Momentum for Basic Income Builds as Pandemic Drags On

The first round of stimulus, authorized in March, prevented national poverty levels from surging.

The first round of stimulus, authorized in March, prevented national poverty levels from surging. Shutterstock

 

Connecting state and local government leaders

Advocates see an opportunity to transform the safety net.

This story originally appeared on Stateline.

When the idyllic upstate city of Hudson, New York, launches its basic-income pilot program in late September, it will become one of the smallest U.S. cities to embrace a policy once seen as far-fetched or radical.

“Basic-income” programs — designed to dole out direct cash payments to large swaths of people, no strings attached — were, until earlier this year, largely the realm of Washington, D.C., policy wonks and West Coast futurists.

But amid the pandemic and a global recession, both basic income and a basket of related policies have gained unprecedented momentum, surfacing everywhere from Capitol Hill to community Zoom meetings in cities like Hudson.

At their most targeted, such programs essentially function as a type of cash welfare, providing a flexible, fungible benefit to low-income Americans. In broader and more ambitious proposals, so-called universal basic-income programs would send cash to everyone regardless of income level — a feature intended, advocates say, to promote consumer spending, lessen the stigma of welfare and protect all workers against future economic upheaval.

Critics from both sides of the political spectrum have historically challenged such programs on the grounds that they cost too much money or don’t always reach the neediest recipients. But since the pandemic began decimating entire sectors of the U.S. economy, that logic has shifted.

In June, a coalition of 11 Democratic mayors from across the country announced the launch of Mayors for a Guaranteed Income, a national campaign that plans to invest in basic-income pilots and lobby for related policies at the state and federal levels.

Fourteen additional mayors have since signed on to the project, representing cities as diverse as Shreveport, Louisiana; Holyoke, Massachusetts; and Los Angeles. In July, Twitter CEO Jack Dorsey pledged $3 million to the group to pay for future pilots. Writing in Time to announce their coalition, the mayors called basic income “a policy solution that is as bold as it is innovative and as simple as it is ambitious.”

In Hudson, two nonprofits — with the blessing of the mayor and the county social services department — plan to mail monthly $500 checks to 25 people, chosen by lottery, for the next five years.

Further afield, nonprofits and volunteer networks also have given millions of dollars to hundreds of thousands of laid-off American workers as part of charitable cash-transfer programs. While such one-off grants are not “basic income” in the classic sense, advocates say they still express a new willingness to embrace unconditional cash payments as a part of the safety net.

Several states, including New York, California and Pennsylvania, have passed or are considering bills that would refund more cash to low-income workers by way of an expanded Earned Income Tax Credit.

Meanwhile in Washington, six separate bills in Congress would direct new cash aid to Americans, whether through a second round of one-off stimulus checks or a series of regular payments. The first round of stimulus, authorized in March, prevented national poverty levels from surging, two studies suggest, and was championed by both Democratic and Republican lawmakers.

Now the challenge, for long-time basic-income proponents, is translating this sudden spike of interest into permanent changes to the safety net.

“When we started talking about this, it was frankly all white papers and intellectual debates in the margins of the internet,” said Natalie Foster, the co-founder of the Economic Security Project, a national nonprofit that funds basic-income initiatives. “But what would it take to make it real? That has always been the question.” 

While basic income has largely existed outside the bounds of mainstream U.S. politics, the concept in this country is far from new. Martin Luther King Jr., and the libertarian economist Milton Friedman both advocated for forms of basic income to reduce poverty and inequality and pare back the bureaucracy and cost of the welfare system.

More recently, basic-income has found vocal and prominent champions in Silicon Valley, where entrepreneurs including Tesla CEO Elon Musk, OpenAI CEO and former YCombinator President Sam Altman, and former Democratic presidential candidate Andrew Yang have advocated for universal basic income: regular cash payouts to all Americans, regardless of how much money they make.

Yang’s presidential platform pitched a monthly “freedom dividend” of $1,000, which he argued would safeguard vulnerable workers against automation and other labor market changes.

But basic-income programs, broadly construed, also can take other forms, said Samuel Hammond, the director of poverty and welfare policy at the Niskanen Center, a center-right think tank in Washington, D.C.

Some types of tax credits and child allowances also provide an “income floor” through direct cash write-offs and payments. Enhanced unemployment insurance — which gave furloughed and laid-off workers an extra $600 a week in benefits until it expired on July 31 — can similarly replace unstable wages and insulate workers from economic downtowns.

Studies have shown that direct cash payments improve the financial and mental well-being of their recipients, though economists still dispute exactly which types are most effective and efficient.

