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Economy / Jobs

An economic crash opens a ‘window for hope’ on universal basic income

A researcher explains how cash assistance fits into governments' response to coronavirus.

American policymakers have long disliked the idea of giving poor people money.

In the 1990s, a bipartisan coalition gutted cash aid for needy families, fulfilling President Bill Clinton’s promise to “end welfare as we know it”. At the state level, general assistance programmes were undermined and eliminated. The remaining nutrition, health, and housing assistance options are often extremely restrictive.

(Photo by Joe Raedle/Newsmakers)

But in recent years, the idea of unconditional cash aid has experienced a renaissance in public policy circles. In her 2016 retrospective Hillary Clinton said she had considered running on a “universal basic income” to provide cash to all Americans. In 2020, Andrew Yang built his quixotic presidential campaign around the idea.

Before the pandemic, American municipalities edged towards narrower “guaranteed income” programmes for poor households. One of the first to embark upon such an experiment was Stockton, California, where 125 people are being given $500 a month on debit cards.

The University of Pennsylvania’s Amy Castro Baker is one of the researchers overseeing Stockton’s programme. CityMetric spoke with her about how the pandemic could change welfare policy, the inequities in Congress’s $2.2 trillion CARES Act, and how cities can lead the way on unconditional cash assistance.

The interview has been edited for clarity and length.

We’re dealing with economic collapse on a stunning scale. But a crisis can be a time for radical policy change, like the New Deal and the Great Depression or single-payer health care in the United Kingdom after World War II.

Do you think cash assistance schemes could bloom from the pandemic?

If you were to ask me this question pre-pandemic, I would say we were a few years out from that being taken seriously as a policy. The fact that we’ve had bipartisan agreement on cash transfers is a window for hope.

At the same time, it’s telling who was left out of the CARES Act. As we know from the New Deal, the inequality of the past shows up as the inequality of the present. Those who were locked out decades prior are those who are now at the bottom end of the income and wealth distribution. Anybody that we’re locking out of the stimulus payments, it’s going to create another form of inequality. I worry we’re creating a legislative pathway so that if we roll out a basic income programme in the future, whoever we lock out now is potentially locked out of future proposals.

Who is being locked out now?

The first group that I’m concerned about are returning citizens. If you haven’t been filing your taxes and you’re returning from prison, you’re going to be locked out. Then there are mixed immigration status households. The unbanked and underbanked. Another big one is that the CARES Act does not protect people from their stimulus checks being garnished by their banks.

You’ve been involved in a basic income experiment in Stockton, California. Can you describe the details of that programme and what the results have shown so far?

In February 2019, we started giving out $500 a month, no strings attached, on a prepaid debit card to 125 randomly selected individuals in census tracts at or below the median income of $46,000. It’s an 18-month programme, the last payments are scheduled this summer.

The goal is to see what type of infrastructure we would need to scale up something like basic income across the whole city, across the whole state. A lot of what we’ve learned so far is how people are spending the money. But also, one of the key things we’ve learned in Stockton is how the flexibility of cash allows people to meet their basic needs.

The second piece is showing that the programme itself needs to be flexible. Compare what’s happening with the CARES Act [where some payments are being delayed or made inaccessible], whereas Stockton is relying on a prepaid debit card. That promotes financial inclusion rather than exclusion.

In terms of the spending data, 40% of the $500 each month goes towards food, but it’s probably higher than that because the next category after that is big box stores like Walmart and Dollar Tree. In Stockton that’s where most folks go to buy their food. We can say at minimum 40% is going to food, but it’s probably closer to 60%.

Are there best practices in terms of structuring a municipal-level cash assistance programme that other cities should consider?

What really differentiates Stockton from a lot of the other things that have been proposed is that we advocate for maintaining access to benefits alongside a cash transfer programme. The way that the social safety net is structured in the US, each additional dollar can push you over a threshold where you’re then losing benefits. Stockton is designed to work alongside government benefits, not in place of them. You can’t have a scenario where someone receives a cash payment that causes them to lose health insurance.

The second one is using a mechanism to distribute the money that meets people where they’re at. In Stockton, the prepaid debit card means no one is forced into a banking relationship with a particular institution, and it allows for really quick transmission of the cash.

The third piece is human contact. Contrary to this idea that you just need more efficient systems and you can eliminate human labor, we’re learning that human relationships make the programme run well. We’ve embedded licensed clinical social workers in the experiment, and they work alongside programme staff to implement it and walk people through benefit structures. That relationship piece is the secret sauce of the experiment. It infuses trust into the programme.

What other cities have been considering UBI in the United States, and what does the current crisis mean for these policy experiments?

There’s Jackson, Mississippi; Chicago has a task force right now; Newark, New Jersey, has one as well; and Philadelphia announced that they’re going to be doing something. Who knows what will happen in the face of the crisis, but there’s good momentum around cash transfers. It’s an idea whose time has come.

People never recovered from the Great Recession. Then you’ve got the second economic crisis of the pandemic that pulls back the curtain and shows how unstable we are. If anything, what the pandemic is going to do is accelerate momentum for more of these experiments.

But aren’t there structural problems keeping American cities from doing this at scale? Municipalities and states can’t run deficits, so even in the best of times there are limits to how generous a city-level programme like this can be in the United States. Philadelphia’s proposed programme was going to be quite small even before the city began facing massive pandemic-related budget cuts.

Then there’s the Republican Party, which is far to the right of pretty much any other conservative party in the developed world in terms of economic policy. Those seem like high barriers to cash aid at the municipal or national level.

First, I would say that our governments and our social safety nets are policy choices that reflect what we value.

Second, we don’t know what works yet. In Stockton, we’re not even done yet. Before we scale something out, we really need more data. There’s been a long history of poor safety net interventions because they’ve moved before they had data. (Also, in Stockton’s experiment I should say that money is all philanthropically funded. No taxpayer dollars are used.)

As far as the Republican Party goes, the idea of cash payments gets a lot of support from both the right and the left, just for very different reasons. Absolutely, there are a lot of Republicans that are opposed, but there’s an awful lot that are for it. I’ve never seen any other policy idea that gets this much bipartisan support.

But it seems like Republican support for it is usually in the context of gutting other programmes.

There is the libertarian argument that we should have this but get rid of things like food stamps. But you have to ask, where’s our space for coalition building? We need to start having the conversation that there’s better ways to address inequality and poverty. If you think about the way our safety net operates, we have not had any major innovations in over 30 years. It’s time for us to rethink how we do things. These are choices. Change is possible.

Looking beyond the United States, are you seeing this kind of policy innovation in other countries?

Spain is toying with rolling something out in response to Covid that will probably be long term but hasn’t been entirely announced yet. It will be targeted towards lower-income people, but until the final version is out it could change.

One of the big questions around basic income is how it will affect the local economy. We can’t tell with Stockton, because it’s too small to measure anything at the community level. The most exciting thing happening now is a partnership between the Jain Family Institute and some universities in Brazil in a city called Maricá. What they are doing is a complete basic income, so it will apply to everyone in that area, but the money is being given in a denomination that can only be spent in that region. It’s going to answer questions we haven’t been able to answer so far about what can happen in a local economy. This cash transfer is going to go to 50,000 people and there are about 150,000 people in the city.

That’s not an option we have in the US but it speaks to the international movement around basic income, knowing that no one country can answer all these questions. We need cities globally to be running pilots to fill these different gaps in knowledge.

Jake Blumgart is a staff writer for CityMetric.