresponding increase in production — and there isn’t.

Representative Tlaib said her plan is “the earned income credit on steroids.” That’s probably a pretty accurate statement since steroids do a lot more harm than good. But the earned income credit — which gives low income folks cash from the IRS — requires that they actually work. This proposal just gives away cash with no requirement to do anything.

There was an idea floated in liberal economic circles a few years ago that giving money to households would somehow lead to more production and thus more jobs. The idea was that folks would spend the extra cash and that would mean more production was needed, resulting in more jobs. But is that what the U.S. really needs right now — more jobs? Unemployment is at a historically low level.

Finland tried this ill-conceived idea a few years ago.

Then Finland abandoned it in a few years after finding the same level of unemployment and the same level of household earnings as before its implementation. It didn’t create jobs, and it didn’t raise incomes. It was found to reduce stress — which is probably a good thing in the pressure cooker of Scandinavia — but otherwise it produced absolutely no economic benefit.

Digging a bit deeper, the Tlaib plan doesn’t have any guidelines for integration with public assistance programs.

Let’s be clear — you can be unemployed, you can receive public assistance, and now you’ll also get a pay raise. Or, you can be working part-time for minimum wage, and with the Tlaib benefit, you can now afford to quit. Why work when you can stay home and watch TV?

This isn’t just a bad idea, it’s a bad idea on steroids!

It removes the incentive to work, it causes inflation, it increases the deficit, and it doesn’t increase jobs or income. But what it does do is keep the idea factory’s unblemished record of unworkable plans intact, and it reduces stress in Finland.

Kevin Cochrane teaches economics and business at Colorado Mesa University in Grand Junction and is a visiting professor of economics at the University of International Relations in Beijing, China. He is a regular contributor to several national publications including the Washington Times, Washington Examiner, and American Thinker. He previously was the economic correspondent for both CBS and NBC TV affiliates in Southern California. For 27 years he formerly was a senior banking executive with a major NYSE listed bank holding company and the CEO of a national multi-bank operating company. To read more of his reports — Click Here Now.

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KevinCochrane
There seems to be no end to the bad idea factory called Democratic Socialism.
rashida tlaib, tax credit, inflation
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2019-42-18
Tuesday, 18 June 2019 11:42 AM
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