Handouts Don’t Help Kids

August 13, 2025 by Dan Mitchell @ International Liberty

A few years ago, advocates of a “basic income” seemed to have a lot of momentum on their side.   Nations were holding referendums, presidential candidates were embracing the concepts, and even some libertarians were saying nice things about the idea. 

Being a curmudgeon and a libertarian (is there a difference?), I argued against the basic income. Giving everyone a big chunk of money, I explained, would be hugely expensive and promote dependency.

Faster economic growth would be a much better approach.

The good news is that support for basic income seems to have withered, in part because the evidence – both domestically and internationally – that universal handouts have a negative impact.

Now there are two new studies that hopefully will be the final nails in the coffin.

One study was entitled “The Impact of Unconditional Cash Transfers on Parenting and Children” and the results were not favorable.

You can download the entire study, but here are some excerpts from an editorial in the Wall Street Journal if you want a quick summary.

 

Progressives and a growing faction of Republicans support cash handouts… So readers might want to know about a study published as a working paper by the National Bureau of Economic Research… Researchers…ran a randomized controlled trial to test the impact of a cash transfer on lower-income, working-age Americans. 

One group received $1,000 every month for three years—$36,000 total—no strings attached. The other were paid $50 a month to participate as a control group. …Notably, while the transfer payments reduced parents’ self-reported stress levels during the first year of the study, the “effects were short-lived and dissipated by the second year,” the researchers write. 

The handouts also “did not have a meaningful effect on most educational outcomes measured in school administrative records,” including attendance, disciplinary actions or repeating a grade. Illinois children whose parents received free cash had worse grades, though this negative effect was not statistically significant after researchers adjusted for other variables. … 

The researchers reported last year that the cash transfers increased healthcare utilization, …but this produced no measurable effects on physical health outcomes. …Recipients also worked less, equivalent to roughly eight fewer days in the previous year. …In other words, the payments led people to work less. The results mesh with other evidence that a guaranteed annual income isn’t the path to upward mobility. It might even make that mobility less likely.

The other study was entitled “The Effect of a Monthly Unconditional Cash Transfer on Children’s Development at Four Years of Age: A Randomized Controlled Trial in the U.S.”

Once again, you can download the study for details, but Kevin Corinth of the American Enterprise Institute has picked out the key findings.

 

A recent study put to the test an idea that has become increasingly influential over the past decade: To help kids thrive, one of the best things you can do is to give their parents cash with no strings attached. …The study provided $4,000 per year without conditions to a random selection of families from the time their child was born, and monitored the children’s outcomes for four years while receiving the payments. 

Across an array of cognitive tests, the kids receiving the generous child allowance scored no better than kids who did not receive it. The results of the study apparently came as a surprise to its authors and others who have previously supported a child allowance. … 

Income assistance that requires work, in the form of the Earned Income Tax Credit (EITC), has shown the strongest evidence of boosting kids’ development. …policymakers require a comprehensive and nuanced understanding of the likely effects of new policies based on what we already know. 

Replacing the Child Tax Credit—which like the EITC requires work and thus is likely to improve children’s outcomes—with an unconditional child allowance with no such track record of success, could very well hurt kids’ development.

I mentioned above that support for universal handouts has withered.

 

But that does not mean the fight is over. 

One of Joe Biden’s first-year “accomplishments” was the creation of universal per-child handouts (notwithstanding what he said a few years earlier).

To minimize the cost, the President and his team set up the giveaway so it only lasted one year. They figured that once people got hooked on the handouts, politicians on Capitol Hill would feel enormous pressure to make it permanent.

Thankfully, that strategy backfired and the per-child handouts expired after one year.

But a future left-wing administration (such as Kamala or AOC) quite likely try to resuscitate the scheme.

Basic Income, Public Choice, and the Slippery Slope

September 23, 2019 by Dan Mitchell 

When “basic income” became an issue a few years ago, I was instinctively opposed because I don’t want Uncle Sam sending big checks to everyone in the country.

But I admitted that there were a few reasonable arguments for the idea. Most notably, plans for a basic income usually assumed that these checks would be a substitute for the existing social welfare state.

Since that system has been bad news for both taxpayers and poor people, a swap sounds very tempting.

