Free Money Debate Heats Up

How UBI programs spark controversy amid hopes for poverty reduction

Ric Edelman: It's Thursday, April 11th. On today's show, state and local governments all across the country are giving away free money with no strings attached. As you can imagine, these programs are largely proposed by Democrats, and Republicans are trying to block these programs. Houston, for example, sits in Harris County, Texas. 

The county has the third biggest population in the country. And in Harris County. 15% of that population lives in poverty. We're talking three quarters of a million people, and 20% of them are children. Nearly a quarter of a million of these folks qualify for food stamps. And starting this spring, about 80,000 of these people are about to start receiving checks from the county government. $500 a month with no strings attached. Folks who get this money can do anything they want with it.  

Harris County is not alone. There are similar programs everywhere from Stockton, California to Birmingham, Alabama, to Louisville, Kentucky, to Nashville, Tennessee. The federal government got in on the act too. During COVID, Congress sent trillions of dollars to US households, including direct payments of nearly a trillion dollars. President Donald Trump was so supportive of the idea that he made sure his name appeared on the checks that got mailed to everybody. And today, Donald Trump is proposing that the government send cash payments to women who get pregnant as an enticement to improve the birth rate. 

South Korea and China have been doing that for a few years already. These payments are collectively known as UBI, Universal Basic Income. The program's details vary from state to state, even county to county, but they all work pretty much the same. If you're low income, you can apply for the program, and if you're selected, you get money every month for up to a couple of years, usually a couple of thousand dollars, with no restrictions on how you spend it. 

All told, we're talking about you getting maybe $25,000 a year completely tax free. Republicans tend to hate these programs. They view these payments as a government giveaway, paid for by hard working Americans who are paying higher taxes than ever, a redistribution of wealth that libertarians and conservatives don't like. 

It's hard to deny those allegations. But one claim is definitely false. Many on the right say that these people who are getting this money are poor because they have a lousy work ethic. They're lazy, and if you give them free money, all they'll do is squander it on booze and drugs and cigarettes. Those claims are simply not true. 

Stanford University did a study of dozens of these programs all across the country, and found that the people who got the money mostly spent it on food, rent, and childcare. Only 3% of the money was used for leisure and entertainment broadly. Republicans in Harris County are not persuaded, they're suing, saying that the guaranteed income programs are unconstitutional under both Texas and federal law. 

So we're going to see this debate being exercised in greater detail over the next several years, because there are so many people who truly love these programs, as well as people who truly hate them. On the positive side, the proponents argue that not only is this helping to reduce homelessness, people are using the money to pay rent that they otherwise wouldn't have been able to pay, they're also discovering that it is providing food security. Children aren't having to go to bed hungry at night. It's allowing mom or dad to rent a car so that they can get to work where they can have a job and generate a paycheck. It's allowing people to go back to school who otherwise couldn't do it because they're now for the first time able to pay for childcare. 

So this is being touted as a great way to lift people out of poverty who are only in poverty because of their economic disadvantages. And by extension, the proponents argue it's reducing the crime rate. It's a whole lot better to give somebody $500 a month rather than wait until they become a criminal where you spend $60,000 a year on incarceration. 

So there's a whole big debate going on here about whether or not this is encouraging people to be lazy, living off the government dole versus trying to give people who are down on their luck a chance to improve their lives. It's a complicated issue and it's going to be played out politically based on who we elect at the state offices, as well as the federal level. Your input, along with that of all the other voters, is ultimately going to determine if these universal basic income programs survive the day.  

On tomorrow's show, the Bitcoin halving is expected next week. I'll tell you all about it. Plus, a conversation with a millennial. 

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