No-strings-attached cash welfare on the rise

Eighty-five families in Austin, Texas, will receive $1,000 dollars a month for one year as part of the state’s first taxpayer-funded guaranteed income program. The $1.1 million pilot plan will supplement the incomes of families at risk of losing their homes, although city officials are still working out the details of which families will qualify. Ideas have included families that have missed several utility payments or have an eviction filing on their record—a mark that makes it difficult to get approved for a lease in Austin’s tight housing market.

At least 28 U.S. cities give low-income residents no-strings-attached cash on a regular basis. In January, single mothers in Birmingham, Ala. applied to receive $375 a month for one year. The city of Chicago rolled out an initiative to give monthly payments of $500 to 5,000 households for one year last October. Formerly incarcerated residents of Gainesville, Fla., received $1,000 in January followed by $600 per month for the rest of the year. For the past three years, Jackson, Miss., has given $1,000 a month to low-income, black mothers. Cambridge, Mass., New York, N.Y., Louisville, Ky., and Los Angeles and Oakland, Calif., all have their own programs, and the list goes on.

Proponents claim a guaranteed income gives struggling families the boost they need to get ahead and will save taxpayers money in the long run. But others warn of long-term consequences from unconditional cash and argue it only masks deeper problems.

In 2019, Democratic presidential candidate Andrew Yang raised awareness of the guaranteed income concept while on the campaign trail promoting the “Freedom Dividend,” a universal basic income proposal of $1,000 per month for every American adult. “It would … give Americans more reason to work because you would actually be able to get ahead and have a foundation,” Yang claimed in an interview with NPR.

Unlike Yang’s proposed universal basic income, the city programs benefit select groups of people based on need. The payments are not indefinite since most of the programs at this point are only approved for one or two years.

“We contribute millions of dollars towards reducing homelessness and towards our support services,” said Austin City Council member Vanessa Fuentes. “So we’re all in this together. It’s important that when we invest in these programs, that we not look at them as a form of a handout; this is truly an investment in giving our community a hand up, and by providing the supplemental income.” The day after the city voted to approve the initiative, Fuentes welcomed mothers into her office to learn more about guaranteed income.

The American welfare system consists of around 80 programs that require recipients to follow complex guidelines and remain below a certain level of income to receive benefits—a system that can punish people for earning more. Advocates for guaranteed income argue that giving people a check without strings attached will fix the incentive problem, simplify welfare, and give participants the dignity of making decisions about how their money is spent.

Cato Institute senior fellow Michael Tanner said that, in theory, a universal basic income program would indeed streamline the welfare system. But he called the concept “simply unaffordable”: If everyone in America received $1,000 a month ($12,000 a year), it would cost $3.96 trillion, most of the federal government’s annual budget. In practice, guaranteed income programs target low-income people and don’t replace any existing welfare programs.

Because existing cash income programs are typically approved for one year at a time, it is difficult to measure long-term results. Many cities are funding these programs using COVID-19 federal relief dollars—money that won’t last forever.

“Most of these are not carefully designed,” Tanner said. “Intentions are not enough.” To get meaningful data on long-term outcomes for program recipients, cities would need to add a control group that receives nothing, track the two groups over a five- to 10-year period, and compare results on multiple levels. Poverty is “multidimensional,” Tanner argued, and simply adding $1,000 to an individual’s bank account every month won’t solve the problem.

According to memo from Brion Oaks, Austin’s chief equity officer, the Urban Institute—a nonprofit think tank based in Washington, D.C.—will evaluate the city’s program by looking at financial stability, health and wellness, employment changes, use of funds, the ability to live more fully (more time to cook meals for children and pursue hobbies), and extended effects such as increase in social capital.

Matt Weidinger, a poverty studies expert at the American Enterprise Institute, argues policymakers should reform welfare incentives and rules, not remove them. He recommends making welfare benefits contingent on addressing the obstacles hindering an individual from self-sufficiency. “These [universal basic income] proposals do none of that,” he said.

The Medford Gospel Mission, a transitional living program for the homeless in Oregon, has firsthand experience with addressing root causes of poverty. Executive Director Jason Bull questions the “money will save the day” mentality and instead emphasizes “restoring relationships.” The mission focuses on breaking the welfare cycle through workforce development.

“God has destined us for hard work,” he said. Monthly checks without employment requirements will not “lead to thriving in any which way, shape, or form.”

Back in Austin, City Council member Alison Alter voted against the guaranteed income measure. She explained to The Texas Tribune, “I believe that we do need to invest in people and their basic needs, but I’m not sure that this is the right way today.”