Skip to main content

Cities Use Covid Funds to Run Guaranteed-Income Experiments

The Wall Street Journal

December 1, 2023

Alexandria, Va.

Dozens of cities around the country have launched welfare experiments called guaranteed-income pilots to send monthly checks of up to $1,000 to needy people. The goal is to demonstrate that giving the poor direct cash aid can improve their economic stability, their children’s educational attainment, and even their mental health. Most of the pilots are “no strings attached,” meaning that the cash aid doesn’t come with any restrictions on how it can be spent or any work requirement.

At least eight cities—including Chicago, Newark, N.J., San Diego, and St. Paul, Minn.—are using leftover Covid relief money to finance their experiments. Taxpayers should understand they are funding a failed idea that could push low-income people away from work and marriage.

Last year, Alexandria, Va., began to use federal pandemic money to send $500 a month to 170 people for 24 months, with no requirement that they work. Less than a year in, program managers say they are happy with the results. Julie Mullen, the city’s economic mobility program officer, told local news site ALXnow that she’s excited to see the checks “lightening people’s mental load . . . which is what we wanted.”

These guaranteed-income pilots mimic the Biden administration’s expanded child tax credit. Between July and December 2021, the federal government sent between $250 and $300 a month per child to parents. While the administration wanted to extend this handout indefinitely, at a cost of $1.6 trillion over a decade, Congress let it expire amid legitimate concerns over excess federal spending. Lawmakers also worried that the child tax credit would severely inhibit workforce participation. University of Chicago researchers estimate that if the expanded child tax credit became permanent, 1.5 million people—nearly 3% of all working parents—would stop working.

These concerns notwithstanding, Mayors for a Guaranteed Income, the group that coordinates the pilot projects, has explained that “there is a very real chance to revive” the expanded child tax credit. Yet history is already repeating itself. ALXnow reports that at least one participant in the Alexandria program has cut back his work hours, swapping his paycheck for a government handout. Many likely will make the same choice over time.

The pilot programs typically run for a year or two, which isn’t long enough to demonstrate the lasting harm that guaranteed income does. The programs seem designed to make cash handouts appear harmless. They conflate paid employment with caretaking and don’t report work hours. The idea is to make congressional opposition to this policy seem misplaced at best and heartless at worst.

Yet Congress was right to kill the expanded child tax credit, and it would be just as right to keep guaranteed income without work off the table in any end-of-year tax package. The guaranteed-income experiment has been tried many times before. It has always led to less work among low-income Americans, weaker families, and more poverty.

The U.S. tested guaranteed income in four large-scale random assignment pilots in the 1970s. Overall, $1,000 in added benefits was offset by a $660 earnings reduction. The reduced earnings persisted long after the programs ended. Each $1 increase in benefits led to a roughly $5 drop in recipients’ lifetime earnings.

The same thing happened with the Aid to Families with Dependent Children program, established by the Social Security Act of 1935. It sent money to low-income single mothers without requiring them to work. By 1996, when welfare reform brought the program to an end, barely 1 in 10 recipient families included a worker. Most were stuck in long-term poverty.

AFDC even appears to have made it less likely that low-income children would be raised in two-parent families. Guaranteed money from the government made it more financially beneficial to cohabitate than to marry. Decades of research shows that married households are better for children on a wide variety of outcomes. In 1970, 85% of children had two married parents. Twenty-five years later, that had fallen to 68%. The nonmarried childbirth rate among welfare recipients stabilized only after Congress passed the 1996 reform, directly connecting welfare to work. Employment in these families rebounded and child poverty dropped for the first time in decades.

The new push for guaranteed income without work will bring back this trend and likely worsen it, since the pilot programs are funding more than mothers and children. Taxpayers deserve to know that the money intended to pay for the Covid crisis is funding a new welfare expansion, one that could cost them dearly while hurting the people it’s supposed to help. If Congress repeats history, Alexandria isn’t the only city that will see the guaranteed harm that comes with unconditional guaranteed income.

Ms. Ford is an adjunct fellow at the American Enterprise Institute’s Center for Opportunity and Social Mobility. She served on the White House Domestic Policy Council, 2018-20.