Universal basic income won't eliminate or prevent poverty

A February 17, 2021 article by Greg Ip in the Wall Street Journal, "Universal Basic Income Could Be Coming for Kids" (see file below) described one Dem attempt to reduce poverty in America: "Tax-credit proposals would send almost every parent $250 or more a month."

Universal Basic Income Could Be Coming f.

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Here are the opening three paragraphs of the article:

Entrepreneurs, intellectuals and presidential candidates have in recent years touted “universal basic income,” a cash stipend to everyone with no strings attached, as the answer to poverty, automation and the drudgery of work. It has never gotten off the ground in the U.S.

Instead, something similar in spirit but cheaper and more practical may be in sight. Both President Biden and Sen. Mitt Romney (R., Utah) have proposed significantly expanding the child tax credit and dropping many of its restrictions, in effect turning it into a near-universal basic income for children.

The main aim of their proposals is to reduce child poverty, which is higher in the U.S. than in most advanced countries. Both would slash the number of children in poverty by around 3 million, or a third, according to the Niskanen Center, a center-right think tank.

Before applying solutions, a good approach would be to better understand both the causes of poverty and the cost of 'reducing poverty.' On this latter point -- the cost -- if reducing poverty simply meant putting more money in a household lacking money, then the solution would be very easy and very expensive. Worse, the solution might be due to the fact that we politicians define poverty in this fashion, i.e., as a lack of money in the household, rather than defining poverty as something other than cash in hand.

Ip included a graphic highlighting "children in poverty" around the world (see image) with a politically correct but meaningless definition of poverty: "living in a household below 50% median income." This is a relative measure of poverty -- inequity or inequality -- that speaks to household income distribution but not to poverty. Progressive politicians ignore the 'old,' absolute definition of poverty because under that absolute standard, poverty has been significantly reduced worldwide and, in America, households rely on so many free or taxpayer-subsidized benefits that income is not an effective measure of poverty. Worse still, the nature of households in America today has changed dramatically, especially from two-parent to single-parent households, relegating the most significant aspects of household poverty to children living in single-parent households. So using number of children and households as unrelated measures of relative poverty provides a vague picture of poverty at best.

Sending people money does not eliminate poverty, primarily because the real cause of poverty is rarely a lack of money. Rather, it is almost always the lack of something else, like two parents, an education, a job. Poor children are poor because they live in poor households. The only sustainable way to eliminate poverty is to prevent it, not to pay low- or no-income people to, in effect, create more people in poverty.UBI and child tax credits are policies of throwing money at a symptom, while not solving a problem. And as long as there is a political force willing to give people free stuff -- unemployment compensation, food stamps, education, healthcare, cell phones -- there is no incentive for those receiving a basic income to make good use of the money. We already have the situation where low-income persons are more likely than the higher income people to spend their money on lottery tickets.Throw in 'open borders' and we have condemned another generation of low-income households to poverty.

Just as taxing work creates no incentive to increase it, subsidizing poverty-causing behavior does increase it. Vouchers – unlike guaranteed incomes or tax credits – come with a specific responsibility attached. A healthcare voucher would be used to secure medical treatment or health insurance, An educational voucher would be used to pay for an education, fees, tuition and other costs involved with teaching and learning. Sending people cash, and at the same time the government covers many of the basic necessities of life, e.g., education, healthcare, food (stamps), is a recipe for disaster, not prosperity, and not poverty eradication.

Supply clean needles to junkies works only if that supply of clean needles is unlimited. Otherwise, besides subsidizing bad behavior, the program would merely postpone life-threatening behavior, when the free needles run out or the drug user fails to secure one.

Distributing free condoms might theoretically reduce pregnancies, but in practice it can increase risky behavior, fail to prevent some sexually transmitted diseases, create a false sense of immunity from pregnancy, and increase the demand for abortion, and all of that theory assumes that the male uses the condom consistently and effectively.

Creating value – wealth creation – is the key to eradicating poverty. The massive decline in absolute poverty world-wide over the past fifty years was nit due to foreign aid or charity. Rather, it stemmed from people working, employing their labor, producing something of value and finding customers or employers to compensate them for their work, with a wage or a purchase of the product produced by that labor. Sometimes, 'work' means putting one's already earned money -- savings, investments, etc. -- to 'work,' generating income from financial capital, not just from labor.

The solution is an old, demonstrably proven one: Work and family. This means productive jobs -- ones where the worker creates more value than the cost of her labor -- and stable, sustainable, 'productive' families, where the income earned exceeds household costs.