I’m a resident of the beautiful, mile-high city of Denver, Colorado. The latest policy decision Denver has made that inspires some hope—but also some skepticism—is a “basic income” program aimed at reducing homelessness and poverty.
For now, Denver’s program is relatively small. Only 140 individuals will qualify. They will receive $1,000 per month for 12 months or $6,500 upfront followed by $500 per month for 11 months.
Basic income programs have multiplied across the country, mostly in big cities as pilot programs. Ninety mayors are involved in a group effort to support basic income programs; at least 28 U.S. cities or states have already launched a program. Most are targeted to people in a specific population, such as homeless people, former foster children, pregnant moms, etc.
Many of these programs started with private funding. A few years ago, former Twitter CEO Jack Dorsey made headlines for committing $15 million to basic income programs. And in Denver, the Denver Basic Income Project started with a $5.5 million budget comprised completely of private donations.
But now the City of Denver is pledging $2 million in taxpayer funds to the effort. This raises the question: Is this a good use of taxpayer funds? Are basic incomes effective at shared goals in the community, like reducing poverty? Are there other considerations policymakers should make before cutting checks to beneficiaries in basic income programs?
Despite their current popularity with Democrat-led cities, basic income programs are not a totally partisan idea. In fact, well-known free-market economist Milton Friedman advanced the idea of a “negative income tax,” which is an idea very similar to “universal basic income.”
Some conservatives today also support such policies, but in general, for people who value limited government, one goal of basic income programs is to reform or replace existing welfare systems. The goal would be to move to a system of cash benefits rather than a patchwork of programs like Medicaid, food stamps, and Section 8, which provide specific benefits like health care, food, and housing to low-income people.
But, as Ronald Reagan famously said, the closest thing to eternity on earth is a government program. So, it’s not likely that universal basic income programs will result in any change to well-entrenched pre-existing safety net programs. Rather, they will layer on top of them.
Even so, a couple of small basic income pilot programs in some major cities have shown promising results when it comes to the goals of reducing poverty, substance abuse, and homelessness, and getting people into steady employment. Given how homelessness has been increasing—in Denver, it’s increased by 12.8% in the last year alone, 31.8% since 2020—policymakers are desperate for solutions to get people off the street and into stable housing.
Of course, the potential benefits of basic income programs have to be weighed against other potential effects. In other places, like Ontario and Finland, experiments with universal basic income have failed, mostly because when these programs are large, they become very costly and unsustainable. And lawmakers in Ontario were concerned that the program became an impediment, rather than a pathway, to financial independence.
Furthermore, in the U.S., many of these programs aren’t truly “universal.” This means they necessarily pick winners and losers. There will always be people who don’t qualify, who are just over the eligibility threshold, and I think the criticism that pouring free money into the economy will further fuel inflation is fair and timely, given how inflation is already breaking the financial backs of so many Americans. Concerningly, inflation in home prices is actually a driver of homelessness.
And one can hope that the time limit for the Denver program stays in place. Safety nets should always be targeted and temporary, with the hope of restoring people to full self-sufficiency. We should always strive to create safety-net programs that don’t create disincentives to work. Work is inherently good; people who have gainful employment reap myriad benefits for their mental health, long-term financial security, sense of worth, and connectedness to others.
So—not to overdo it on the Reagan quotes—but the best social program is a job. If holding a job is too difficult because of extremely difficult circumstances, like homelessness, then perhaps a temporary basic income program can help people get to a more stable place.
When privately funded and run, basic income programs are effectively functioning as charities, and of course people are free to give to charitable causes they believe in. Private charities have a good track record at efficiently delivering donor dollars to people in need.
But as government programs, basic income programs face more hurdles and have more potential for unintended consequences, and because of this, policymakers in my city of Denver and elsewhere should proceed with caution.