How Cryptocurrency Can Help In Paying Universal Basic Income (#GotBitcoin)
The utopian idea of universal basic income — which has been with humanity for at least half a millenia — can become real with digital currency. How Cryptocurrency Can Help In Paying Universal Basic Income (#GotBitcoin)
Due to the crisis caused by COVID-19, millions of people have lost all or part of their income. To support them, governments have been giving out money to victims. Is it possible to make this practice permanent? And if so, why will we need state digital currencies?
The COVID-19 pandemic has forced the United States, Canada, Japan, Russia and many other countries to print large budget reserves and to start helping people with direct cash payments. Such measures have, again, led the world to talk about the idea of an unconditional or universal basic income, otherwise known as UBI, an idea that Thomas Moore put forward in his novel Utopia in 1516. Its essence is that every citizen has the right to regularly receive a certain amount from the government without fulfilling any conditions and can spend this money at their discretion.
The introduction of UBI experiments began long before the coronavirus pandemic. One example is in Alaska, where a similar system, dubbed the “Permanent Fund Dividend,” has been operating since 1982. Once a year, every resident of the state receives a certain part of the profit from the local oil industry. In 2019, it was $1,606 dollars, and in the most “profitable” year of 2015, it was $2,072. Another example is in Namibia where about 1,000 residents of two villages received 100 Namibian dollars each month during 2008 to 2009. Also in Finland, a UBI system was tested from 2016 to 2017 in which 2,000 nonworking citizens received 560 euros each month.
Today, 71% of Europeans support the idea of UBI. Pope Francis has encouraged such payments. Andrew Yang, a former 2020 U.S. presidential candidate, made UBI the focus of his campaign and created the Humanity Forward fund. Recently, the organization received $5 million from Twitter founder Jack Dorsey to give out money in the form of 20,000 microgrants of $250 each.
However, many point to the imperfections of the UBI system and believe that in the world of traditional finance, it can bring more problems than benefits. That said, things might be different if you look at the situation from a different perspective. The development of crypto technologies opens up new opportunities for introducing UBI, changing relations between the state and society and creating a more just world.
What Is Wrong With The Idea Of UBI?
One of the main arguments from opponents of UBI is that if the state distributes money to all citizens, people will work less, which will negatively affect the economy. It may also lead to an increase in the consumption of alcohol and other harmful substances, especially among the poorest segments of the population. However, experiments that have been performed refute these stereotypes.
Researchers found that in Namibia, UBI recipients began to eat better, their children were more likely to attend schools and crime rates decreased. In developed countries — for example, Finland — UBI recipients are more satisfied with their lives, more positively perceive their economic situations and, at the same time, do not try to avoid employment. Moreover, the reduction of anxiety about making money for food leads to the development of creative skills, which helps to find new areas of activity.
To realize a fair distribution of funds in the world of traditional finance, we need a simple system of interaction between all participants, which must take into account many factors — from inflation and possible corruption to the characteristics of migration flows. As a result, for a country with a population of 300 million people located in five different time zones, the cost of paying a UBI in the amount of $1,000 would be from $10 to $130 for each $1,000 paid.
Today, however, there is a technical solution that can help the state build an effective payment system for UBI with minimal costs.
How Bitcoin’s Blockchain Will Help
Using Bitcoin’s Blockchain and it’s accompanying transparancy, the distribution of UBI occurs inside a peer-to-peer information system, the participants of which will be:
The State: It carries out issuance, (using smart contracts) direct transfer of UBI payments to electronic wallets of citizens, control of cash flows within the system, and blocking of suspicious transactions, including the purchase of certain goods and services.
Citizens: They Spend The Money Received.
Organizations: UBI payments are accepted for payment from citizens, then they use the accumulated to pay taxes and/or convert to other currencies, which they then use for any traditional payments.
The blockchain will allow for the instant and reliable exchange of data necessary for calculating the value of a UBI payment, as well as to control its timely payment to each person. In order to avoid fraud and attempts to obtain a payment several times decentralized identification along with smart contracts will be utilized.
Thanks to the absolute transparency and automation of processes due to smart contracts, the technologies behind Bitcoin’s Blockchain can solve the main problems that today interfere with the technical implementation of the database technology.
Here Are Some Examples:
1. Inflation. When calculating the value of UBI payments, it is important to constantly monitor the change in the purchasing power of money, taking into account the actual consumer basket. Today, data for calculating the consumer price index is manually collected; that is, workers go shopping and write out prices. It is slow and expensive.
Solution: Using Bitcoin’s Blockchain will make the collection of information almost instantaneous, increase the objectivity of the data and eliminate errors in the calculations. Blockchain also allows you to change the position of goods and services for monitoring based on actual consumption by the population.
2. Different Living Standards. The same goods and services may have different prices and different densities in the consumer basket. When using “ordinary” fiat money for UBI payments, the issue will be resolved using simple averaging, which can lead to significant distortions of the overall picture. This problem is especially typical for nations with a large territory and a significant difference between urbanized and agricultural/fishing areas.
