Handouts Don’t Help Kids

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 concept, 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.