The high cost of ‘free’ money

Some politicians and activists are eager to give you “free” money.

They call it universal basic income (UBI) – cash for everyone, no strings attached.

Comedian Dave Chappelle thinks UBI would “save my community almost instantly.”

In my new video, UBI activist Conrad Shaw agrees, “You would effectively get rid of extreme poverty immediately.”

He says a UBI will help people “start businesses, fix their homes or invest in sustainable gardens.”

Well, “sustainable gardens” might be nice, but someone still has to make stuff. And that requires work – often difficult work.

When I was young, If I hadn’t needed to work to support myself, I wouldn’t have pushed so hard to overcome my fears, my stuttering and my reluctance to speak publicly. I wouldn’t have become successful. I might have stayed in bed most of the day.

But Shaw disagrees. “I don’t believe you,” he says. “Nobody actually wants that … people find their passions not simply because they need to make money.”

We could argue about this all day. It would be nice if someone ran a serious test of UBI – give a lot of people significant money for, say, three years. Would people still work? Improve their lives? Their families’ lives?

It turns out that Sam Altman, the guy behind ChatGPT, helped create such a test. His big study gave 1,000 low-income people $1,000 per month for three years – no strings attached. What happened?

Not the great things that were promised. After three years of getting $1,000/month, UBI recipients were actually a little deeper in debt than before.

Why? Because they worked less. Their partners did, too.

Some recipients talked about starting businesses, but few actually tried it. Most who said they did start a business waited until the third year of the study – when their free money was about to end.

I’m not surprised. Give people free money, you take away an incentive to work. Incentives matter.

Shaw argues, “We conflate the idea of work with jobs.”

It’s true, people do meaningful work outside jobs. But being paid to do a job does say you’re worth that amount to somebody.

“How much money are you worth to the kid you’re raising?” Shaw replies. “The parent who’s sick that you’re taking care of?”

A lot. “But it doesn’t address that other people have to work to pay for it.”

Shaw replies, “We pay taxes towards things that are better for our population, for the general welfare. It’s … something we do as a country.”

“But this would pretty much double it!” I point out. “We already spend almost $2 trillion on welfare programs. You want to add to that?”

Shaw says, no, UBI should “replace existing welfare programs.”

That’s an interesting idea.

“If we were to get rid of unemployment insurance, food stamps, welfare and all the other insane policies we have, and just have a moderate universal basic income,” says Harvard economist Jeffrey Miron, “I think it would be a huge improvement.”

But that will never happen. Anytime anyone tries to cut any government program, people freak out. Imagine trying to cut all welfare.

“The chances politically that will happen are probably zero,” says Miron.

Progressives want to add UBI to already existing programs.

“Adding more programs is insane!” says Miron. “It will make the entire country melt down. The people who will bear the brunt of that will be people who are poor. The rich will move to other countries … hide their assets. We will have a debt crisis like nobody’s ever seen before.”

We already have a debt crisis like nobody’s seen before!

Let’s not make it worse with a UBI.