Solution: UBI, issued in bitcoin, allows not only to take into account changes in the cost of goods but also to create a “basket of subcurrencies.” The cost of goods in each region can be considered separately and then reduced to a common denominator through conversion rather than averaging. As a result, people will be able to buy an identical amount of goods and services, regardless of the real standard of living in a particular region.
3. Corruption. In regions with a weak law enforcement system, the payment of UBI in traditional currency can lead to an increase in corruption.
Solution: All transactions will be recorded on the blockchain, and it will be possible to track the entire path of the transaction from the moment of issue. Such transparency of payments leaves no room for corruption.
4. Immigration. With the current level of globalization, people often move to countries with more developed economies. If UBI is paid to all citizens, even those who do not reside in the territory of the donor state, this provokes even greater inequality: Those who leave are twice winners. On the other hand, if UBI is not paid to visitors who are legally working in the territory of the donor state, the welfare gap between them and the citizens of the country widens. In both cases, UBI can provoke an increase in social tension and affect migration flows.
Solution: Bitcoin’s Blockchain makes it possible to make UBI payments selectively — taking into account the main geolocation of the tax resident. For example, only to those who contribute to the creation of value added in the territory of the state or who have other legal grounds for receiving funds. For example, in the case of minors, pensioners, etc.
5. Costs. Within the framework of the traditional financial system, administering direct, regular, simultaneous settlements with millions of people is difficult and expensive. This requires the payment of many staff and the cost of operating an information technology banking infrastructure. It is also necessary to take into account additional costs during IT development and operation of systems: They must have an excess supply of productivity, which is necessary at peak load times.
Solution: Bitcoin’s Blockchain technology automates all processes related to accounting, routing, cash charging, etc. The total transaction cost — from the issuer to the electronic wallet — in the case of the state blockchain, becomes much cheaper than in the traditional fiat payment infrastructure. Custom wallets can be created through public application program interfaces, which will make them free for both the state and the public. In this case, the state will retain only the certification function of this software.
6. Relevance of Statistics. Today, businesses are forced to prepare many reports for various departments, which then turn into summary data for industries, regions and the country as a whole. Such a process requires a lot of labor, time and money, but its effectiveness is extremely low, as the final statistics are sent to the treasury a few months later when they could be, already irrelevant or at least outdated.
Solution: With Bitcoin’s Blockchain, statistics will become instant, accurate and reliable. When a person pays with UBI funds from a Bitcoin wallet, the information reflected in the cash receipt is sent to the state settlement centers in real time.
Accurate data on the dynamics of sales in the assortment context will make it possible to form informed plans for the production of goods and a price policy, and to make timely adjustments in the field of remuneration and social security.
States can become an effective tool for the economic interaction of the state and citizens on the basis of other, more equitable relations. Three years ago, in a speech to Harvard graduates, Mark Zuckerberg called for the use of UBI to give people the opportunity to try new things, make mistakes and look for their callings. And today, when there are so many restrictions in the world, we have technologies that can give each person more freedom and security. This must be used, making UBI an ideal tool to empower the individual and help create a better world.
Cities Experiment With Remedy For Poverty: Cash, No Strings Attached
Guaranteed income comes without work requirements; some worry about work disincentive, high cost.
Last year, Stockton, Calif., embarked on a civic experiment. For 18 months the city would send $500 a month to 125 randomly selected households in low-income neighborhoods. Researchers would compare the effect on participants’ health and economic situation to that of residents who didn’t get payments.
The $3.8 million experiment is the brainchild of Stockton’s 30-year-old mayor, Michael Tubbs, made possible by the Economic Security Project—a group co-founded by Facebook co-founder Chris Hughes that funds guaranteed-income projects—and other donors.
Stockton is at the forefront of a rethinking of the American safety net among some academics and public officials, particularly as the coronavirus pandemic has revealed the financial fragility of many households. They say the best way to combat poverty is to give cash to poor households, trusting them to make their own best decisions.
The idea is related to universal basic income, popularized by former Democratic presidential candidate Andrew Yang. Whereas UBI involves regular payments to everyone regardless of income, Stockton’s experiment targets poor neighborhoods.
If implemented nationwide, guaranteed income along the Stockton model would represent a significant expansion of the safety net and one that isn’t conditional on working or looking for work. Food stamps, welfare, Medicaid, the earned-income tax credit and unemployment compensation all include some form of work requirement.
Stockton’s payments have helped people affected by the recession cover their bills, said Mr. Tubbs. More than half of the funds have been spent on food and utilities, according to preliminary findings. One recipient, 64-year-old Magdalena Taitano said she used the money to pay for medicine and the electric bill and to buy a car after her old one was totaled in a crash.
“What we found is that you can trust people to make good decisions,” Mr. Tubbs said.
The program was originally set to end in July but new donations extended it until January.
Critics point to several potential drawbacks.
