Successful philanthropists – people who create positive change – know the difference between charity and self-help. Charity usually alleviates the misery of dependency. Self-help can lead to freedom, prosperity, happiness and healthy self-esteem.
Charity costs society money, while supportive aid pays the combined dividend of reducing dependency and increasing productivity, which contributes to the common good.
So it’s troubling to see Boulder County become the latest county to confuse handouts with a form of compassion. The county, following the city of Boulder, recently announced a new $6 million program – in federal currency – to fund a “basic income program” for 725 randomly selected recipients.
The money is spent without restrictions, meaning you can spend it to start a new business, feed kids, or buy lots of beer. The county will pay each recipient $300 every month for two years. Eligibility requirements for the lottery include maximum income limits for adults with at least one child under the age of 4.
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Similar experiments, commonly referred to as “universal basic income” programs, have been launched in more than 30 cities and states. Denver’s new Basic Income Project has paid out more than $6.5 million to about 800 “homeless” people.
“The goal of the program is to test the feasibility and impact of a guaranteed income…,” says the Denver Basic Income Project website.
The test of giving away cash aimlessly has been around since time immemorial. Charity without a defined outcome is almost always bad, both for the recipient and the giver – in this case, consumers who are already burdened by high taxes and the inflation of the cash produced and get nothing in return.
If we need a scientific study to tell us the guaranteed results of handouts, it’s the National Bureau of Economic Research, which released one last month. The bureau studied 1,000 low-income people who were randomly selected to receive $1,000 every month for three years.
“The transfer (“free” $1,000) resulted in individuals’ total income decreasing by approximately $1,500/year compared to the control group (without the transfers). The program resulted in a 2.0 percentage point decline in participants’ labor market participation and a 1.3 to 1.4 hour reduction in weekly work hours.”
That is, these programs force working people to pay, through taxes and inflation, for other working people to work less. That is not the job of money. Cash transactions elevate humanity only when both the payer and the receiver benefit from the exchange.
If such experiments become widespread and commonplace, they will dramatically increase inflation. Worse still, they will reduce the productivity, achievements, incomes and self-reliance of the recipients.
The recipients of these charity “experiments” are literally little lottery winners. Everyone wants to win the lottery, but those who do often do poorly.
“Studies have found that, far from getting people out of financial trouble, winning the lottery actually gets them into even deeper trouble, with bankruptcy rates for lottery winners skyrocketing three to five years after winning,” economist Jay L. Zagorsky wrote for U.S. News and World Report.
The Review of Economics and Statistics also found that large cash gifts are no less destructive than small cash gifts.
“A comparison of lottery winners in Florida who received $50,000 to $150,000 at random with small winners shows that such transfers only delay bankruptcy rather than prevent it,” the report says. “…Our results suggest that skepticism about the long-term effects of cash transfers may be warranted.”
If “free” money without any results could improve lives, we could all stop working and live on minted paper money. That won’t work, anywhere, on any scale.
Editorial staff of the Denver Gazette
