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The first findings are in from a groundbreaking program in Stockton CA in which 500 financially struggling residents were given $500 per month for a year by the city with no string attached.
Advocates of universal basic income, a concept used around the world but not in the U.S., have to be happy about the results. The program, known as the Stockton Economic Empowerment Seed, got rave reviews from an independent study.
<p> Here's how the Atlantic <a href="https://www.theatlantic.com/ideas/archive/2021/03/stocktons-basic-income-experiment-pays-off/618174/" rel="noopener noreferrer" target="_blank">reported</a> it:</p><p> "An exclusive new analysis of data from the demonstration project shows that a lack of resources is its own miserable trap. The best way to get people out of poverty is just to get them out of poverty; the best way to offer families more resources is just to offer them more resources.</p><p> "The researchers Stacia Martin-West of the University of Tennessee and Amy Castro Baker of the University of Pennsylvania collected and analyzed data from individuals who received $500 a month and from individuals who did not. Some of their findings are obvious. The cash transfer reduced income volatility, for one: Households getting the cash saw their month-to-month earnings fluctuate 46 percent, versus the control group's 68 percent. The families receiving the $500 a month tended to spend the money on essentials, including food, home goods, utilities, and gas. (Less than 1 percent went to cigarettes and alcohol.) The cash also doubled the households' capacity to pay unexpected bills and allowed recipient families to pay down their debts. Individuals getting the cash were also better able to help their families and friends, providing financial stability to the broader community. </p><p> "It let me pay off some credit cards that I had been living off of, because my household income wasn't large enough," one recipient named Laura Kidd-Plummer told me. "It helped me to be able to take care of my groceries without having to run to the food bank three times a month. That was very helpful." During the study, Laura also experienced a spell of homelessness when the apartment building, she was living in had a fire. The Stockton cash helped her secure a new apartment, ensuring that she could afford movers and a security deposit.</p><p> The researchers also found that the guaranteed income did not dissuade participants from working—adding to a large body of evidence showing that cash benefits do not dramatically <a href="https://home.uchicago.edu/~j1s/Jones_Alaska.pdf" rel="noopener noreferrer" target="_blank">shrink the labor force</a> and in some cases <em>help</em> people work by giving them the stability they need to find and take a new job. In the Stockton study, the share of participants with a full-time job rose 12 percentage points, versus five percentage points in the control group."</p><p> Mashable also <a href="https://mashable.com/article/universal-basic-income-stockton-program-results/" rel="noopener noreferrer" target="_blank">weighed in</a> on the initial success of the Stockton program:</p><p> "After a year of operating the program, cash transfer recipients were more likely to obtain full-time jobs than a group of people who were not receiving money but providing data to researchers as a comparison. Recipients also primarily spent the money on basic needs, paid off debt, and saw improvements in their emotional health, program officials announced Wednesday. </p><p> "While not a full-fledged <a href="https://mashable.com/article/what-is-universal-basic-income/" rel="noopener noreferrer" target="_blank">universal basic income</a>, the program's findings will likely crop up time and time again in UBI arguments as support for the concept continues to pick up steam. Since former presidential candidate and UBI evangelist Andrew Yang announced his candidacy for New York mayor, the most populous city in the U.S., others in the race have been promising <a href="https://www.nytimes.com/2021/01/14/nyregion/andrew-yang-ubi-mayor.html" rel="noopener noreferrer" target="_blank">some form of basic income</a>, too."</p><p> While it was Yang who gave the biggest spotlight to UBI, Michael Tubbs, Stockton's former mayor, was the young progressive force behind Stockton's effort. Business Insider <a href="https://www.businessinsider.com/stockton-basic-income-experiment-success-employment-wellbeing-2021-3" rel="noopener noreferrer" target="_blank">put a spotlight</a> on Tubbs' initiative.