With widespread closures and restrictions of population movement and retail commerce in force (and likely more coming), one of the stimulus items being bruited about most loudly is a direct cash payment. The exact amount(s) vary from “$1000 per American” to “$1000 per American adult and $500 per child”, and both a one-time payment and a monthly payment during the pendency of the emergency (a la Universal Basic Income) have been proposed. On the face of it, this seems like an easy and rapidly effective way to help the population, but unfortunately it’s nowhere near as clear-cut as a short sound bite would make it seem. Since my entire day job revolves around highlighting edge cases, here are a few things to think about:
Who is “an American” in this context? It’s simple enough to answer this one with “U.S. citizens”, but there are a great many people living in America (both legally and illegally) who are not U.S. citizens. Many of them are taxpayers. Off-hand, at least the following ELEVEN categories exist: Citizens who pay taxes. Citizens who earn no income, or unrecorded cash income only. Citizens who are homeless and lack all paperwork. Illegal noncitizens who pay taxes on a false/borrowed SSN. Illegal noncitizens who pay taxes on a genuine TIN. Illegal noncitizens who earn unrecorded cash income. Legal permanent residents who pay taxes. Legal permanent residents who earn no income, or unrecorded cash income only. Legal permanent residents who are homeless. Legal temporary residents with work authorization. Legal temporary residents who do not have work authorization. All of them are equally affected by this pandemic, and note that several of those categories are eligible for other benefits, such as unemployment insurance. Without even needing to start looking at the inevitable argument of “whom should we be helping?”, it’s clear that a substantially complex definition is needed for who is entitled to these payments. And the reason I listed out all those options above is because it leads neatly into the next thorny question:
How do you find these people to give them money? Again, it’s easy to sound-bite “I want to start mailing checks to everyone”, but first you need to know where they live. The easy case is for people who have a fixed address and file tax returns every year, but this is far from everybody. There are also quite a few gray area situations; for example, if we’re giving $500 to every child, then a baby born this year is eligible, but he or she has never appeared on a tax return as a dependent, so how does the relevant money-disbursing authority know they exist? How do you get checks to the homeless? How do you get checks to people who don’t file a tax return or appear on anyone else’s, either for legitimate reasons or not? And, again, this set of questions leads into the next problem:
How do these people redeem those checks? According to Wikipedia, there were an estimated 55 million unbanked/underbanked adults in the U.S. Yes, there are check-cashing places, but this is probably not an industry sector that deserves much of a bailout. And a significant number of the people who lack banks also lack the ID required to cash a check. Again, there are easy answers to some of these questions, such as “send debit cards and they can pull out cash at an ATM”, but among numerous other logistical problems, this is tantamount to sending billions of dollars of cash in the mail. Once more, “send out checks” is not a simple answer and some more complex payment structure must be devised. Note, there is an interesting example of a somewhat similar program during the analog TV shutdown in the United States, wherein each household was entitled to request two $40 coupons to buy digital tuner boxes for their analog TVs. That program could be a relevant illustration of how “free government debit cards to everyone” might work out (tl;dr – lots requested but not redeemed due to loss or other factors, probably many issued to ineligible recipients).
Lastly, how do we ensure that the money is directed most effectively? And by “most effectively” here I mean in the sense of “maximum suffering erased per dollar spent”. I am fortunate in that I can work from home, I still have a job (at least for now), and I had enough resources to prepare myself for at least a short period of more expensive existence on home-delivered groceries and the like. Last night I spoke to another person in a similar situation about the “fairness”/effectiveness question and she replied that we, the better-off people, would spend our $1000 in the local economy and thereby benefit the poorer folk working in that economy. But the “local economy” has been largely shut down. Consider a food server who is permanently jobless (for the duration) due to restaurant closures. Unless he/she runs some kind of etsy business that can ship goods to me (and my need for such goods is hard to imagine), there is literally no way my $1000 can trickle to him or her. There is simply no trickle-down route, and hence that $1000 is going to be the sole income for those individuals no matter how much I’m spending around them. The $1000 that I’m being sent is, honestly, a waste of government funds – I am earning enough to feed myself and don’t need it. The only hope for the coronavirus-jobless to get some of my trickle-down money is to get a job at (for example) a fulfilment company like Amazon, or some other large business that will still be operating in lockdown conditions.
I don’t present any solutions to these problems, and I do think that providing people with cash is likely to be one of the fastest ways to provide relief, but like any plan that needs to cover four million square miles of territory and 330 million people, it is fraught with complexity and you can expect its actual implementation to be riddled with errors, fraud and injustices, small and large.