You can probably guess why that wasn't raised by Yang - people who have said programs or think that poor people benefiting from said programs would see it as a bad trade.
Personally, without cost containment on the supplier side (ie, inflation), or pegging this benefit to inflation, it sounds like a bad idea.
Cash handouts are some of the most cost-effective things a government can do (up to a point), as dollars given to people living on a shoestring often recycle in the economy up to 5x, and result in about $1.73 returning to government via taxes for every $1 spent.
Andrew Yang's argument is that a lot of people already receive some level of help from the state (food stamps, unemployment, etc) which would be transferred to cash instead. So you need to account for those as well.
This is why all subsidies should be in the form of cash. Give poor people cash rather than obfuscate prices, which then results in hampering of market mechanisms and results in inefficient allocation of resources.
The thing about government programs that hand out cash is that the money will be circulated back into the local economy most of the time, which is a net benefit (I think it would be a net positive if the money was required to be spent locally if the beneficiary makes above a certain income). It's not like it's getting thrown down a black hole. Even if a person is making great money, that additional money is more likely to be spent on higher quality local services, aside from online purchases from places like Amazon.
Most economists probably would be surprised if it could actually work in general. Cash handouts do not cause the behavioral changes necessary for individuals to develop sustainable habits. Most poor people are not poor because they don’t have access to the market, but because they either don’t know what to do, or they don’t have the discipline to do what they know they should. Cash handouts can make this even worse as people become complacent and dependent on them, and the impetus to work out a sustainable solution dissolves. The implementation of welfare programs in the US during the 60s has a strong negative correlation with progress in lower income (and often minority) communities.
An ideal solution might involve temporary relief for catastrophic events that can help an otherwise mostly sustainable lifestyle, but avoid misaligning incentives in a way that makes the problem even worse.
In practice it would inform the market where to divert resources. If you want to give poor people help, then you should provide them cash. This preserves the purpose of transparent prices, which is to inform other suppliers in the market to enter to drive the price down.
However, this is not done as it's more difficult to corrupt and profit off of this since it is transparent how much help the poor are getting. It's easier to muddy the waters and steal from taxpayers by creating a byzantine system of tax breaks and subsidies.
The idea of replacing existing social programs with cash handouts reminds me of Bitcoin's earlier days. Proponents were thinking of what it would be like if they were poor, and not what life is like for poor people.
It is not the case that you can reasonably just give large groups of people with histories of poor financial literacy cash as a replacement for food, shelter, or other necessities. Many people will make bad choices if just given money. That's why many of these programs were built this way: to ensure people can't spend all their cash and be unable to afford baby formula or rent.
Notwithstanding the concerns about inflation, I challenge the notion that helping people feed their families when they're poor, redistributing wealth from the tippity-top to the middle and down, providing more education, and providing more healthcare to the elderly are "ridiculous". "Handout" is a dogwhistle.
Well, let me try to convince you of the futility of trying to convince other people to change their views.... oh wait... :)
Anyways, the last point, handing cash out to people, will essentially not work for the exact same reason: logistics. Who will do the handing out? The same agencies that are supposed to give grains at subsidized rates? How well is that working?
I would disagree on the relative merits of in-kind vs. cash assistance, for reasons that have mostly been explored by other replies. There is a specific problem, I see though, and it's what all of these quotes have in common:
"When poor people are explicitly given a room, 3 square meals/day, and government issue poor-people sweats"
"You've now demanded that specific goods be added to the list and we can explicitly have a debate on the merits of those goods."
"then they can consume only some of the available in-kind benefits"
"But you can also just eliminate the bad choices and directly manage their lives until they develop the ability to manage their own life."
All of these things have massive overhead at the administrative, procurement, and distribution tiers. Each of these things costs a lot of money:
1. Deciding on what to distribute
2. Subsequently arguing with recipients over the addition of items to the available benefits, and subsequently approving new items
3. Selecting and procuring the available options for each benefit item or type.
4. Distributing each item.
5. Tracking inventory of each in-kind benefit.
6. Negotiating returns of each in-kind benefit.
7. Balancing stock levels of available benefits to match the partial consumption of some recipients.
While I haven't seen a specific evaluation, I would be completely flabbergasted if this overhead was somehow a lesser cost than the potential loss of cash benefits to pleasure spending.
EDIT: To summarize, why manage this all centrally instead of relying on market dynamics that are well understood and efficient retail and distribution infrastructures that already exist?
The following is a non-value judgement. We see generally better outcomes when we just hand people cash than when we make them jump through hoops, and partake in non standard services to acquire resources. It also generates more administrative overhead than if we just hand them cash.
I don't know if this would hold for a universal social services infrastructure.