Cash transfers, unlike in-kind welfare programs such as housing vouchers or food stamps, give recipients the flexibility to cover whatever needs are most pressing at the time, said Hilary Hoynes, a professor of public policy and economics at the University of California-Berkeley who has studied basic-income programs.

Basic income also does not seem to dissuade most people from working, and past pilots show recipients very rarely spend their payments on vices, a common political concern. In an ongoing pilot in Stockton, California, researchers found that the program’s 125 participants spent less than 1% of their monthly disbursement at tobacco and liquor stores.

“Basically all these fears people have around strictures and strings on how people spend the money — those have been pretty definitively shown to be misguided,” Hammond said. “And the other major findings are kind of obvious: Yes, giving people $1,000 a month improves their well-being and their health.”

Such interventions have gained new urgency in the past six months. In addition to enhanced unemployment benefits, the federal government also mailed one-time cash stimulus payments of up to $1,200 per adult earlier this year, and Congress is debating a second round of payments.

Both Democrats and Republicans — including Republican U.S. Sen. Josh Hawley of Missouri, and Democratic vice-presidential nominee U.S. Sen. Kamala Harris of California — have since proposed new plans that would extend regular, direct cash payouts until the end of the pandemic.

Such proposals are popular: A July 23 Reuters/Ipsos poll found that three-quarters of Americans support both additional stimulus payments and larger unemployment checks.

In Santa Clara County, California, 72 young adults aging out of the county’s foster care system began receiving monthly cash payments in July as part of a new basic-income experiment.

St. Paul, Minnesota, distributed cash grants to more than 1,200 families in April as part of an emergency COVID-19 bridge funded by the city’s housing authority and a slate of local and national foundations.

In Compton, California, the international nonprofit GiveDirectly — best known for its work pioneering unconditional cash transfers and universal basic income in Kenya — partnered with city officials to send $1,000 checks to a thousand low-income residents, randomly selected through a popular food-stamp budgeting app.

GiveDirectly has since sent similar cash payments to more than 115,000 households across the country, the largest in a growing field of charitable direct-cash efforts by organizations including Charles Koch’s Stand Together initiative and Yang’s Humanity Forward Foundation.

One of Humanity Forward’s partners, a volunteer network called the $1K Project, has paired 550 families with interested donors for three months of no-strings-attached, $1,000 monthly payments.

“I think the beauty is in its simplicity — people understand the idea and connect with it really quickly,” said Minda Brusse, a tech investor and co-founder of the $1K Project. “You’re giving directly to that individual. All you have to do is read their story and drop your credit card number.”

But while initiatives like the $1K Project sprang up to address the extraordinary need of the COVID-19 recession, economists and advocates have begun to turn their attention to basic-income policies that may outlast it.

One popular proposal, backed by the Economic Security Project and some conventional anti-poverty groups, would expand the Earned Income Tax Credit to include a wider range of low- and moderate-income workers, increase the maximum benefit amount and pay it out in monthly increments.

Twenty-eight states and the federal government have some version of the tax credit and could expand it, Foster said, which the Economic Security Project pitches as a sort of backdoor to basic income.

Another popular option is an expansion of the child tax credit, which reduces working parents’ federal income taxes and refunds low-income parents up to $1,400 per child. Under current law, however, the country’s lowest-income families are excluded from the program: It requires annual earnings of at least $2,500.

“I personally think that’s the direction to go in,” said Hoynes, the University of California economist. “That would provide a lot of protection for the most disadvantaged Americans, in the spirit of the basic-income movement.”

Back in Hudson, advocates say they’re also laying the foundation for a new safety net, meant to endure even after the current crisis. The pilot’s organizers, Susan Danziger and Albert Wenger, are tech industry veterans who plan to open-source their materials and publish a playbook for other small cities to follow.

The pilot is accepting applications from adults making less than Hudson’s median wage and plans to select participants in late September. By October, recipients should receive their first round of $500 checks, funded by Danziger and Wenger’s nonprofit, Spark of Hudson, and Yang’s Humanity Forward Foundation.

In an Aug. 20 community meeting about the pilot, hosted by the local public library on Zoom, some three dozen Hudson residents praised the project and peppered Danziger and Wenger with questions about extending it to the most people possible. To the couple, who have championed basic income for years, the change in tone is notable.

“I’ve actually been surprised by how few skeptics there have been,” Danziger said. “But everyone sees the potential, especially in the context of the pandemic.”

Caitlin Dewey is an American journalist.

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