Mayor Lori Lightfoot (D) has proposed the more than $31 million program as part of her 2022 budget, which the city council is scheduled to consider on Wednesday. The one-year pilot, funded by the nearly $2 billion Chicago received from the Biden administration’s American Rescue Plan, is supported by most of city’s 50 aldermen. But it has received pushback from the 20-member Black Caucus, which has urged Lightfoot to redirect the money to violence prevention programs.
Lightfoot has said the program is motivated by her own childhood memories of hardship while growing up in Ohio. “I knew what it felt like to live check to check. When you’re in need, every bit of income helps,” she wrote in a tweet announcing the plan earlier this month.
Basic income programs have been spreading across the country since Stockton, Calif., started providing monthly stipends with no strings attached to 125 of its residents in 2019. Those stipends resulted in more full-time employment and improved mental and emotional well-being among recipients, according to preliminary findings reported earlier this year by researchers who helped design the program.
Michael Tubbs, who implemented the program as then-mayor of Stockton, noted that recipients’ largest expenditure was food, making up at least a third of spending each month, according to the report. “I had no idea so many people in my area were hungry,” Tubbs said.
Since Stockton’s program launched, about 40 other cities have considered or started similar efforts to target economic insecurity within their boundaries, according to Mayors for a Guaranteed Income, including Denver, Newark, Pittsburgh, San Francisco, New Orleans and Compton, Calif. A program in Los Angeles will provide 2,000 residents with a guaranteed income of $1,000 a month for a year.
The surge of interest has been fueled in part by the influx of money that cities have received from the coronavirus stimulus and the formation of Mayors for Universal Basic Income, an advocacy coalition that Tubbs founded last year.
Critics worry that guaranteed income programs will discourage people from finding jobs and drain the labor force, a particular concern amid the record job openings in the country this year, said Michael Faulkender, an assistant treasury secretary for economic policy during the Trump administration. Last week, the National Federation of Independent Business reported that 51 percent of small business owners have job openings they cannot fill, which more than doubles the historical average of 22 percent.
“There are still millions upon millions of low-skilled jobs out there, and you have small business owners who can’t find workers to join their companies,” said Faulkender, who teaches finance at the University of Maryland. Proposals like the one in Chicago feed the “process of reducing the willingness of people to participate in the workforce,” he said.
Opposition to federal entitlement programs, such as rent vouchers and food stamps, has been waged for decades, but advocates like Tubbs say that today, “the climate has changed.” Economic blows struck by recent natural disasters and the pandemic have proven that “the economy doesn’t work for a vast number of Americans,” he said.
The inequalities in Chicago are particularly stark. A 2019 report by an economic inequality task force created by the mayor’s office found that 500,000 Chicagoans — about 18 percent of the population — are living below or at the poverty level. Nearly half the city’s households do not have a basic safety net to help in emergencies or to prepare for future needs, such as homeownership or higher education. A quarter of households have more debt than income.
Lightfoot says the effects of the despair can be seen in recent drops in life expectancy among the poorest and the current spike in street violence throughout the city. Harish Patel, executive director of Economic Security For Illinois, an advocacy group that helped coordinate the report, says the pandemic has made the disparities worse.
The 5,000 recipients, who must be adults and make less than $35,000 a year, will be chosen randomly for the program. Chicago Alderman Gilbert Villegas said the city plans to track the recipients’ expenditures during the first six months and then provide more targeted assistance, such as help with paying heating bills or for food. The costs of supporting the program, he said, “is well worth the investment” when weighed against daily costs of poverty in Chicago, such as gun violence and incarceration.
Chicago’s basic income proposal dates back two years when a small group of aldermen led by Villegas proposed a resolution that would have established a $50 million basic income program. The subject is particularly important to Villegas, who considers himself “a product” of similar assistance. Following the death of his father when Villegas was 8 years old, his mother received $800 in monthly survivor benefits from Social Security until he and his younger brother turned 18. The funds supported child-care costs and gave her the freedom to work just one job, rather than two, so she could be with her sons more often.
U.S. Inflation Hit 30-Year High in October as Consumer Prices Jump 6.2%
Core index was up 4.6% as pandemic-related supply shortages, strong consumer demand continue
U.S. inflation hit a three-decade high in October, delivering widespread and sizable price increases to households for everything from groceries to cars due to persistent supply shortages and strong consumer demand.
The Labor Department said the consumer-price index—which measures what consumers pay for goods and services—increased in October by 6.2% from a year ago. That was the fastest 12-month pace since 1990 and the fifth straight month of inflation above 5%.
The core price index, which excludes the often-volatile categories of food and energy, climbed 4.6% in October from a year earlier, higher than September’s 4% rise and the largest increase since 1991.Consumer-price index, percent change froma year earlier.
On a monthly basis, the CPI increased a seasonally adjusted 0.9% in October from the prior month, a sharp acceleration from September’s 0.4% rise and the same as June’s 0.9% pace.
Price increases were broad-based, with higher costs for new and used autos, gasoline and other energy costs, furniture, rent and medical care, the Labor Department said. Food prices for both groceries and dining out rose by the most in decades. Prices fell for airline fares and alcohol.
U.S. stocks fell and bond prices rose as investors digested the impact of price pressure on the global economy.
