Date: 2024-12-21 Page is: DBtxt003.php txt00020330
Economy
Basic Income
Biden’s Stimulus Plan Contains an Experiment in Universal Basic Income ... The bill’s child tax credit has the potential to change the way that the United States addresses poverty.
Peter Burgess
Biden’s Stimulus Plan Contains an Experiment in Universal Basic Income
The bill’s child tax credit has the potential to change the way that the United States addresses poverty.
A woman and child walk on a sidewalk lined with grass and trees
A U.B.I. experiment in Stockton, California, may contain insights into how the federal government can address income inequality in the future.Photograph by Nick Otto / AFP / Getty
On Tuesday, March 9th, Amy Castro Baker stood on her front porch and watched as her two teen-age children boarded a bus and went off to school together for the first time in a year. Her sense of relief was profound. Baker, a researcher of economic mobility and an assistant professor at the University of Pennsylvania’s School of Social Policy & Practice, had been through a challenging period familiar to most parents—and especially to working mothers. For the past year, she had balanced the demands of a full-time job with overseeing her kids’ online schooling, while also cooking, cleaning, and running the household as a single parent. “We’re at the point in my home where it’s a choice between what’s higher risk, covid or my kids’ mental health,” Baker said. “I’m not sure I could have handled another month.” These are the kinds of difficulties that the American Rescue Plan, the $1.9-trillion pandemic-relief bill recently passed by Congress, was designed to address. Benefits in the bill could help millions of families who are facing similar challenges and are living under much greater financial precarity.
The bill, which was signed by President Joe Biden on Thursday, offers a variety of benefits intended to address economic hardship caused by the pandemic. No Republicans voted for the legislation, largely based on the argument that the pandemic will end soon and the economy doesn’t need the help. And it’s true that some aspects of the legislation go beyond the demands of the pandemic, addressing economic disparities that existed before covid-19 hit. The bill includes provisions to give one-time, fourteen-hundred-dollar payments to individuals earning fewer than eighty thousand dollars a year, and to increase unemployment insurance by three hundred dollars per week until early September. But it is the plan’s expanded, fully refundable child tax credit—which is worth thirty-six hundred dollars for each child under age six and three thousand dollars for those aged six to seventeen—that has the greatest potential to change the way that the United States addresses poverty.
A typical child tax credit can only be claimed by people earning enough money to pay taxes in the first place, which excludes those with an earned income of fewer than twenty-five hundred dollars—in other words, those in the most dire need. The new child tax credit works differently: starting in July, the federal government will send cash each month, until December, to parents for every child that they have regardless of the family’s employment status, and the remaining balance will be disbursed once families file their taxes next year. “It will actually maintain and lift living standards for millions of women and their children,” Heidi Shierholz, a senior economist and director of policy at the Economic Policy Institute, told me, adding that she hopes the credit will eventually become a permanent benefit. “There’s also a massive racial-justice angle here, too. This will disproportionately help families of color, and it will disproportionately bring Black kids and Hispanic kids out of poverty. This is groundbreaking.”
In some ways, the credit resembles much debated proposals to set up a universal-basic-income program, which would send cash to families every month to help them get by. Such a program never seemed possible in the United States, but lessons from the 2008 financial crisis, the Trump Presidency, and the pandemic have changed what policymakers are willing to try. “It signals a turn in the way that we approach alleviating poverty and supporting the unpaid care work of women that makes the economy move,” Baker told me.
One of the only large-scale guaranteed-income experiments to take place in the U.S. since the nineteen-seventies is currently under way in Stockton, California. After the 2008 financial crisis, Stockton saw one of the highest foreclosure rates in the country. Since February, 2019, the city has been sending five hundred dollars a month, funded by philanthropic organizations, to a hundred and twenty-five people, with no strings attached. The program, called the Stockton Economic Empowerment Demonstration, is led by Stockton’s former mayor Michael Tubbs, and it has just released its first batch of data. Baker and Stacia Martin-West, a professor at the College of Social Work at the University of Tennessee, Nashville, are spearheading an ongoing evaluation of the trial results. The lessons that researchers learned from the first twelve months of the experiment may contain insights into how the federal stimulus plan’s child payments will affect the families who receive them, and how the government can address income inequality in the future.
One of the biggest issues that low-income families face, Baker told me, is that their earnings are often unpredictable from month to month. The rise in unstable gig employment and the fluctuation of work shifts make it difficult for families to be sure that there will be enough money to pay the rent and buy adequate food. That combined with the unpredictable nature of expenses, especially those related to children, leads people in this position to have elevated levels of stress and anxiety, which can make it even harder for them to improve their financial situation. One of the questions driving the Stockton researchers is whether steady cash payments can reduce income volatility, and whether that may lead to other benefits, such as lower stress and more flexibility to seek out better jobs. Baker told me that the researchers are excited about the results so far. In the program’s first year, the guaranteed monthly payments did seem to reduce the volatility of monthly income. The recipients were more stable and better positioned to make thoughtful decisions about the future, to set goals and take risks. Ultimately, they were more likely to move from part-time to full-time employment. This runs directly counter to the argument that conservatives often make regarding universal basic income: that sending money to people will disincentivize working.
In the case of the pandemic, Baker anticipates that the child tax credit will function much the same way. “What the pandemic has shown is that needs are very dynamic,” she said. “Something as small as three hundred dollars a month could mean the difference between getting a babysitter or not, making up gaps in food stamps or not. The pandemic has kind of pulled the veil back on all the ways that households with kids, especially, are scrambling to get by.” Since the Stockton experiment began, the mayors of more than forty cities across the country have committed to trying pilot programs involving cash transfers. Ten have been announced or launched so far, in cities including St. Paul, Pittsburgh, Oakland, and New Orleans.
When I asked whether she was surprised to see the idea of universal basic income embraced by such a wide spectrum of groups, Baker said that she was. But she also saw the change as part of a broader historical trend. “When we look back, every major leap we have in the social safety net follows an economic drop that does not go away, and then a period of civil unrest,” she said. She noted that after the Great Recession of 2008 there was a protracted economic decline, which was accompanied by agitation on both the left and right sides of the political spectrum: Occupy Wall Street, the Tea Party, the election of Donald Trump, and Black Lives Matter, for example. Political norms have been dislodged, and things that were previously unthinkable now seem close to becoming reality. “People have been organizing and pushing back,” Baker said. “Maybe this period of churning means the public is ready for a conversation about the market and the safety net.”
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Sheelah Kolhatkar is a staff writer at The New Yorker, where she writes about Wall Street, Silicon Valley, economics, and politics. She is the author of “Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street.”
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