</p><p> "Tubbs didn't see much risk in giving money to his city's poorest residents, no strings attached. The former mayor of Stockton, a city in California's Central Valley, is a strong proponent of universal basic income, a policy that essentially pays people for being alive as a way to alleviate poverty. "My belief in it came from being raised by three amazing women, including my single mom," Tubbs told Insider. "The issue wasn't that they couldn't manage money. The issue was they never had enough money to manage."</p><p> "As mayor, Tubbs spearheaded the Stockton Economic Empowerment Demonstration, a pilot program that gave 125 residents debit cards loaded with $500 each month. The program launched in February 2019 and ended in January.</p><p> "Its critics argued that cash stipends would reduce the incentive for people to find jobs. But the SEED program <a href="https://www.businessinsider.com/stockton-basic-income-test-success-mayor-tubbs-2019-12" rel="noopener noreferrer" target="_blank">met its goal</a> of improving the quality of life of 125 residents struggling to make ends meet. To qualify for the pilot, residents had to live in a neighborhood where the median household income was the same as or lower than the city's overall, about $46,000.</p><p> "A new report from a team of independent researchers found that Stockton's program reduced unemployment among participants during its first year and helped many of them pay off debt. The report studied the effects of the payments from February 2019 through February 2020. SEED participants also reported improvements in their emotional well-being and decreases in anxiety or depression.</p><p> "It's really made a huge impact on my quality of life and being able to go do just normal things that a lot of people take for granted," one participant said in the report, "whether it's go out to eat once every two weeks and sit down for a nice dinner, or whether it's, you know, my mom's birthday and I just want to get her a birthday present."</p><p> "Tubbs said it was likely that the $500 monthly payments helped in other ways during the pandemic, such as tiding people over until their stimulus checks arrived or allowing them to take days off work if they got COVID-19."</p><p> Here's a <a href="https://www.stocktondemonstration.org/" rel="noopener noreferrer" target="_blank">link</a> the Stockton Economic Empowerment Seed demonstration project.</p>
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Congresswoman Alexandria Ocasio-Cortez on Wednesday strongly pushed back against a move by Senate Democrats and President Joe Biden to further restrict the number of people who will receive direct payments under the emerging coronavirus aid package, warning the new eligibility structure would deny direct relief to people who received checks during Donald Trump's presidency.
"I don't understand the political or economic wisdom in allowing Trump to give more people relief checks than a Democratic administration. People went far too long without relief last year," the New York Democrat told the Washington Post's Jeff Stein. "If anything we should be more generous, not more stingy.""It's also an insensitive compromise for the roughly 80% of Americans that live in urban areas, which are known for higher costs of living," Ocasio-Cortez added.
<p><a href="https://twitter.com/JStein_WaPo/status/1367164931183902720" target="_blank">According to</a> the Institute on Taxation and Economic Policy (ITEP), the new eligibility framework pushed by conservative Senate Democrats and accepted by the party leadership and the president would result in around 12 million fewer adults and five million fewer children receiving direct payments compared to the eligibility structure proposed by the House.</p> <iframe src="https://platform.twitter.com/embed/Tweet.html?creatorScreenName=commondreams&creatorUserId=14296273&dnt=false&embedId=twitter-widget-0&frame=false&hideCard=false&hideThread=false&id=1367219546315227144&lang=en&origin=https%3A%2F%2Fwww.commondreams.org%2Fnews%2F2021%2F03%2F03%2Faoc-warns-biden-giving-relief-checks-fewer-people-trump-would-be-nonsensical-own&siteScreenName=commondreams&siteUserId=14296273&theme=light&widgetsVersion=e1ffbdb%3A1614796141937&width=550px" style="position: static; visibility: visible; width: 550px; height: 515px; flex-grow: 1;" title="Twitter Tweet"></iframe> <p>"We have a responsibility to show people in this country what a Democratic majority can do for working people," Ocasio-Cortez added. "That means more generous relief checks, $15 min wage, ending the filibuster to protect our democracy. It's a once-in-generation shot, and we need to legislate like it."