Persistently higher inflation—triggered by a faster-than-anticipated but uneven economic recovery, trillions of dollars in pandemic-related government stimulus and other factors—is hitting consumers’ wallets. At the same time, a rebounding economy and healthy household balance sheets are both stoking demand and cushioning price increases.
The inflation surge is complicating the Federal Reserve’s strategy for unwinding easy-money policies the central bank imposed early in the pandemic. It has also emerged as a political factor affecting the Biden administration’s economic agenda.
Prices climbed the fastest in the South, a part of the country that reopened earlier in the pandemic but was hit relatively harder by the Delta variant of Covid-19. Prices were also up more in the Midwest than in the Northeast and West.
Americans have never been in so much debt
American households are carrying record amounts of debt as home and auto prices surge, Covid infections continue to fall and people get out their credit cards again.Between July and September, US household debt climbed to a new record of $15.24 trillion, the Federal Reserve Bank of New York said Tuesday.
It was an increase of 1.9%, or $286 billion, from the second quarter of the year.
“As pandemic relief efforts wind down, we are beginning to see the reversal of some of the credit card balance trends seen during the pandemic,” such as lower spending in favor of paying down debt balances, said Donghoon Lee, research officer at the New York Fed.
Now that the stimulus sugar rush has worn off, consumers are going back to their old ways of spending with their credit cards. Credit card balances rose by $17 billion, just as they had during the second quarter. But they’re still $123 bullion lower than at the end of 2019 before the pandemic hit.
Mortgages, which are the largest component of household debt, rose by $230 billion last quarter and totaled $10.67 trillion.Auto loans and student loan balances also increased, rising by $28 billion and $14 billion, respectively.
Even though credit card debt has yet to get back to its pre-pandemic level, total debt is already $1.1 trillion higher than at the end of 2019.
High spending spurred by even higher inflation
Americans are spending big at the moment. Economists’ explanation is, for the most part, “because they can”.
With the labor market recovery chugging along and the worker shortage driving up wages, people’s wallets are getting filled ahead of the holidays.
That’s a good thing, because everything is getting more expensive.
Inflation is sitting at multi-year highs thanks to supply chain disruptions that have increased the costs of shipping and raw materials. At the same time, consumer demand is also going through the roof.
The latest inflation data from early Tuesday showed prices producers receive for their products rose 0.6% in October, adjusted for seasonal swings, or 8.6% over the preceding 12-month period. Much of the increase was due to higher energy costs.
Businesses can only absorb so much of the increase in prices before passing the higher costs down to end-consumers.
Stripping out energy and food prices, as well as trade services, the producer price index rose a seasonally adjusted 0.4% last month, or 6.2% over the 12-month period.
The price index tracking intermediate demand — that’s goods and services sold to businesses — for processed goods jumped 2.1%, its biggest advance since May, mostly driven by higher energy costs.
Over the 12-month period ended October, the index has climbed 25.4%, the biggest increase since January 1975.Consumer price inflation, which tracks prices paid for food, housing and the like in October is due Wednesday morning.
IRS reporting requirement: Why crypto and NFT fans are worried about the infrastructure bill
Industry groups are concerned about a ‘digital assets’ provision that may require reporting cryptocurrency transactions to the Internal Revenue Service.
The $1.2 trillion infrastructure bill, which is on its way to President Biden’s desk, includes provisions to fund everything from new roads to improved broadband connections, but it also includes tax reporting provisions that people and organizations in the cryptocurrency and NFT worlds are concerned could stifle transactions.
Existing tax law, in a section of the U.S. tax code called 6050I, requires that people who receive more than $10,000 in cash and equivalents (like cashier’s checks and money orders) in many business transactions file a report with the Internal Revenue Service (IRS), including details about who paid them—such as names and Social Security numbers—or potentially face felony charges. The new law expands the definition of cash to include “digital assets” and comes as governments around the world grapple with the rapid rise of crypto and the potential for its use in money laundering. Critics worry the new provision could force participants in crypto transactions and NFT trades, which are often anonymous, to have to disclose information about the people they’re doing business with, which they simply might not have.
“Miners, stakers, lenders, decentralized application and marketplace users, traders, businesses, and individuals are all at risk of being subject to this reporting requirement, even though in most situations the person or entity in receipt is not in the position to report the required information,” warned attorney Abraham Sutherland, an adjunct professor at the University of Virginia School of Law and advisor to the Proof of Stake Alliance, an industry group, in a September report.
Decentralized finance, or defi, operations, where automated smart contracts essentially provide financial services, could also be affected by the provision, warn people in the industry.
“This 6050I provision in the infrastructure bill seems like a disaster if I understand it,” said Coinbase CEO Brian Armstrong in a tweet. “Criminal felony statute that could freeze a lot of healthy crypto behavior (like Defi).”
The new law also contains a provision that would expand the definition of “broker” under the law to include cryptocurrency brokers, which some in the industry—including a group called the Crypto Council for Innovation—have feared would rope in coin miners and developers involved in building and maintaining crypto systems. Brokers are also required to report many transactions to the IRS.
Bloomberg reported earlier this year that the Treasury Department, which is ultimately responsible for putting out regulations saying how the new provisions will actually work in practice, is likely to exempt organizations and people that aren’t brokers in the usual sense. Since getting the law itself amended seems difficult with a fiercely divided Congress, it’s likely that the Treasury Department will see furious lobbying by the crypto industry to make sure it doesn’t interfere too much with their operations.