Hansae Catlett, MBA ’18: Free Money: Eradicating Old-Fashioned Poverty with an Old-Fashioned Idea

TL;DR

Poverty and inequality in the US are at alarming levels, with one in five children living in absolute poverty. A basic income, or citizen's dividend, can alleviate poverty and improve overall economic growth.

Transcript

[MUSIC] I've always wondered, why in a nation so rich are some people so poor? To me it's always seemed so old fashioned. Like governments that don't resemble a democracy or voting rights that don't include women or like these wool cardigans. >> [LAUGH]

Things that just shouldn't exist. [LAUGH] Growing up, I often asked myself this question. Why... Read More

Key Insights

• 😣 Poverty and inequality in the US are severe, with one in five children living in poverty and income disparities reaching 1928 levels.
• 💪 The American dream of upward mobility through hard work has become elusive, as a person's race and parents' income have become stronger determinants of success.
• 🪡 A basic income, supported by individuals across the political spectrum, can alleviate poverty by providing a secure source of income for basic needs.
• 🥺 Concerns about people misusing a basic income on drugs and alcohol are unfounded, as evidence shows that cash transfers lead to reduced spending on temptation goods.
• 🧑‍⚕️ A basic income experiment in Canada demonstrated that recipients continued working while experiencing improvements in education and mental health.
• 🇨🇷 Poverty is expensive, costing billions of dollars in higher healthcare costs, dropouts, and crime rates. A basic income could be financed with a relatively small percentage of GDP and result in significant economic growth.
• 🤦‍♀️ Previous attempts at implementing a basic income faced political opposition and biases against women's independence, but the current moment is ripe for its re-emergence.

Questions & Answers

Q: How can a basic income address poverty and inequality?

A basic income is an unconditional monthly cash grant that covers basic needs like food, shelter, and education. It provides a sense of security and enables individuals to invest in their future, reducing poverty and inequality.

Q: Will people misuse a basic income on drugs and alcohol?

The assumption that poor people make poor decisions is flawed. Research shows that in cash transfer programs, spending on temptation goods like alcohol and cigarettes decreases. People prioritize education, healthcare, and improving their conditions when given hope and a brighter future.

Q: Will a basic income discourage people from working?

Evidence from a basic income experiment in Canada showed that recipients did not quit their jobs. Some groups, like new mothers and students, worked slightly less, but overall, individuals continued working while experiencing improvements in school performance and mental health.

Q: Can the US afford to implement a basic income?

Poverty is already costing the US billions of dollars in healthcare expenses, crime rates, and dropouts. A basic income could be funded using a negative income tax credit, costing less than 1% of GDP, and actually lead to a 13% increase in GDP, creating a net positive impact on the economy.

Summary & Key Takeaways

• One out of every five children in the US live in absolute poverty, with a poverty rate higher than many other wealthy nations.

• Inequality in the US is the highest it's been since 1928, with the top 0.01% experiencing significant income growth while the bottom 90% face stagnant incomes.

• The American dream of working hard to escape poverty is no longer applicable, as a person's parents' income and race have become the primary predictors of future success.