American experiments with guaranteed income

The new federal coronavirus control bill about to be passed on Capitol Hill could put unprecedented sums of money in the hands of American families.

That includes new incentive checks of up to $ 1,400 for adults and their family members, as well as up to $ 300 per month per child through an increased child tax credit.

This week, some Democratic senators have raised the bar, calling for recurring stimulus checks and unrestricted expansion of unemployment benefits for the duration of the pandemic.

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For some experts, the move shows the idea of ​​a guaranteed income, where a certain amount of soil is provided to a certain number of people, is gaining traction in the US.

The idea of ​​direct checks to Americans has become more popular. Former Democratic presidential candidate Andrew Yang brought the concept to national attention when he proposed direct payments to individuals on the debate stage in 2019.

Around that time, cities like Jackson, Mississippi, and Stockton, California, began running tests to see exactly how these types of programs could work.

Now even more places are embracing the concept, with 42 cities signing up with mayors for guaranteed income, a program helping them follow Stockton’s lead and run their own pilots.

Those developments come as the coronavirus has further exposed the economy’s shortcomings, particularly with regard to income inequality, said Amy Castro Baker, assistant professor in the School of Social Policy and Practice at the University of Pennsylvania. She also works as a co-principal investigator of the Stockton Economic Empowerment Demonstration of SEED.

“It has pulled back the curtain on the fact that most communities and most households, especially working class families, have not recovered from the welfare loss of the Great Recession,” said Baker.

Now the pandemic has exacerbated that situation for many individuals and families. The Pew Research Center recently found that 1 in 10 Americans say they will never recover from the current crisis.

“Something’s broken,” said Baker.

Springboard to Opportunities, a Jackson, Mississippi-based organization that helps families living in affordable housing find ways to improve their lives, has witnessed the devastation Covid-19 has wreaked across the community.

“It will take years, if not a generation, for families to get back on their feet,” said Aisha Nyandoro, Springboard’s CEO.

Nyandoro is also the founder of Magnolia’s Mother’s Trust, a program that provides African-American mothers living in extreme urban poverty with $ 1,000 a month for a year.

In 2018, the trust implemented its first one-year program with 20 mothers. Magnolia completed the second round of $ 1,000 payments to 110 mothers last month. Now the program is preparing to launch a third program for about 100 mothers.

Preliminary research shows that the program helped 40% of the participants avoid borrowing money. Meanwhile, 27% were more likely to see a doctor if needed, and 20% were more likely to have children performing above their class in school.

“You can trust black mothers to do what they need for their families,” Nyandoro said of the results. “We don’t need all these layers of bureaucracy to give families the support they need.”

This week, Stockton’s SEED program also released preliminary results from the program, which started in 2019. It gave 125 of the city’s residents $ 500 a month for 24 months.

The results showed that program participants were twice as likely to find full-time employment compared to people who weren’t part of it. In addition, the participants also said they were better able to handle emergency costs and saw improvements in their physical and mental health.

According to the data, the money was mainly used for food, sales and merchandise such as household items or clothing, utilities and car expenses. Alcohol and tobacco accounted for less than 1% of the expenditure.

“What struck me was how right we were when we talked about how not $ 500 would replace work, but people who choose to work more stable jobs,” said Michael Tubbs, founder of Mayors for a Guaranteed Income and former mayor of Stockton.

The data released this week shows the effects of the program’s first year. The full results expected in 2022 show how the program affected participants during the pandemic.

“We know the $ 500 acted as a financial vaccine for people who got it,” Tubbs said.

“I am sure that their results during Covid-19 will unfortunately be much better than people who were unable to participate in the program.”

Both Nyandoro and Tubbs hope that the concept of guaranteed income will be embraced at the federal level.

Certainly, this type of policy has received both fierce criticism and support.

Baker remembers people telling her she was crazy when she first started working with the Stockton project.

“I was told I was risking my career as a researcher,” said Baker. “The amount of pushback we got was unlike anything I’ve ever experienced in my career.”

Now, the pandemic has only shed light on the urgent need for these types of programs, Baker said.

Mayors act first because they don’t have the luxury of time, she said. But there could be a twofold interest in providing more assistance to families at the federal level.

Still, according to Baker, it is still unclear whether this would be in the form of a guaranteed income or a universal basic income.

Universal basic income, where everyone receives a certain amount, has its share of critics.

One problem is that universal basic income support is distributed, says Daron Acemoglu, an institute professor in the Massachusetts Institute of Technology’s economics department.

Some want a substantial universal basic income on top of already existing government assistance programs. Meanwhile, others want to ditch those benefits in favor of fixed payments to everyone.

“That inconsistency, I think, is dangerous,” said Acemoglu.

To date, 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 have not updated our safety net, tax policy.”

Before any national policy is passed, more testing needs to be done, he said.

“I think we need a lot more knowledge about what works, what will be effective, what will help poor families most effectively, so experimentation is great,” Acemoglu said.