December 12, 2018

Basic Income on the Res

Thomas Sowell has a platinum resume: Marine Corps war vet, bachelor’s Harvard, master’s Columbia, Ph.D. U of Chicago, professor at Cornell and UCLA, Urban Institute and the Hoover Institute at Stanford, books, articles…. You get the point: when he talks economic and social policy, people listen.

The people at The Institute for Family Studies (IFS) were listening when they published a blog post earlier this year entitled “What We Can Learn From Native Americans About a Universal Basic Income.” The article describes the Seneca tribe’s practice of distributing casino money to its members, and focuses on the particularly disastrous provisions pertaining to the money for minors:

Half the money for children under 18 is given to their parents, and the other half is put into a trust. When a Seneca youth turns 18 and can show that he or she has graduated from high school or earned a GED, he or she receives a lump sum of $30,000. Those who don’t get a high-school degree have to wait until they’re 21 to receive the money.

Government officials and other members of the nation tell me that the best thing most young adults do with this money is to buy a new truck. These are kids who have never had very much before; so when someone hands them a huge check, they clearly don’t know what to do. Store owners report that young people will come in to buy candy, handing $50 or $100 without expecting any change. These young people seem to have no concept of saving or investing.

I used to practice estate planning, and need to point out that the Seneca approach to minor beneficiaries unfortunately borrows the worst kind of legislation drafting laziness from intestacy law, uniform gifts to minors acts, and similar laws involving minors and money. Their experience therefore has nothing to do with UBI specifically. Of course dropping a wad of cash on an unprepared 18 or 21 year-old is a dumb idea. Of course the kids “have no concept of saving or investing.” (Like the rest of us do.) Moving on, the article cites more disasters:

The money “is almost never saved for education.

“Despite a vast apparatus to help Seneca members set up businesses, almost no one starts one.

“Unless people are employed by the tribe (either through the casino or in tribal government), they are largely unemployed.

“Theft is also a problem. One official told me that they have had reports of elder abuse where children and grandchildren were stealing payments from older members of the tribe.

“The results of all this can be seen in the poverty rates for the Senecas, which have continued to rise. Their territory is divided into two reservations. As of 2011, the Allegany reservation poverty rate was 33.3 percent and the Cattaraugus reservation poverty rate was 64.9 percent, the highest in Cattaraugus County. During the first decade that the casino was operating, the poverty rate in Cattaraugus County, which includes part of the Seneca Territory, increased from 12.8 in 2000 to 18.7 in 2011.”

Finally, the article ends by citing Thomas Sowell:

Writing about the concept of a Universal Basic Income last year, Thomas Sowell summed up the situation: ‘The track record of divorcing personal rewards from personal contributions hardly justifies more of the same, even when it is in a more sophisticated form. Sophisticated social disaster is still disaster—and we already have too much of that.’

The Sowell article cited by the IFS blogger was “Is Personal Responsibility Obsolete?” (Investor’s Business Daily, June 6, 2016). It begins this way:

Among the many disturbing signs of our times are conservatives and libertarians of high intelligence and high principles who are advocating government programs that relieve people of the necessity of working to provide their own livelihoods.

Generations ago, both religious people and socialists were agreed on the proposition that ‘he who does not work, neither shall he eat.’ Both would come to the aid of those unable to work. But the idea that people who simply choose not to work should be supported by money taken from those who are working was rejected across the ideological spectrum.

And so we see the standard anti-UBI fightin’ words:

“divorcing personal reward from personal contributions”

“government programs that relieve people of the necessity of working to provide their own livelihoods”

“people who simply choose not to work”

“money taken from those who are working”

I confess, I can’t help but wonder what people who say those things think they would do with UBI money. Again moving along….

Other tribes also distribute casino money. The following is from What Happens When the Poor Receive a Stipend?”, published by The New York Times as part of a 2017 series on economic inequality called “The Great Divide.”

Scientists interested in the link between poverty and mental health, however, often face a more fundamental problem: a relative dearth of experiments that test and compare potential interventions.

So when, in 1996, the Eastern Band of Cherokee Indians in North Carolina’s Great Smoky Mountains opened a casino, Jane Costello, an epidemiologist at Duke University Medical School, saw an opportunity. The tribe elected to distribute a proportion of the profits equally among its 8,000 members. Professor Costello wondered whether the extra money would change psychiatric outcomes among poor Cherokee families.

Same idea, different tribe. How’d they do? We’ll find out next time.

 

Kevin Rhodes studies and writes about economics in an effort to understand the world his kids are growing up in, which is also the world he’s growing old in. You might enjoy his latest LinkedIn Pulse article “The Fame Monster: Rockstars And Rockstar Entrepreneurs.”

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