Flint Offers New Mothers $ 7,500 During The First Year

BridgeMI first covered this story with a longform article in January. We posted it under "MDHHS" where it has too many views to move, so I'll link it here.

https://mihealthfreedom.org/community/mshhs/michigans-55m-experiment-with-guaranteed-income-begins-with-flint-moms/#post-752

The Flint Rx Kids guaranteed basic income program is expanding to other locales with the dedication of federal TANF funds in the new FY 2025 Michigan budget:

https://www.freep.com/story/news/local/michigan/2024/07/06/cash-program-moms-babies-michigan-child-tax-credit-universal-basic-guaranteed-income/74279675007/

Program providing $7,500 for Flint moms and babies expected to expand across Michigan
Nushrat Rahman - July 6, 2024

A program on a mission to eliminate deep infant poverty by giving cash payments to pregnant moms and babies in Flint is expected to expand to cities across Michigan.

Rx Kids, regarded by officials as a first-of-its-kind initiative in the country, provides moms with $1,500 mid-pregnancy for essentials like food, prenatal care, cribs or other needs. Then, after birth, families get $500 a month for the first year of the infant's life, for $7,500 in total. The no-strings attached program, which does not have income restrictions for eligibility, launched in January.

Now, thanks to $20 million in a recently approved state budget, the program is tentatively slated to grow beyond Flint to five counties in the eastern Upper Peninsula, including Alger, Chippewa, Luce, Mackinac and Schoolcraft; the cities of Kalamazoo, Saginaw, Dearborn, Highland Park, River Rouge and parts of Detroit. The budget was sent to Gov. Gretchen Whitmer, who is expected to sign it, the Free Press reported last week.

If Rx Kids is able to raise the needed philanthropic dollars, programs could go live in other cities as early as January.

"Rx Kids is a prescription for health, hope and opportunity," said Dr. Mona Hanna, director of Rx Kids and associate dean of public health at the Michigan State University College of Human Medicine. Hanna, a pediatrician who spotted high lead levels among children in Flint and was among the key people to expose the water crisis, said she had wished for a "prescription" to take away poverty for her patients.

In Flint, where nearly 78% of children under 5 live in poverty, Rx Kids has so far distributed more than $2 million in cash to 828 families. About 60% of the families have an annual household income of less than $10,000, Hanna said. With the dollars in hand, families are able to pay their rent, utilities, food and diapers. They can put the money into savings.

"This is generational, historic work," she said.

Cash can alleviate poverty

There's evidence that cash benefits for children can lift them out of poverty.

Rx Kids co-director H. Luke Shaefer pointed to the pandemic-era expanded Child Tax Credit, which provided $250 to $300 per month for each eligible child. The payments reached more than 61 million children and nearly cut child poverty in half in 2021, compared with the year before, according to Columbia University's Center on Poverty and Social Policy. After the benefits ended, child poverty rose sharply in 2022. January of that year saw 3.7 million more kids in poverty compared with December 2021.

"For that brief, shining moment, we lifted millions of children out of poverty. We saw food hardship among families with children fall to the lowest level that we've ever recorded. We saw the credit scores of families hit their all-time high," Shaefer, who is a professor of public policy at the University of Michigan and director of the Poverty Solutions initiative, said. "And then we reversed course and weren't able to extend that past the one year and we saw child poverty spike — the highest one-year increase in history. We saw food hardship increase and just the financial security of families doing worse."

Shaefer said Rx Kids, a child cash benefits initiative, falls within the same family of programs as universal basic income, recurring cash payments that are not targeted, and guaranteed basic income, which provide no-strings-attached cash payments that are often geared toward people with the greatest needs. The latter two are largely untested, he said, but multiple countries have some type of child cash transfer program.

"Investments in children pay dividends over the long term. Also, families with children are often sort of the most economically vulnerable," Shaefer said.

Program to expand but needs philanthropic funds
Lawmakers approved $20 million in funding from the federal Temporary Assistance for Needy Families (TANF) program for Rx Kids.

The five-year Flint program relies on a combination of public dollars, including TANF, alongside philanthropic contributions, from funders like Charles Stewart Mott Foundation. The program is slated to expand to other parts of the state, but organizers need philanthropic matches to make it available to moms in those municipalities, regardless of their income.

