Free money plan is thin gruel for cities’ starving artists

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While these experiments might have short-term, anecdotal benefits to citizens in need, data suggest UBI is a poor substitute for free-market economic solutions.

Starve no more, Sacramento artists. The City Council is apparently moving forward with a plan to offer guaranteed income to creative types in the city.

Guaranteed income, often called Universal Basic Income, gives free money to those deemed in need of it by the government. Focusing this latest effort on artists is a somewhat new spin on an old idea.  Supporters say UBI programs are “positive,” citing anecdotal evidence, but critics call them “disastrous,” pointing to some failed past experiments.

Under the Sacramento plan, participating artists would be given a choice between $10,000 grants funded by the National Endowment for the Arts or an unconditional gift of $10,800 spread out over $450 monthly payments for two years funded by the American Rescue Plan Act. That’s the third federal COVID relief package, which critics said was unnecessary and would – and did – drive inflation.

“Unconditional” means recipients are free to spend the money however they see fit, with no requirement to complete an arts project during the two-year period.

“Basic income programs have produced positive outcomes for individuals and families, and we are eager to try this approach in Sacramento,” Mayor Darrell Steinberg said in a statement. “Many artists struggle to get by financially, and a small infusion of funds could give them the ability to focus on their work without fear.”

This would be on top of the city’s other UBI experiment, which is geared towards low-income residents – those making less than 150 percent of the California Poverty Measure. That program is offered as part of a partnership with the United Way. It also is funded by the American Rescue Plan Act and recently was expanded to 180 recipients.

“We know that other basic income programs have been very successful in improving the financial stability of households currently living on economic margins,” Steinberg added. “We are putting dollars directly into the hands of our residents and empowering them to decide how best to use it.”

If all this sounds repetitive, that’s because it is. These experiments have been conducted before and the results are generally the same, which is to say they often don’t get past the trial phase. There are some anecdotal benefits, like people temporarily being able to buy basic needs like diapers and feminine hygiene products, as one study reported.

As a broader policy, however, it faces many challenges – including long-term funding. But Orange County economist David Bahnsen says it’s bad policy across the board.

First, UBI is based on a false thesis, he says, “that there is money the government has to offer to citizens.” UBI sucks money out of the private sector, where it is used most efficiently, and allocated by the government, where it is used least efficiently. Second, it’s “financially irresponsible.” Third, it undermines the dignity of work.

“Human beings were meant to be productive, proactive, innovative and responsible,” Bahnsen added. “The transfer of money passively to someone whether they are in need or not and whether they are working or not is dehumanizing. Mankind is not a ward of the state and mankind is made with individuality, agency and dignity.”

But California progressives remain undeterred. Besides Sacramento, the state has a pilot program offering a guaranteed income for individuals in foster care who are either aging out or pregnant. Oakland is experimenting with giving 90 former foster care youths who are 21 years old $1,000 per month. And not to be outdone, the city of Los Angeles is giving approximately 3,200 families in poverty $1,000 per month for a year.

All of this comes on the heels of Stockton’s highly publicized UBI scheme, which received lots of positive attention from the media and academia. Stockton gave 125 residents $500 per month for two years, after which the city reported an uptick in employment and a decrease in depression among recipients. But the program was funded by private donors, which means it would have a tough time expanding and extending.

According to The Conversation, one of the main reasons UBI usually fails to graduate from pilot program into something larger is because “few, if any, schemes were launched with a clear understanding of how they would be fully implemented if deemed successful.”

Even if governments could find long-term funding, there are other concerns. Between 1968 and 1980, the United States conducted trials on a version of UBI called the negative income tax, which initially had support spanning the ideological spectrum.

Even free-market economist Milton Friedman championed the idea. Conservatives argued that giving people direct payments was better than funding a complex of bureaucracies. Of course, today’s UBI proponents have no intention of replacing the current government welfare apparatus.

The results were not good, according to Heritage Foundation’s Vijay Menon, who wrote that the negative income tax substantially reduced “desired hours of work” and led to prolonged bouts of unemployment among those who lost their job during the trial period.

This conflicts with Stockton’s findings, but that could be due to the temporary nature of Stockton’s trial – people are likely to be more prudent when they know benefits will end soon. Over a longer period, UBI largely discourages employment.

Also conflicting with Stockton’s results was a recent study from researchers at Harvard and Exeter universities. They found, through a randomized experiment of 5,000 U.S. residents, that there was no measurable increase in financial, psychological and physical health outcomes from UBI. Instead, they found that, “the notion that receiving some but not enough money made participants’ needs – and the gap between their resources and needs – more salient, which in turn generated feelings of distress.”

While these experiments might have short-term, anecdotal benefits to citizens in need, data suggest UBI is a poor substitute for free-market economic solutions. And there’s no evidence that providing aid for starving artists will result in a thriving arts community.

Matt Fleming is an opinion columnist for The Orange County Register.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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