The Democrats are all about free everything. Sen. Bernie Sanders pitches free college tuition. Rep. Alexandria Ocasio-Cortez hypes free health care. But Sens. Cory Booker and Kamala Harris go one step further: They tout free money.
The plan, largely known as “universal basic income” (UBI) would redistribute money from working Americans to low-income citizens. Harris, who, like Booker, is looking to run for president in 2020, unveiled a plan last month that would give families making less than $100,000 a year up to $500 a month, or $6,000 a year, in tax credits. Individuals making less than $50,000 would get up to $250 a month in tax credits from the government.
“Americans are working harder than ever but stagnant wages mean they can’t keep up with cost of living increases,” Harris said in a statement about her legislation, dubbed the Livable Income for Families Today (LIFT) Act. “We should put money back into the pockets of American families to address rising costs of childcare, housing, tuition, and other expenses,” Harris said.
But the Heritage Foundation’s Vijay Menon writes that UBI has a detrimental effect on work ethics.
“This has been tried before—and the results weren’t pretty,” Menon writes, noting that from 1968 to 1980, there were four “random, controlled trials across six states designed to test the negative income tax. Similar to the universal basic income, a negative income tax guarantees a minimum income, which phases out as earnings increase.”
…[T]he experiment’s planners hoped that providing a minimum income would encourage work. But their worst fears were realized when the results showed the opposite.
Evaluations of the experiment found that the negative income tax reduced “desired hours of work by 9 percent for husbands, by 20 percent for wives, and by 25 percent for single female heads of families.”
For single males who were not heads of households throughout the experiment, the reduction in hours worked per week was a staggering 43 percent.
If recipients lost their jobs during the experiment, they experienced significantly longer spells of unemployment compared with non-recipients—more than two months longer for husbands, almost a year longer for wives, and longer still for single mothers.
For every $1,000 in additional benefits, there was an average reduction of $660 in earned income, meaning that $3,000 in government benefits were required to increase net income by $1,000.
These studies also made clear that it was the receipt of unconditional aid, not the phase-out of benefits, which led to the reduced work effort.
In conclusion, Menon writes, “Policy should be designed to reward work, rather than replace it. Therefore, a better alternative to a universal basic income would be to expand the earned income tax credit.”
“Evidence from the negative income tax experiment strongly suggests that a comprehensive universal basic income program would significantly reduce work and increase dependency,” Menon writes.
By the way, those “free” programs carry staggering price tags. Sanders’ plan to give college tuition to all students would cost $75 billion in taxpayer cash. Ocasio-Cortez’s “free” health care plan would cost $32.6 trillion over 10 years, according to a new study.
Booker’s proposal unveiled last month, which would create “opportunity accounts” for the children of low-income parents, would cost American taxpayers at least $60 billion annually,