But I’ve repeatedly warned (over and over again) that any theoretical attributes don’t matter because politicians almost certainly would pull a bait-and-switch by adding a basic income on top of all current redistribution programs.

Andrew Yang is now proving my point. When asked about potential budgetary savings to accompany his proposal for basic income, the candidate for the Democratic Party’s presidential nomination asserted that the new handouts would be in addition to the existing welfare state.......To Read More....

Basic Income and Handouts for People Who Are “Unwilling to Work”

February 17, 2019 by Dan Mitchell

 

When I wrote about Alexandria Ocasio-Cortez’s so-called Green New Deal, I mostly focused on the very expensive fiscal implications. I also noted that AOC’s proposed 70 percent tax rate on the rich wouldn’t even pay for a tiny fraction of the multi-trillion dollar cost (in other words, you and me would be pillaged).

Others focused on some of the inane goals of the legislation, such as phasing out cows and air travel.

But the part of the plan that produced the most controversy was the promise to provide “economic security” to those “unwilling to work.” This generated so much mockery that it no longer appears in any supporting documents and some supporters even claim that it never was part of the plan.
But some true believers aren’t backing down. Let’s look at some excerpts from Christine Emba’s recent column in the Washington Post.

The rollout of the progressives’ Green New Deal has been less than smooth. One major reason: the release of an FAQ that listed “economic security” for those “unwilling to work” as one of the program’s goals. “Unwilling”? The now-retracted FAQ made other eyebrow-raising claims, but conservatives pounced on that word in particular. …welfare as a reward for laziness, it was called extreme, absurd…a “Communist Manifesto, 21st Century.”

Give Ms. Emba credit.

She didn’t pretend, like many other folks on the left, that the promise of no-strings handouts for the indolent wasn’t part of AOC’s original plan. For this reason, we should probably add her to our collection of honest leftists.

But while I applaud the honesty at the start of her column, the analysis that follows is profoundly awful.

She basically argues that the success of welfare should be judged by whether recipients are happy to get free money.

…is the idea of unconditional economic security really so extraordinary? …A state-dispensed, unconditional cash stipend for every single citizen — whether willing to work or not — has been touted as a way to…perhaps end deep poverty …most Americans look askance at the idea of giving anyone anything free, let alone something as intangible as well-being. It’s life, liberty and the pursuit of happiness, after all. Actually getting it is up to you. But what if we thought differently? Well-being — happiness in some sense… Health is a key measure of well-being. Adequate food and housing support it. …Which outcomes do we really care about? …Work isn’t all that matters. Improving well-being is a more than respectable goal.

And she even cites the failed program from Finland to justify her position.

Finland recently completed a landmark basic income project… One of the main goals of the Finnish project was to test whether a basic income would promote employment. …the program wasn’t much of a success: During the first 12 months, at least, basic income recipients fared no better or worse at finding employment than a control group. But it made a radical difference in other ways. “The basic income recipients of the test group reported better well being in every way,” chief researcher Olli Kangas told Reuters.

For all intents and purposes, Ms. Emba is lowering the bar for success. Basic income no longer should be supported because it will encourage more work (as some claim). Instead, we should support it because non-working people will be happy to get more handouts.

Let’s think about what that means. I wrote about socialism a week ago and I shared a very persuasive cartoon that shows why the theory has an inherent practical flaw.

While I’m tempted to recycle that cartoon again, this Wizard-of-Id parody makes the same point.
The bottom line is rather grim. A society that taxes productivity and subsidizes idleness over time will get less of the former and more of the latter.

P.S. While recipients express positive thoughts when they get more handouts, Arthur Brooks has explained that depending on others is not a route to a genuinely happy and fulfilled life.

Joe Biden, Basic Income, and Societal Capital

September 19, 2017 by Dan Mitchell @ International Liberty

 

Most economic policy debates are predictable. Folks on the left urge higher taxes and bigger government while folks on the right advocate lower taxes and smaller government (thanks to “public choice” incentives, many supposedly pro-market politicians don’t follow through on those principles once they’re in office, but that’s a separate issue).