</p><p>Under Senate Democrats' newly adopted framework, individuals earning $75,000 per year or less and married couples earning $150,000 or less—<a href="https://www.cnbc.com/2021/02/10/when-to-file-your-taxes-to-maximize-your-stimulus-payment.html" rel="noopener noreferrer" target="_blank">based on either 2019 or 2020 income</a>—would still receive full $1,400 payments, but the checks would phase out more quickly for people whose earnings exceed those thresholds.</p><p>The new plan would completely deny payments to individuals earning more than $80,000 annually and married couples earning more than $160,000.</p><p>As the <em>New York Times</em> <a href="https://www.nytimes.com/live/2021/03/03/us/joe-biden-news" rel="noopener noreferrer" target="_blank">reported</a>, "the change in the upper limit being discussed in the Senate, if adopted, would mean that some people who got a check during the Trump administration would not get one under Mr. Biden."</p> <p>"Nearly nine million households that would have received at least some amount of payment under the House bill would not receive any payment at all," the <em>Times</em> noted, citing an estimate from tax modeling specialist Kyle Pomerleau of the American Enterprise Institute, a right-wing think tank.</p><p>Pomerleau said the eligibility change would slash around $15 to $20 billion off the top-line cost of the relief legislation, a small fraction of the $1.9 trillion total.</p> <iframe src="https://platform.twitter.com/embed/Tweet.html?creatorScreenName=commondreams&creatorUserId=14296273&dnt=false&embedId=twitter-widget-1&frame=false&hideCard=false&hideThread=false&id=1367193987296206856&lang=en&origin=https%3A%2F%2Fwww.commondreams.org%2Fnews%2F2021%2F03%2F03%2Faoc-warns-biden-giving-relief-checks-fewer-people-trump-would-be-nonsensical-own&siteScreenName=commondreams&siteUserId=14296273&theme=light&widgetsVersion=e1ffbdb%3A1614796141937&width=550px" style="position: static; visibility: visible; width: 550px; height: 472px; flex-grow: 1;" title="Twitter Tweet"></iframe> <p>Brian Beutler, editor-in-chief of <em>Crooked Media</em>, <a href="https://twitter.com/brianbeutler/status/1367147621337423872" rel="noopener noreferrer" target="_blank">called</a> the eligibility rollback "an absurd, stupid decision," echoing Ocasio-Cortez's concern about the possible political consequences of millions of people being denied direct relief payments under Biden and a Democratic Congress after receiving checks under Trump.</p><p>"It should be pretty straightforward to tabulate the number of Democratic voters in Georgia who will not get their supplemental $1,400 checks under this plan, and compare it to the vote margins in the Ossoff and Warnock races," Beutler tweeted, referring to the two senators whose <a href="https://www.commondreams.org/news/2021/01/06/progressive-push-2000-checks-georgia-shows-bold-universal-policies-winning-strategy" rel="noopener noreferrer" target="_blank">electoral victories</a> in January handed Democrats control of the Senate.</p><p>"Or to be more precise," Beutler added, "the number of voters who will be getting no supplemental check at all who were supposed to get one somewhere on the sliding scale."</p><p>The change to the eligibility framework comes despite <a href="https://www.commondreams.org/news/2021/02/04/politically-its-suicidal-frustration-grows-biden-entertains-narrower-eligibility" rel="noopener noreferrer" target="_blank">loud progressive warnings</a> that excessively means testing direct relief amid a pandemic and economic crisis would be politically, economically, and morally foolish. Some analysts have <a href="https://twitter.com/dylanmatt/status/1367137244621004802" rel="noopener noreferrer" target="_blank">argued</a> Congress should approve universal checks and tax high earners on the back end, a proposal that Democratic lawmakers never put on the table.</p><p>"Further 'targeting' or 'tightening' eligibility means taking survival checks away from millions of families who got them last time," Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, <a href="https://twitter.com/RepJayapal/status/1366587817137037313" rel="noopener noreferrer" target="_blank">tweeted</a> earlier this week. "That's bad policy and bad politics, too."</p>
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How an Obama-era effort to help small businesses backfired
March 04, 2021
The Jump-Start Our Business Start-Ups (or JOBS) Act of 2012 was supposed to mean great opportunities for small business owners to raise capital and grow family-controlled businesses. At the time President Barack Obama called it "a potential game-changer" that would give them "access to a big, new pool of potential investors—namely, the American people."
The law was intended to allow small operations to raise money through crowdfunding, pretty much the same way people raise money with a GoFundMe type campaign or how companies use Kickstarter for specific projects.
