Here’s How to Get Cash to Americans — Quickly and Fairly
Don’t discriminate against kids. Don’t impose income floors or ceilings. And set a monthly amount that we can sustain
This post is co-authored with Miranda Perry Fleischer, Professor of Law and Co-Director of Graduate Tax Programs at the University of San Diego School of Law. Follow her on Twitter: @mirandaperrygrl. Recommendations are based on our co-authored article, “The Architecture of a Basic Income,” which will appear in the University of Chicago Law Review this spring.
With millions of Americans likely to lose their jobs or see their incomes plummet as a result of the Covid-19 outbreak, the Trump administration and lawmakers from both parties have proposed to soften the virus’s economic blow by providing cash assistance directly to U.S. households. Treasury Secretary Steven Mnuchin laid out further details of the administration’s plan on Thursday, saying that it would provide for payments of $1,000 per adult and $500 per child in three weeks and another round of payments at the same level three weeks later.
Direct cash assistance is the fastest and surest way to protect Americans from the economic fallout of Covid-19. But the devil is in the details, and the cash aid proposals unveiled in response to the virus all have features that will make the schemes unnecessarily difficult to implement. Moreover, several of the plans — including the administration’s emerging proposal — unduly discount the needs of families with children.
A better approach would be to provide a uniform amount — we suggest $500 a month — to every adult and child in the United States as long as the crisis persists. A steady stream of monthly payments will ensure that almost all households can continue to meet their basic needs even if the recession caused by Covid-19 lasts a year or longer. And a uniform amount — $500, regardless of age, income, or other characteristics — will guard against the administrative complications that come with variable payments.
Giving money to everybody with no strings attached — a universal basic income, or UBI — is an old idea that has found new life in the coronavirus crisis. The early 16th century English Catholic thinker Thomas More may have been the first to suggest the idea — later supporters include the English-American revolutionary Thomas Paine, civil rights leader Martin Luther King, and conservative economist Milton Friedman. President Richard Nixon briefly embraced the idea of a basic income for families with children in his first term — the plan even passed the House of Representatives in 1970, though it failed in the Senate. Former 2020 Democratic presidential candidate Andrew Yang is the most recent UBI popularizer — he rallied his “Yang Gang” of supporters behind a basic income of $1,000 per adult per month before dropping out and endorsing former Vice President Joe Biden.
The proposals floated by the Trump administration and lawmakers over the last several days are essentially trimmed-down versions of a UBI. Rep. Tulsi Gabbard (D-Hawaii) was one of the first to propose a coronavirus basic income: $1,000 per month for all adults as long as the public emergency lasts. Several of her House Democratic colleagues — including Tim Ryan of Ohio and Ro Khanna of California, Joe Kennedy III of Massachusetts, and Ilhan Omar of Minnesota — have since said that they will introduce cash assistance proposals of their own.
Over in the Senate, the scramble to put forward a cash assistance proposal has been bipartisan. Republican Senator Mitt Romney of Utah introduced his $1,000-per-adult idea on Monday, and fellow Republicans followed up the next day with their own ideas: Senator Tom Cotton of Arkansas proposed one-time payments of $1,000 per adult and $500 per dependent child, while Senator Josh Hawley of Missouri suggested monthly payments to families based on the number of days their children’s schools have been closed. Also on Tuesday, six Senate Democrats rolled out a proposal to pay $2,000 per person (adult or child) immediately, followed by additional payments of $1,500 in the summer and $1,000 each subsequent quarter that unemployment remains elevated. Senator Bernie Sanders has proposed payments of $2,000 per person per month as long as the crisis lasts.
There is something to like about all of these plans. Each would cushion Covid-19’s economic impact for millions of American households. Each, though, also comes with flaws.
First, there is no good reason why payments should be smaller per child than per adult. (Gabbard and Romney would exclude children entirely, while the Trump administration’s proposal as well as the Cotton, Kennedy, and Omar plans would allow less for children than for adults.) All else equal, a single parent with a school-age child at home faces greater economic hardship than a childless married couple. The household headed by the single parent has just as many mouths to feed and one fewer potential income earner. Moreover, a wealth of social science evidence indicates that boosting a family’s income can have positive long-run consequences for children — indeed, it’s for families with children that the empirical case for a UBI is strongest.
Second, several of the proposals would impose income eligibility criteria that could impede implementation. The task of pushing 330 million payments out the door on an expedited basis is formidable enough; verifying income and adjusting payment amounts on a person-by-person basis transforms that task into an overwhelming challenge.
The Senate Democratic proposal suggests that income could be verified by looking at a taxpayer’s 2019 federal tax return — due this April. But that will delay payments further, since less than half of taxpayers have filed their 2019 returns so far, and more than the usual number will likely seek an extension due to Covid-19-related work slowdowns. Moreover, even returns filed this April reporting the prior year’s income could provide an inaccurate snapshot of financial circumstances for households whose cash streams have dried up entirely since the crisis struck.
Worries about “wasting” money by making unnecessary payments to high-income households are largely window-dressing. The federal government can recoup the value of payments to high-income households by taxing them more later on. For now, the goal should be to push cash out the door quickly and broadly — we can take cash back from billionaires when they file their next return. The old Navy adage — “keep it simple, stupid” — applies with full force here. When it comes to nationwide cash assistance, as with other mammoth undertakings, keeping it simple is smart.
Undoubtedly the most hairbrained scheme is one reportedly circulating among Senate Republicans to provide $1,200 to most taxpayers but only $600 to lower-income individuals and families who pay less in taxes. Yes, you read that right: some Senate Republicans want to give more to higher-income than lower-income households. From a distributive justice perspective, the idea is jaw-dropping. From a logistical perspective, it’s likewise nightmarish. Weeding out lower-income taxpayers so as to give them less would take the IRS time and resources that otherwise could go toward getting checks out the door.
Finally, we should plan for the long haul — and we should help households plan too. That means guaranteed monthly payments rather than less frequent lump sums. Studies of families receiving benefits under the Supplemental Nutrition Assistance Program suggest that planning on even a month-long timeframe is challenging for households facing serious financial distress. Add to that the enormous uncertainty surrounding Covid-19, and the case for short payment intervals becomes especially compelling.
Planning for the long haul also means setting payments at a level that the federal government can sustain. Optimistic projections still put us 12 to 18 months away from a covid-19 vaccine — in the meantime, widespread closure of workplaces and schools could become the new normal. Payments of $500 per person per month in a nation of 330 million would cost around $2 trillion if continued over a year — already a serious strain on the federal budget (and roughly the same as the 10-year cost of the 2017 Republican tax cuts). Going much higher — such as the $1,000-per-adult level suggested by Gabbard or the $2,000-per-person level suggested by Sanders — would threaten to break the bank unless coupled with spending cuts elsewhere.
Cash assistance won’t stop the spread of the coronavirus. It would, though, make it easier for workers with little or no savings to comply with social distancing protocols while covering basic needs. But not all cash assistance plans are created equal. A program of monthly payments to all Americans — with the same amount per child and per adult, and without unnecessarily complicated eligibility cutoffs — is the best way to get cash out the door and to sustain support throughout a crisis with no end in sight.