The normal dividing line between right and left disappears, however, when looking at whether the welfare state should be replaced by a “universal basic income” that would provide money to every legal resident of a nation.

There are some compelling arguments in favor of such an idea. Some leftists like the notion of income security for everybody. Some on the right like the fact that there would be no need for massive bureaucracies to oversee the dozens of income redistribution programs that currently exist. And since everyone automatically would get a check, regardless of income, lower-income people seeking a better life no longer would face very high implicit tax rates as they replaced handouts with income.

But there are plenty of libertarians and small-government conservatives who are skeptical. I’m in this group because of my concern that the net result would be bigger government and I don’t trust that the rest of the welfare state would be abolished. Moreover, I worry that universal handouts would erode the work ethic and exacerbate the dependency problem.

And I have an ally of the other side of the ideological spectrum.

Former Vice President Joe Biden…will push back against “Universal Basic Income,”… UBI is a check to every American adult, but Biden thinks that it’s the job that is important, not just the income. In a blog post…timed to the launch of the Joe Biden Institute at the University of Delaware, Biden will quote his father telling him how a job is “about your dignity. It’s about your self-respect. It’s about your place in your community.”

I often don’t agree with Biden, but he’s right on this issue.


Having a job, earning a paycheck, and being self-sufficient are valuable forms of societal or cultural capital.

By contrast, a nation that trades the work ethic for universal handouts is taking a very risky gamble.
Let’s look at what’s been written on this topic.

In an article for the Week, Damon Linker explores the importance of work and the downside of dependency.

…a UBI would not address (and would actually intensify) the worst consequences of joblessness, which are not economic but rather psychological or spiritual. …a person who falls out of the workforce permanently will be prone to depression and other forms of psychological and spiritual degradation. When we say that an employee “earns a living,” it’s not merely a synonym for “receives a regular lump sum of money.” The element of deserving (“earns”) is crucial. …a job can be and often is a significant (even the primary) source of a person’s sense of self-worth. …A job gives a person purpose, a reason to get up in the morning, to engage with the world and interact with fellow citizens in a common endeavor, however modest. And at the end of the week or the month, there’s the satisfaction of having earned, through one’s own efforts, the income that will enable oneself and one’s family to continue to survive and hopefully even thrive.

Dan Nidess, in a column for the Wall Street Journal, opines about the downsides of universal handouts.

At the heart of a functioning democratic society is a social contract built on the independence and equality of individuals. Casually accepting the mass unemployment of a large part of the country and viewing those people as burdens would undermine this social contract, as millions of Americans become dependent on the government and the taxpaying elite. It would also create a structural division of society that would destroy any pretense of equality. …UBI would also weaken American democracy. How long before the well-educated, technocratic elites come to believe the unemployed underclass should no longer have the right to vote? Will the “useless class” react with gratitude for the handout and admiration for the increasingly divergent culture and values of the “productive class”? If Donald Trump’s election, and the elites’ reactions, are any indication, the opposite is likelier. …In the same Harvard commencement speech in which Mr. Zuckerberg called for a basic income, he also spent significant time talking about the need for purpose. But purpose can’t be manufactured, nor can it be given out alongside a government subsidy. It comes from having deep-seated responsibility—to yourself, your family and society as a whole.

An article in the American Interest echoes this point.

…work, for most people, isn’t just a means of making money—it is a source of dignity and meaning and a central part of the social compact. Simply opting for accelerated creative destruction while deliberately warehousing the part of the population that cannot participate might work as a theoretical exercise, but it does not mesh with the wants and desires and aspirations of human beings. Communities subsisting on UBIs will not be happy or healthy; the spectacle of free public redistribution without any work requirement will breed resentment and distrust.

Writing for National Review, Oren Cass discusses some negative implications of a basic income.

