Coronavirus cash: Is now the time to ‘go big’ with a basic income relief package?

Philadelphia streets have slowed down in the wake of the coronavirus shutdown. (Kimberly Paynter/WHYY)

Philadelphia streets have slowed down in the wake of the coronavirus shutdown. (Kimberly Paynter/WHYY)

It feels like a century ago, but just two weeks back, hints about a “Philly Basic Income” began circulating City Hall. 

It soon became clear that the planned program would take the form of a small experiment where 500 low-income renters in Philadelphia would receive unconditional payments of about $400-$600 a month. Policymakers would then measure life outcomes for the group against a different set of 500 poor renters who would be given rental vouchers.

Then, the coronavirus pandemic swept across the country.

Now Philadelphia is a ghost town, and President Donald Trump’s administration is talking about sending most Americans a $1,000 payment in the mail. On Wednesday, the Treasury Department said it wants to start issuing direct payments to Americans as soon as April through two $250 billion cash infusions.

Senators on both sides of the aisle have offered their own versions of unconditional cash transfers.

“We are looking at sending checks to Americans immediately,” said Steven Mnuchin, Treasury Secretary for the Trump administration. “Americans need cash now, and the president wants to get them cash now, and I mean now, as in the next two weeks.”

Although it is unclear if Congressional leaders will go along with this proposal, the general concept proved popular on Wall Street and among many Democrats.

At a press conference on Wednesday, President Trump refused to provide more details, saying that negotiations are ongoing and dismissing critics of the idea, saying, “everyone seems to want to go big.”

For the University of Pennsylvania’s Amy Castro Baker, a leading expert on unconditional cash assistance programs, it isn’t surprising to see the idea rise rapidly to the top of the policy agenda.

“There has been a body of research that’s being built up in the policy space for a long time around the idea of cash transfers,” said Baker, who is closely involved with an ongoing basic income experiment in Stockton, California. “We know that’s the most efficient way to respond to natural disasters.”

The Penn professor points to the non-profit GiveDirectly, which provides no-strings-attached funds to both very low-income people and those battered by natural disasters. She also points to Dolly Parton’s efforts to aid her wildfire-ravaged hometown, where she donated and raised money that was then distributed to the townspeople unconditionally. Researchers found that recipients used the money to provide new housing for their families.

Philadelphia Mayor Jim Kenney, on Tuesday, said that political leaders on all levels need to think bigger than they have in generations.

“We’re going to do everything we can,” Kenney said. “But this is a national issue, and it’s going to have to be addressed similar to World War II or to a depression. They’re going to have to step up, both the federal and the state governments.”

Philadelphia’s municipal government is working on relief plans of its own, although its limited budget severely hampers the amount of aid the city can offer. The plan is to offer a package of grants and zero-interest loans to small Philadelphia businesses, targeted to those with under $5 million in annual revenue. But without help from the federal government, a large-scale cash transfer would be impossible.

Still, Philadelphia officials didn’t dismiss the idea of expanding the city’s experiment or rolling it out earlier.

“That’s a conversation the state, the federal government, and we will have together,” said Brian Abernathy, the city’s Managing Director at a press briefing Wednesday. “These aren’t easy conversations, and we’ll have to figure out where all those resources come from. But we haven’t taken anything off the table at this point.”

Baker said there are two essential areas to watch as the debate around unconditional cash transfers unfolds in Washington. First, the intervention needs to happen quickly.

Almost half of Americans live paycheck-to-paycheck, and, in 2016, the Federal Reserve Board found that if they needed $400 in an emergency, 47% of Americans would have to sell something or borrow it. That percentage is probably higher in Philadelphia, the poorest big city in the nation.

As the economy goes into deep freeze, and millions of service sector workers are laid off, the majority of Americans, and Philadelphians, will need help right away.

She also emphasized that sending checks to Americans shouldn’t be seen as a substitute for other welfare programs, like food stamps. Libertarians have long argued that unconditional cash transfers should replace the federal government’s myriad social assistance programs.

Baker fears that checks sent today, and throughout the crisis, could push people over the eligibility limit for other benefits. Food stamps, Medicaid, Section 8 housing vouchers and many other aid programs are means-tested, and recipients are disqualified if they make over a particular income limit in a year.

“The thing that I’m most concerned about is whether this cash transfer is going to leave people more vulnerable at the end,” Baker said. “What we don’t want to see is nine months from now, people receiving a drop in their food stamps or losing health insurance because of an influx of cash.”

Mnuchin said on Tuesday that millionaires should not expect any cash payments. Historically, universal assistance programs like Medicare and Social Security have proven the most popular and least vulnerable to attack. But Baker said she doesn’t think that dynamic will be a problem here.

“We really want to see something that’s immediate and targeted at the people who need it the most,” Baker said. “However, you always have to balance that with what’s going to be politically palatable. This isn’t completely universal, but the fact that it is going to essentially everyone except the top earners still makes it palatable to folks.”

Much remains to be determined about the federal aid package, and what will be politically palatable to Congressional leaders of both parties.

Baker also praised the Philadelphia government’s planned basic income experiment and said that she hopes the city moves forward with the renter-focused program in the future.

“Experiments like Philly’s are still important because the lack of affordable housing is such a driver of poverty,” Baker said. “Thinking about that in the context of cash transfers is going to be key moving forward.”

WHYY is one of over 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push towards economic justice. Follow us at @BrokeInPhilly.

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