The Coronavirus Crisis Means We Need Cash Assistance for All

But the proposals on the table are leaving our most vulnerable neighbors behind.

The Coronavirus Crisis Means We Need Cash Assistance for All

But the proposals on the table are leaving our most vulnerable neighbors behind.

This piece is a commentary, part of The Appeal’s collection of opinion and analysis.

The shut down of businesses across the country designed to slow the spread of the new coronavirus has raised concerns about rising unemployment and a massive decline in consumer spending. In response, officials as politically disparate as Treasury Secretary Steven Mnuchin and Representative Alexandria Ocasio-Cortez have proposed sending checks to American families, giving them a thousand dollars or more to continue covering their household expenses during this difficult time.

Many experts have applauded this proposal, arguing that it could represent the first step toward a universal basic income, like that which former presidential candidate Andrew Yang advocated.

But there’s a massive gap in what’s been discussed so far: The proposals would be far from universal.

In fact, they could leave behind the most vulnerable members of American society, unless Congress members act quickly to ensure that any stimulus legislation is designed to reach everyone.

There are two distinct issues to keep in mind.

First, any distribution of aid to families must be progressive, supporting the most needy as a priority. Some proposals, including one reportedly discussed by Senate Republicans, would be adjusted based on household income, so wealthier families up to a cutoff would get more cash aid than poorer ones—a regressive policy. This would mean that low-income people, the people who are in most need of assistance, would be denied the full support of the federal government. At least on this front, Republican proposals are likely to run into Democratic opposition, since congressional Democrats have proposed doing just the opposite.

But the second issue is one that afflicts all proposals on the table right now, including those proposed by Democrats. Simply put, as currently conceived (though sketchy on the details), cash assistance would not go to anyone who is not a tax filer.

That would mean that many low-income people would be left out of the stimulus.

Cash-assistance proposals have involved giving aid to households, adjusted based on family size. The concept is that the Internal Revenue Service (IRS) would assemble information about recent-year tax filing, and then use that information to send money to households.

This is the strategy that the Bush administration undertook when it distributed aid to households in 2001 and 2008. Both times, the administration took IRS information and used it to mail checks to families or provide them cash via direct deposit.

But many American families do not file with the IRS.

The Tax Policy Center calculated that about 16 percent of “tax units”—typically households—do not pay either income or payroll taxes; the IRS does not require people with low incomes to file. You also must have a Social Security number to file income taxes.

It’s clear who will be left out: People who live on the street. People who do not have steady jobs. Undocumented people. Incarcerated people. These people would not receive cash assistance if a stimulus policy repeated what occurred in 2008.

Even if some people who fit into these categories have filed taxes, they are likely to face other sorts of obstacles to benefiting from this cash program. For one, many homeless people lack a mailing address, which they would need to receive this assistance. Moreover, a surprisingly large share of Americans is “unbanked,” meaning they do not have bank accounts in which to deposit checks or receive direct deposits. A recent survey suggests that about 6.5 percent of households face this situation. If these families received checks, they theoretically could go to the cash-checking retail shops present in many communities throughout the country. But many of these outlets are predatory, taking a large share of the checks people bring in as a commission.

Congress’s proposals may not always be intentionally regressive. They may rely on information from the IRS simply because it’s the best data we have, and we know how to distribute aid to people using tax information.

So what are some steps we could take to remedy this problem?

The good news is that, in other situations, the federal government has used alternative means to support those who do not file taxes.

The 2009 stimulus, for example, included a provision that sent $14.2 billion in checks to people receiving Social Security and Supplemental Security benefits, as well as retirees on the separate veterans’ and railroad systems (the legislation also included tax cuts and additional benefits for other households). In some cases, the individuals who received checks were not on the IRS rolls.

This means that there is a pre-existing mechanism for allocating federal aid to retiree families not involved with the federal income-tax system. The federal government could take advantage of other databases it oversees, such as those of people receiving housing, food aid, and Medicaid support, to expand its information about which families need assistance, and where they live. (Census data cannot be used as it is kept confidential.)

A universal approach to cash assistance, then, would begin by moving beyond just data provided by the IRS, and incorporating information from other federal agencies.

But that’s insufficient because some people would likely still fall through the cracks.

The Federal Emergency Management Agency has taken a broader approach in response to disasters, like Hurricane Harvey in 2017. In that case, affected individuals were able to request cash assistance through an application available online, by phone, or in person at disaster centers.

Today, too, people who are excluded should have the opportunity to apply for aid. The process should be as simple as possible, giving people automatic eligibility in many cases, and offering recipients debit cards for use anywhere, so they don’t have to rely on check-cashing stores.

It should also instruct other levels of government to proactively step up to identify others who are left out—homeless people, undocumented people, and unconnnected people cut off from the news. It’s reasonable to ask local and state agencies to develop community support centers, connected to a national database, to distribute assistance.

This approach would surely be complicated to implement, and could produce overlap between data sets. But the possible duplication of aid for the poorest families would be a far more equitable outcome than not providing aid to these vulnerable people at all.

Yonah Freemark is a Ph.D. candidate in the MIT Department of Urban Studies and Planning.

Support The Appeal

If you valued this article, please help us produce more journalism like this by making a contribution today.