Long-term effects of short-term free cash (guaranteed minimum income experiments)

Americans have short memories. Implicit in nearly every proposal regarding a guaranteed minimum income that I’ve seen is that this has never been tried in the United States. “The Long-Term Effects of Cash Assistance” (Price and Song 2016), a paper by a Stanford graduate student and a Social Security Administration economist, provides a forgotten history lesson.

Are Americans able to sit on the sofa and watch TV faster than the government can print money? The answer turns out to be “yes.” The economists found that “treatment caused adults to earn an average of $1,800 less per year after the experiment ended. Treat adults were also 6.3 percentage points more likely to apply for disability benefits, but were not significant more likely to receive them, or to have died.”

The guaranteed income plan started in 1970 and lasted only 3-5 years, depending on the group, but the effect of reduced income from work lasted for decades. Also, it turns out that if you give people the freedom that comes from a guaranteed stream of government cash, one thing that they choose is increased sexual variety: “A second important set of results were that the treatment decreased marital stability. Treatment caused black and white families to be approximately 40% more likely to split up.”

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