<p>Except, things didn't work out quite that way for either small businesses or small-time investors. New rules, called Reg CF (for crowdfunding), from the Securities and Exchange Commission were supposed to fix problems that had made the concept pretty much unworkable. But nine years after the law was passed, it has ended up favoring larger enterprises while strengthening the hold on business financing of Wall Street banks, Silicon Valley venture capitalists and other large financial players.</p><h3>The Intent</h3><p>The law was a response to the Great Recession. Banks, after years of reckless practices, tightened lending standards even as they accepted taxpayer bailouts. The <a href="https://www.federalreserve.gov/newsevents/speech/duke20100712a.htm" rel="noopener noreferrer" target="_blank">Federal Reserve noted in 2010 </a>that many small businesses said they couldn't get credit even if they seemed credit-worthy.</p><p>"This was a bill that originated in a Republican-controlled House and it was designed to be a law that made access to capital easier," said Roger Royse, a corporate and securities lawyer in Palo Alto, Calif.</p><p>Then the bill hit the Democratic-controlled Senate."It changed from an ease-of-capital-raising bill to an investor protection bill," Royse added. After all, the government has to make sure that investors don't lose their savings to a risky small business, or at least so said the Senate Democrats who worked the bill over</p><p>The practice is long-established. Going back to the 1934 creation of the SEC under President Franklin D. Roosevelt, a double focus on capital and investor protection has been standard.</p><h3>Small Business Hurting</h3><p>Even though the worst of the Great Recession had passed, the needs for business funding are eternal. The <a href="https://www.fedsmallbusiness.org/medialibrary/fedsmallbusiness/files/2019/sbcs-employer-firms-report.pdf" rel="noopener noreferrer" target="_blank">Federal Reserve in a 2019 report</a> found while 48% of small businesses either had or obtained sufficient financing, 23% had a financing shortfall, and 29% might have unmet financing needs. Also,80% of small business owners wanted their enterprise to grow.</p><p>Regular investors sought good returns. Taking a flyer on small businesses was also more appealing as interest rates fell, making the return on fixed-income investments like safe corporate bonds and Treasury notes hardly enough for a cup of coffee. Meanwhile, big institutions and wealthy people kept gaining major profits from investments in hot companies.</p><p>The initial SEC regulations for the JOBS Act fell short. Companies could raise at most a tad more than $1 million. That wasn't enough money "to justify the cost" of complying with the rules, Royse said. Complying with the regulations was expensive.</p><p>There was also a $100,000 limit on the amount of capital an individual, no matter how well-heeled or savvy, could invest in a year. The same limit applied to institutions. That greatly reduced the total pool of money that might be available for small businesses.</p><h3>Business Impact</h3><p>The new regs increase the amount a business can raise to $5 million. That helps rationalize the company's costs. But it really doesn't fix the problems.</p><p>"The regs weren't necessarily designed for your brick-and-mortar mom-and-pop business to go out and raise capital," said Nick Mathews, CEO of Mainvest, one of the platforms that companies crowdfunding under the regulations might use.</p><p>No, they don't, but that is what the 20121 law was intended to do.</p><p>The regulations require detailed disclosures, not the kind most small businesses can explain in plain English. The accepted and generally tortured legalese the SEC prefers "requires an infrastructure comprised of financial, accounting, and legal professionals," said David Bissinger, a securities litigator and partner with Bissinger, Oshman & Williams in Houston. The lawyers, auditors, and other staff to check everything favors firms raising at least close to the $5 million limit under the JOBS Act.</p><p>"I just become skeptical," that companies with a valuation under $100 million can adequately perform the compliance and "whether that securities offering makes sense for anybody," Bissinger told DCReport.</p><p>The terms of getting capital are also challenging.</p><p>"Reg CF is designed for something like scalable businesses," Royse said, meaning companies that can grow fast and get big, with a large potential payoff for investors.</p><p>"They don't have to be Silicon Valley unicorns," he added, referring to hose firms valued at a billion dollars before they even sell stock to the public."But I think they have to be something with opportunities for growth."</p><h3>Surrendering Control</h3><p>Under the crowdfunding scenario, the company looking for money has to give something in return. It may be equity—a significant slice of the business. Equity financing often means that big and savvy institutions demand that the people who came up with the idea surrender control of their baby business and a huge share of future riches. That tends to keep wealth concentrated in the hands of the already rich.</p><p>That is in part what the JOBS act was intended to address – entrepreneurs not earning big financial rewards because of lack of access to capital to grow their business without giving up confiscatory amounts of ownership to venture capitalists.</p><p>Another approach substituted royalty financing or shared earnings arrangements, where investors get a cut of future profits, instead of providing equity ownership. "There are a lot of those out there, now," said Royse. "It's like really expensive debt."</p><p>According to Matthews, Small Business Administration-backed bank debt runs in the range of 7% annual interest. The more complicated sharing arrangements effectively translate into a 10% to 20% interest rate on the amount loaned, a steep expense when Treasurys pay a bit more than 1%, home mortgages go for as little as 1.75% and many people with good credit scores can pay under 10% on credit card debt.</p><p>In a down year when revenues shrink, the JOBS Act theory was that owners would pay out less in royalties or shared earnings, helping level out the often-volatile finances of small companies so they endure until better times return. In a good year, though, the payout gets much larger.</p><p>All this means that the system of raising money for new businesses remains heavily weighted in favor of the venture capitalists, the big Wall Street stock and bond writers and other big boys of finance. The big winners are institutional investors—pension funds, hedge funds, and private equity firms—that can get the investments they want and do their own form of crowdfunding. That is, crowding out the little people so they still keep the best investments for themselves.</p>
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