…even if it could work, it should be rejected on principle. A UBI would redefine the relationship between individuals, families, communities, and the state by giving government the role of provider. It would make work optional and render self-reliance moot. An underclass dependent on government handouts would no longer be one of society’s greatest challenges but instead would be recast as one of its proudest achievements. Universal basic income is a logical successor to the worst public policies and social movements of the past 50 years. These have taken hold not just through massive government spending but through fundamental cultural changes that have absolved people of responsibility for themselves and one another, supported destructive conduct while discouraging work, and thereby eroded the foundational institutions of family and community that give shape to society. …Those who work to provide for themselves and their families know they are playing a critical and worthwhile role, which imbues the work with meaning no matter how unfulfilling the particular task may be. As the term “breadwinner” suggests, the abstractions of a market economy do not obscure the way essentials are earned. A UBI would undermine all this: Work by definition would become optional, and consumption would become an entitlement disconnected from production. Stripped of its essential role as the way to earn a living, work would instead be an activity one engaged in by choice, for enjoyment, or to afford nicer things. …Work gives not only meaning but also structure and stability to life. It provides both socialization and a source of social capital. It helps establish for the next generation virtues such as responsibility, perseverance, and industriousness. …there is simply no substitute for stepping onto the first rung. A UBI might provide the same income as such a job, but it can offer none of the experience, skills, or socialization.

Tyler Cowen expresses reservations in his Bloomberg column.

I used to think that it might be a good idea for the federal government to guarantee everyone a universal basic income, to combat income inequality, slow wage growth, advancing automation and fragmented welfare programs. Now I’m more skeptical. …I see merit in tying welfare to work as a symbolic commitment to certain American ideals. It’s as if we are putting up a big sign saying, “America is about coming here to work and get ahead!” Over time, that changes the mix of immigrants the U.S. attracts and shapes the culture for the better. I wonder whether this cultural and symbolic commitment to work might do greater humanitarian good than a transfer policy that is on the surface more generous. …It’s fair to ask whether a universal income guarantee would be affordable, but my doubts run deeper than that. If two able-bodied people live next door to each other, and one works and the other chooses to live off universal basic income checks, albeit at a lower standard of living, I wonder if this disparity can last. One neighbor feels like she is paying for the other, and indeed she is.

In a piece for the City Journal, Aaron Renn also comments on the impact of a basic income on national character. He starts by observing that guaranteed incomes haven’t produced good outcomes for Indian tribes.

…consider the poor results from annual per-capita payments of casino revenues to American Indian tribes (not discussed in the book). Some tribes enjoy a very high “basic income”—sometimes as high as $100,000 per year— in the form of these payments. But as the Economist reports, “as payment grows more Native Americans have stopped working and fallen into a drug and alcohol abuse lifestyle that has carried them back into poverty.”

And he fears the results would be equally bad for the overall population.

Another major problem with the basic-income thesis is that its intrinsic vision of society is morally problematic, even perverse: individuals are entitled to a share of social prosperity but have no obligation to contribute anything to it. In the authors’ vision, it is perfectly acceptable for able-bodied young men to collect a perpetual income while living in mom’s basement or a small apartment and doing nothing but play video games and watch Internet porn.

Jared Dillian also looks at the issue of idleness in a column for Bloomberg.

I do not like the idea of a universal basic income. Its advocates fundamentally misunderstand human nature. What they do not realize about human beings is that for the vast majority of them, a subsistence level of income is enough — and those advocates are blind to the corrosive effects that widespread idleness would have on society. If you give people money for doing nothing, they will probably do nothing. …A huge controlled experiment on basic income has already been run — in Saudi Arabia, where most of the population enjoys the dividends of the country’s oil wealth. Saudi Arabia has found that idleness leads to more political extremism, not less. We have a smaller version of that controlled experiment here in the U.S. — for example, the able-bodied workers who have obtained Social Security Disability Insurance payments and are willing to stay at home for a piddling amount of money. …the overarching principle is that people need work that is worthwhile, for practical and psychological reasons. If we hand out cash to anyone who can fog a mirror, I figure we are about two generations away from revolution.

By the way, it’s not just American Indians and Saudi Arabians that are getting bad results with universal handouts.

Finland has been conducting an experiment and the early results don’t look promising.  The bottom line is that our current welfare system is a dysfunctional mess. It’s bad for taxpayers and recipients.

Replacing it with a basic income probably would make the system simpler, but at a potentially very high cost in terms of cultural capital.

That’s why I view federalism as a much better approach. Get Washington out of the redistribution racket and allow states to compete and innovate as they find ways to help the less fortunate without trapping them in dependency.