Successful philanthropists — people who cause positive change — know the difference between a handout and a hand up. A handout typically sustains the misery of dependence. A hand up can lead to freedom, prosperity, happiness and healthy self-esteem.

A handout costs society, whereas a hand up can pay the combined dividends of reducing dependence and facilitating productivity that contributes to the common good.

As such, it is troubling to see Boulder County become the latest jurisdiction to confuse handouts as a form of compassion. The county, following the city of Boulder, recently announced a new $6 million program — using federal fiat currency — to fund a ‘basic income program” for 725 recipients chosen by lottery.

The money will come with no restrictions, meaning one could spend it to start a new business, feed children, or buy a lot of beer. The county will distribute $300 each month for two years to each recipient. Qualifications for entering the lottery include maximum income thresholds among adults with at least one child under age 4.

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Similar experiments, typically called “Universal Basic Income” programs, have launched in more than 30 cities and states. Denver’s new Basic Income Project has given out more than $6.5 million to about 800 “unhoused people.”

“The aims of the program are to test the feasibility and impact of guaranteed income…,” explains the website of the Denver Basic Income Project.

The test of aimlessly giving away cash has been done through time immemorial. Handouts with no defined outcome almost always go bad, for the recipient and the giver — in this case, consumers already burdened by high taxation and the inflation of manufactured cash chasing nothing in return.

If we need an academic study to know the guaranteed outcome of handouts, the National Bureau of Economic Research published one last month. The bureau studied 1,000 low-income individuals randomly chosen to receive $1,000 each month for three years.

“The transfer (“free” $1,000) caused total individual income to fall by about $1,500/year relative to the control group, excluding the transfers. The program resulted in a 2.0 percentage point decrease in labor market participation for participants and a 1.3-1.4 hour per week reduction in labor hours.”

That means these programs force working people to pay, through taxation and inflation, for other working people to work less. That’s not what money is supposed to do. Transactions of cash elevate humanity only when the payer and receiver each benefit from the exchange.

If these experiments become widespread and common, they will dramatically increase inflation. Even worse, they will reduce the productivity, accomplishments, incomes and self-reliance of the recipients.

Receivers in these handout “experiments” are, quite literally, small-time lottery winners. While everyone wants to win the lottery, those who do so often fare poorly.

“Studies found that instead of getting people out of financial trouble, winning the lottery got people into more trouble, since bankruptcy rates soared for lottery winners three to five years after winning,” wrote Economist Jay L. Zagorsky for U.S. News and World Report.

The Review of Economics and Statistics also found that big cash giveaways are no less destructive than small cash giveaways.

“A comparison of Florida Lottery winners who randomly received $50,000 to $150,000 to small winners indicates that such transfers only postpone bankruptcy rather than prevent it,” the report explains. “…Our findings suggest that skepticism regarding the long-term impact of cash transfers may be warranted.”

If “free” cash tied to no outcomes could improve lives, we could all quit working and live off minted paper. It won’t work, any place at any scale.

Denver Gazette Editorial Board