My personal analysis is that I would tend towards decentralization via cash payments, so as to enable choice, and not have the state takeover the potential economic activities enabled by such cash payments. Nobody wants to be given food from a government kitchen or government food box, but most people, I would think, would not mind getting $X per week/month/year to supplement their other income from the government.
Because it doesn’t make economic sense. If you give all people money, ostensibly to make them not poor, you’ll just cause inflation and they’ll be poor again.
I’m not opposed to basic housing and/or food instead - those are much simpler, as there is finite demand (in contrast to money), which can be planned for and satisfied.
The government is very good at giving people money. It's less good at adjudicating whether people require that money. Replacing every government assistance program with direct, unconditional cash transfers would almost certainly be cheaper than the bureaucracy that must be maintained to ensure only "deserving" people get assistance.
I would be for this but I'm afraid that once all the other programs are dismantled, food stamps, welfare etc, that the poor might end up getting less support than they did before.
I try hard not to be cynical, but I wonder if this isn't a ruse to accomplish exactly that.
I mean the US is known for being "frugal" when it comes to helping people. See the medical system for example, or the treatment that veterans get. Why the sudden surge in generosity, why the sudden desire to redistribute income?
Weren't these anathema just recently, even to some democrats?
Also the fact that it keeps coming up in the media makes me slightly suspicious.
Why is this being promoted so much right now? I bet there are PR firms out there calling newspaper reporters and bloggers, to promote coverage of this idea on behalf of who knows which group or organization. [1]
Depends on your definition of "handouts". Free cash transfers don't seem to be a successful antipoverty program but what about free college tuition? High education levels strongly correlate with above average lifetime incomes but you can't expect poor mothers to feed their children on college degrees. I guarantee you even the most ardent proponent of regressive taxation schemes has some pet govt benefit they consider not a handout but a right.
As to the second, it's an interesting idea. Everyone complains about the NYC MTA but for $2.75 you can traverse the entire city -- even with delays it's a steal. People are definitely disconnected from the price vs reward of public transit.
There is unfortunately a large political danger with giving cash. If you give cash, then it becomes possible for pundits to agitate for more assistance on the theory that "you can't live on $X". When poor people are explicitly given a room, 3 square meals/day, and government issue poor-people sweats, it's pretty hard to argue that they are somehow lacking anything necessary to live.
Based on this article, there is also no reason to believe that cash assistance rather than in-kind assistance is necessary. The proposed mechanism is "Parents are happier because they have more money, leading to less fighting within the family. This lowers stress on kids..." But in-kind assistance would also lower stress since parents wouldn't need money.
In-kind assistance has the added benefit that parents can't divert public assistance intended for children's welfare into other goods (e.g. alcohol, tobacco, drugs, junk food).
I have often wondered about corruption in these programs? Not so much of the poor people, but how do you secure the transfer and avoid making the poor people a target of abuse? (eg: people with guns lie in wait right after payday).
What's stopping a corrupt government from making up a bunch of fake people to capture the money. Or giving each person 2-3 identities and allow them to get 2-3x the distribution?
Anyone know the details on corruption?
And to use a line from the article
>“I think we often end up holding the poor, the recipients of aid, to a higher bar than we hold ourselves to, and that shows up when you hear the question, ‘Why cash?’ I think we should start with recipient empowerment and choice and ask, ‘Why not cash?’”
People can only eat a certain amount of food before it's kinda a waste, whereas cash can be infinitely consumed/transferred. Yes food can be stolen and resold, but at a fraction of it's value -- decreasing the incentive to steal/resell
The main problem with government poverty programs is that they usually focus on spending money instead of giving money to people who need it. That is, the government spends money on things, but this is a very inefficient or even counterproductive way to help. And a lot of the time it just means that the money is going to whoever is politically connected.
A much more efficient way to help people is just to give them money directly, and then people can spend it on whatever they think they need.
Budgetwise this is not feasible without raising taxes across the board.
We already have safety nets in place to aid people. EBT, WIC, Medi-Cal, Lifeline phones, discounted/free home internet. I’m not sure what giving money to someone does. I would use it buy crap that doesn’t make me better off which is supposed to be the point of the program.
In my 20s and 30s, being wise with money was not my strong point. Giving me free cash every month wouldn’t help me but aid me. I probably would buy cigarettes, alcohol, and gas. How does that help me better in life?
Personally, without cost containment on the supplier side (ie, inflation), or pegging this benefit to inflation, it sounds like a bad idea.
Cash handouts are some of the most cost-effective things a government can do (up to a point), as dollars given to people living on a shoestring often recycle in the economy up to 5x, and result in about $1.73 returning to government via taxes for every $1 spent.
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