"There's a private part that is necessary," Hanna said. "We will not launch this only for low-income people. It must be a universal program."

Dearborn, for instance, would get about $3 million in state TANF funding that could support the first four cash payments for lower income families. To extend to the full 12 months and to make it open for all moms and babies in a given area — like the Flint program — Rx Kids would need to raise another $9.5 million. An alternative option would be to make it a perinatal program — providing the first four payments for families regardless of income. The perinatal version of the program would require nearly $2 million for Dearborn.

In the case of Detroit, of the $20 million allocation, the city would get about $10 million in TANF, Hanna said, covering about 3,000 babies a year. To make it similar to the one in Flint, Rx Kids needs to raise an additional $32 million but $7 million to launch a perinatal program. For Detroit, Rx Kids will be looking at areas of greatest need, likely based on highest poverty rates by ZIP code. A spokesperson for the Detroit Health Department said it is not involved with the Rx Kids program at this time.

About 49% of children under the age of 5 in Detroit live below the poverty line, according to 2022 Census estimates. In River Rouge, the child poverty rate is nearly 68%.

In Wayne County, 52% of households in 2022 earned more than the federal poverty level but still struggled to make ends meet. In other words, they fall within the United Way's ALICE threshold, meaning they aren't technically living in poverty but don't earn enough to afford the basics where they reside.

Dr. Abdul El-Sayed, director of Wayne County’s Department of Health, Human, and Veterans Services, said the county is eager to make the program a reality.

"Stable housing or good healthy food or a safe living environment or transit opportunities — addressing those issues are critical to giving every child that best first start at their life," El-Sayed said. "And so, when you think about what it is that the government and philanthropy, even society, can do to make sure that everybody has an equal shot at a dignified life, it's making sure that, at that transition of life, that the resources that people need are available, and cash is the single best way to do that."

Ali Abazeed, founding director of the Dearborn Department of Public Health, said there's no better intervention than investing in the period before and after pregnancy. He pointed to how the birth of a child increases the risk of poverty, especially for first-time mothers.

"Giving people cash — especially when they're dealing with this thing that causes a spike in poverty, both before and after the birth of the child — that's redefining the social contract, that's redefining what we do for one another, that's redefining how we support one another and our residents," Abazeed said.

Abazeed said the city plans to allocate $1 million in federal funding to the program, and is talking to local and state partners for further investments.

"We have quite the lift ahead of us," he said, but is confident the program will launch for Dearborn residents.

Over on the southwest side of the state, the Kalamazoo Community Foundation has committed $500,000 so far and is pursuing local government and philanthropic funds for a full 12-month program. Exploring an Rx Kids initiative is among the top priorities for the Kalamazoo City Commission as part of the city's 2025 budget, but funding has not yet been determined, according to a spokesperson for the city of Kalamazoo.

"Rx Kids will ensure that our newborn residents are born into a thriving community, where their family's income level does not adversely impact their life's trajectory,” Grace Lubwama, CEO of the Kalamazoo Community Foundation, said in a statement.

Rx Kids is exploring what the program could look like outside of Michigan, too. Hanna said there is interest in both red and blue states that have unspent TANF dollars.

"We started this in Flint, but the intent was never to end in Flint," Hanna said.

Peter Jacobsen at the Foundation for Economic Education (FEE) has a second paper with thoughts on these Universal Basic Income (UBI) schemes:

https://fee.org/articles/a-second-working-paper-shows-that-people-who-receive-a-guaranteed-income-tend-to-work-less/

A Second Working Paper Shows That People Who Receive a Guaranteed Income Tend to Work Less
It’s not the answer UBI supporters want.
By Peter Jacobsen - December 29, 2024

In October, I reported on the release of the largest research project ever on universal basic income (UBI). The study’s results were disappointing for advocates of the idea. In short, the research showed that many people who received the income reduced their hours working and increased leisure time. Furthermore, people didn’t use their leisure time in any of the productive activities advocates often claim (e.g., self-improvement, entrepreneurship, time with family).

This month, a National Bureau of Economic Research (NBER) study on UBI authored by economists Sidhya Balakrishnan, Sewin Chan, Sara Constantino, Johannes Haushofer, and Jonathan Morduch was released.

