US experiments with guaranteed income

The new federal coronavirus bill that is about to pass the Capitol 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 dependents, as well as up to $ 300 per month per child through an enhanced child tax credit.

This week, some Democratic senators stepped up and called for recurrent stimulus checks and indefinite expansion of unemployment benefits during the pandemic.

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For some experts, the change shows that the idea of ​​guaranteed income, in which a certain floor of money is provided to a certain set of people, may be gaining momentum in the USA.

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

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

Now, even more places are embracing the concept, with 42 cities signing contracts with mayors for a guaranteed income, a program that helps them follow Stockton’s example and operate their own pilots.

These developments occur as the coronavirus exposes even more the failures of the economy, especially with regard to income inequality, according to Amy Castro Baker, assistant professor at the University of Pennsylvania School of Social Policy and Practice. She is also working as a co-principal investigator for the Stockton Economic Empowerment Demonstration, or SEED.

“This pulled the curtain on the fact that most communities and families, especially working-class families, have not recovered from the loss of wealth from the Great Recession,” said Baker.

Now, the pandemic has aggravated this situation for many individuals and families. The Pew Research Center recently found that 1 in 10 Americans says it will never recover from the current crisis.

“Something is broken,” said Baker.

Springboard to Opportunities, an organization based in Jackson, Mississippi, that helps connect families living in affordable housing to resources to help improve their lives, has witnessed the devastation that Covid-19 has brought to the community.

“It will take years, if not a generation, for families to return to the point of support they had,” said Aisha Nyandoro, CEO of Springboard.

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

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

Preliminary research shows that the program helped 40% of participants to avoid borrowing money. Meanwhile, 27% were more likely to go to the doctor when needed and 20% were more likely to have children who outperformed their grades at school.

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

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

The results showed that program participants were twice as likely to find full-time work compared to people who were not part of it. In addition, participants also said that they were able to cope with emergency expenses and saw improvements in their physical and mental health.

The money was used mainly for food, sales and goods, such as household items or clothes, utilities and car costs, according to the data. Alcohol and tobacco accounted for less than 1% of spending.

“What struck me was how right we were when we talked about how no $ 500 would replace work, but would allow people who chose to do it to work in more stable jobs,” said Michael Tubbs, founder of Mayors for the Guaranteed Income and former mayor of Stockton.

The data released this week show the effects of the program’s first year. The full results expected for 2022 will show how the program impacted participants during the pandemic.

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

“I am sure that your results during Covid-19 will be much better, unfortunately, than the people who could not be part of the program.”

Both Nyandoro and Tubbs hope to see the concept of guaranteed income adopted at the federal level.

Certainly, this type of policy has attracted fierce criticism as well as support.

Baker remembers how people said 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 resistance we received was unlike anything I have experienced in my career.”

Now, the pandemic has only shed light on the urgent need for such a program, Baker said.

Mayors are acting first because they cannot afford to have time, she said. But there may be a bipartisan interest in providing more help to families at the federal level.

However, it is not yet clear whether this would be in the form of guaranteed income or universal basic income, according to Baker.

Universal basic income, for which everyone receives a certain amount of money, has its share of criticism.

One problem is that support based on universal basic income is divided, said Daron Acemoglu, a professor at the Massachusetts Institute of Technology’s Institute of Economics.

Some want substantial universal basic income in addition to existing government aid programs. In the meantime, others want to eliminate these benefits in favor of fixed payments for everyone.

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

So far, the experiments carried out in the United States have guaranteed income. The advantages of them are that they are targeted and therefore cost less.

“The world has changed,” said Acemoglu. “We have not updated our safety net and fiscal policy.”

Before a national policy is adopted, more testing must be done, he said.

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