New economic stimulus proposals look like a guaranteed income experiment. Initial results show whether it will work
Attorneys and tenants of residential buildings in New York march to demand that Governor Andrew Cuomo cancel rent during the October 10, 2020 pandemic.
Andrew Lichtenstein | Corbis News | Getty Images
The new federal coronavirus alleviation law due to be approved on Capitol Hill could put unprecedented sums of money in the hands of American families.
This includes new stimulus checks of up to $ 1,400 for adults and their loved ones, and up to $ 300 per month per child through an expanded child tax credit.
This week, some Democratic senators stepped up the stakes, calling for recurring stimulus controls and an indefinite expansion of unemployment benefits for the duration of the pandemic.
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For some experts, the move shows that the idea of a guaranteed income, where a certain portion of the money is given to a certain group of people, could gain momentum in the US
The idea of direct control of the Americans has become more popular. Former Democratic presidential candidate Andrew Yang drew attention to the concept when he proposed direct payments to individuals during the 2019 debate.
At that time, cities like Jackson, Mississippi, and Stockton, California began running tests to see exactly how these types of programs could work.
Now more places are backing the concept: 42 cities have signed up with mayors for Guaranteed Income, a program that will help them follow Stockton’s lead and run their own pilots.
These developments are because the coronavirus has further exposed the shortcomings of the economy, particularly in terms of income inequality, according to Amy Castro Baker, assistant professor at the University of Pennsylvania’s School of Social Policy and Practice. She also works as the Co-Principal Investigator of the Stockton Economic Empowerment Demonstration (SEED).
“It has pulled the curtain back that most communities and households, especially working-class households, have not recovered from the wealth loss of the Great Recession,” Baker said.
Now the pandemic has exacerbated this situation for many individuals and families. The Pew Research Center recently found that one in ten Americans says they will never recover from the current crisis.
“Something is broken,” said Baker.
“Give families the support they need”
Aisha Nyandoro, founder of Magnolia Mother’s Trust
Springboard to Opportunities, a Jackson, Mississippi-based organization that helps connect families who live in affordable housing with resources to improve their lives, has seen the havoc Covid-19 has wreaked the community .
“It will be years, if not a generation, for families to get back to where they were,” said Aisha Nyandoro, CEO of Springboard.
Nyandoro is also the founder of Magnolia’s Mother’s Trust, a program that provides $ 1,000 per month to African American mothers living in urban extreme poverty for a year.
In 2018, the Trust ran its first year-long program with 20 mothers. Magnolia completed its second round last month with payments of $ 1,000 to 110 mothers. Now the program is preparing to start a third program for about 100 mothers.
Preliminary research shows that the program helped 40% of participants refrain from borrowing. Meanwhile, 27% were more likely to see a doctor when needed and 20% more likely to have children who performed in school above their grade level.
“You can trust black mothers to do what they need for their families,” Nyandoro said of the results. “We don’t have to have all these levels of bureaucracy to give families only the support they need.”
$ 500 a month as a “financial vaccine”
Michael Tubbs, former Mayor of Stockton, California.
Nick Otto | AFP | Getty Images
This week, Stockton’s SEED program also released the preliminary results of its program, which began in 2019. 125 residents of the city received $ 500 a month for 24 months.
The results showed that program participants were twice as likely to find full-time work as those who did not. In addition, participants said they were better able to deal with emergency costs and saw improvements in their physical and mental health.
The money was mainly used for groceries, sales, and goods such as housewares or clothing, utilities, and car expenses, according to the data. Alcohol and tobacco accounted for less than 1% of spending.
“What caught my eye was how right we were when we talked about how not $ 500 would replace work but people choosing to make more stable jobs possible,” said Michael Tubbs, founder of Mayors for a Guaranteed Income and Former Mayor of Stockton.
The data released this week shows the impact of the first year of the program. The full results for 2022 will show how the program affected participants during the pandemic.
“We know the $ 500 was used as a financial vaccine for the people who received it,” Tubbs said.
“I’m sure your results during Covid-19 will unfortunately be far better than those of people who couldn’t be part of the program.”
Guaranteed income vs. universal basic income
A sign supporting Democratic presidential candidate Andrew Yang’s plan for a monthly universal basic income of $ 1,000 at a rally in New York on May 14, 2019.
Drew Angerer | Getty Images
Both Nyandoro and Tubbs hope that the concept of guaranteed income will be implemented at the federal level.
It is true that this type of policy has generated strong criticism and support.
Baker recalls how people told her she was crazy when she started working on the Stockton Project.
“I was told I was risking my research career,” said Baker. “The amount of setbacks we’ve had was unlike anything I’ve ever seen in my career.”
Now the pandemic has only shed light on the urgent need for such programs, Baker said.
Mayors act first because they don’t have the luxury of time, she said. However, there could be a non-partisan interest in providing more aid to families at the federal level.
However, it is still unclear whether this would take the form of a guaranteed income or a universal basic income, according to Baker.
The universal basic income, with which everyone receives a certain amount of money, has its share of critics.
One of the problems is that support for universal basic income is shared, said Daron Acemoglu, an institute professor at the Massachusetts Institute of Technology Department of Commerce.
Some want a substantial universal basic income in addition to existing government aid programs. In the meantime, others want to ditch these benefits in favor of flat-rate payments to all.
“This inconsistency is dangerous in my opinion,” said Acemoglu.
So far, the experiments taking place in the US are a guaranteed income. The advantages of this are that they are targeted and therefore cost less.
“The world has changed,” said Acemoglu. “We haven’t updated our safety net or our financial policies.”
More testing should be done before a national policy is adopted, he said.
“I think we need a lot more knowledge of what works, what is effective, what is most effective at helping poor families, so experiments are great,” said Acemoglu.