The study examined 2,097 households in Compton, California. They gave around one-third of the households a guaranteed monthly income of an average of $487 and examined how recipient households acted relative to the non-recipients.

Employment and Guaranteed Income

The most obvious impact of a guaranteed income is going to be on a recipient’s work decisions. Predictably, many people who received the guaranteed income reduced their working hours.

The researchers found that part-time workers (those who worked less than 20 hours per week) reduced their time working by 13 percent. Less time working means less money. How much less? The paper states:

The negative impacts on labor market participation translate into negative impacts on household income. While the average monthly cash transfer amount for the treatment group is $487 … the net impact on total monthly household income over the past 30 days including the cash transfer was just $92 and not significantly different from zero.

This means that these part-time worker households who received a nearly $500 transfer ended up only being $100 richer overall, because they reduced their working hours. Furthermore, this $100 difference was not statistically significant, which means it’s unclear whether the transfer really leaves people with more income than before!

It should be noted that full-time employees did not significantly change their working habits. This fact also does not bode well for UBI advocates. Why?

Ask yourself, why would part-time employees work less, but full-time employees work the same amount? One explanation is that it is generally easier to pick up part-time work than it is to find a full-time job. As such, full-time workers were likely reluctant to leave behind their stable full-time jobs for a temporary guaranteed income. Additionally, an income of $500 per month is likely not enough to make up for the loss of a full-time job. So it’s unsurprising that this program didn’t affect the decisions of full-time employees.

However, if this program were a permanent government program, I would expect that some full-time employees would also leave their jobs or cut back hours. If you expect to get a guaranteed monthly stipend for two years, you aren’t going to quit your job, because you’re going to have to take on the cost of finding a new full-time job when it ends. However, if you’re going to get it forever, you’re more likely to do so.

Other Impacts of Guaranteed Income

Unlike the study I discussed in October, this study did not examine extensively how recipients used their time. However, it examined other impacts of guaranteed income, some positive and some negative.

On the positive side, the monthly stipend appears to “have a strong positive impact on the index of housing security,” but the authors also highlight that it had “no clear impact on the indices of psychological well-being, financial security, or food security.”

The research also found: “The list experiments show strong evidence of relative reductions in IPV [intimate partner violence], weak evidence of reduced alcohol consumption, and moderately strong evidence of relative increases in tobacco consumption.”

So in some of these other areas, we see some positive results. Does this vindicate the idea of a government-provided guaranteed income? Not exactly.

It’s no surprise to economists, or anyone for that matter, that if you give people money, they’ll get some benefits. Adding more inputs leads to producing more outputs in the simplest systems. However, the economic problem is determining which beneficial avenues are best to pursue. For example, instead of giving people a guaranteed income of $500 per month, that money could have been spent on healthcare, education, means-sensitive charity, or research and development of technology.

This gets even more complicated when you think about who the $500 comes from. In a government-run guaranteed income system, the money for the guaranteed income comes from taxpayers.

Do the benefits generated by such a system outweigh the benefits taxpayers would have enjoyed if they were able to keep their own money? How could we even begin to compare the benefits of a government program like this to all the unimplemented, unseen plans of the millions of taxpayers who pay into the system?

What This Means for Basic Income

Overall, the picture drawn by the two recent studies on this policy is underwhelming in my estimation. Looking at both studies together, it seems like when you give people a guaranteed income, they become a bit wealthier and more financially stable, but the gains are small because the policy disincentivizes working relative to leisure. We would expect this problem to worsen if the policy were permanent, and this may cause the benefits to evaporate almost entirely.

On the flip side, such programs on a large scale would be extremely expensive—meaning that taxpayers would have to give up a lot. To give a stipend to every adult would be more than a trillion dollars every year.

While advocates may consider more leisure a good thing by itself, that argument becomes a tougher sell when we look at studies that show how the type of leisure people engage in with basic income isn’t of the kind that its advocates usually tout. Furthermore, that increase in leisure by some will simply result in more labor on the part of taxpayers who now must achieve the same standard of living with higher taxes.

When something sounds too good to be true, it often is. Receiving “free money” every month may sound enticing, but the more we study the details, the more we see the real costs and illusory benefits.