First, if only people below a certain income receive the transfers, and aren’t required to work, they may hesitate to take a job, or a higher-paying one, since they would then forgo the payment. The result could be less work and less economic dynamism.
“Giving money to people, no strings attached, changes behavior,” said Douglas Besharov, a professor of public policy at the University of Maryland. “We create incentives we don’t like or want.”
Studies of universal cash transfers in Alaska and among the Eastern Band of Cherokees in North Carolina found no negative effect on work. A study of lottery prizes—which are analogous to unconditional cash transfers—found that winners of relatively small amounts didn’t change how much they worked but winners of larger amounts did.
That disincentive could be mitigated by phasing out payments more slowly as other income rises, said Jesse Rothstein, an economist at the University of California, Berkeley.
“There’s not really a way to design that phaseout without creating some disincentive of people to work,” he said. “If it’s well-designed, you wouldn’t get a big effect.”
Second, a national guaranteed income would carry a steep price tag. Giving $10,000 a year to individuals earning less than $20,000 or married households earning less than $40,000 with a long phaseout period would cost roughly $1.2 trillion, or nearly 5.9% of annual economic output, according to University of Maryland economist Melissa Kearney and Magne Mogstad, an economist at the University of Chicago.
That is more than the federal government spent on Social Security in 2019. It would have to be funded either through an increase in the budget deficit, when the national debt is already headed over 100% of gross domestic product; much higher taxes; or sharp cuts to spending.
“Given how expensive it would be and given the political realities, it’s unlikely we would just be doing this on top of [existing] government safety-net programs,” said Ms. Kearney. “Then the question is, OK, which safety-net programs would you replace?”
It is hard to imagine Congress enacting guaranteed income anytime soon. But its approval of one-time payments of up to $1,200 for most Americans in March for coronavirus relief suggests openness to unconditional assistance, at least in some circumstances.
This Covid[-19] economy has just yanked the rug out from our communities across the country in a way we’ve never experienced before
— Saint Paul, Minn., Mayor Melvin Carter
“There hasn’t been a lot of hand-wringing about whether people might use the $1,200 checks to buy cigarettes or something like that,” said Ed Dolan, an economist at the Niskanen Center.
It is unclear whether Stockton’s initiative has affected people’s willingness to work. But since it is intended to be temporary, it might change behavior less than a permanent program.
Inspired by Stockton’s experiment, roughly two dozen mayors from cities as large as Los Angeles and as small as Holyoke, Mass., have signed on to a newly formed coalition advocating for a nationwide guaranteed income.
“This Covid[-19] economy has just yanked the rug out from our communities across the country in a way we’ve never experienced before,” said Melvin Carter, mayor of Saint Paul, Minn., and a member of the group.
Mr. Carter said his city is working with donors to set up its own experiment similar to the one in Stockton.
Other initiatives have sprung up in recent years. Santa Clara County in California gives $1,000 a month for a year to young people leaving foster care. Hudson, N.Y., is launching a pilot program—partly funded by a nonprofit founded by Mr. Yang—to give $500 a month to randomly selected residents for five years.
For now, most of the experiments are relatively small, temporary and reliant on philanthropy. But “each of these experiments gives you a few more data points,” Mr. Dolan said.
Rising Star Mayor Who Championed Guaranteed Income Loses Hometown Race
Michael Tubbs pushed an ambitious agenda for Stockton, California. Four years later, a blog campaign against him fanned criticism of his national profile.
Stockton Mayor Michael Tubbs came into elected office on a high in 2016, winning 70% of the vote. Since becoming mayor, he put himself and his economically distressed hometown on the national map through his advocacy for progressive programs, including one of the first guaranteed income experiments in the U.S.
The subject of documentaries and Daily Show appearances, particularly as cash assistance programs gained momentum during Covid, Tubbs had been a rising political star.
But this November, Tubbs’ star fell in Stockton: The 30-year-old mayor conceded the race to his Republican challenger, Kevin Lincoln, who was leading by 12 percentage points (though the tally isn’t final yet).
What changed? Some residents resented his national profile, viewing him as more committed to his own reputation than to giving attention to the city. Others objected to his progressive policies, choosing instead the candidate who was supported by the local police union and ran on a campaign to reduce homelessness and make government more efficient.
But Tubbs and his supporters also point to another factor that has become an increasingly common suspect in national and local races alike: A targeted misinformation campaign, in this case led by a local blog called the 209 Times.
The blog has published damaging and often misleading or false articles about the mayor, including misstating the impact of a scholarship program he spearheaded and inflating the amount of funding the city had received to address homelessness.
“I think when you spend four years unchecked with no real counter, just blatantly making things up every single day, there’s an impact,” said Tubbs of 209 Times’ influence. “I wish I had a crystal ball to foresee that, but I was too busy doing the work.”
Motecuzoma Patrick Sanchez, one of the founders and a writer for the blog, rejects the idea that any of his stories were fabricated. But he gladly takes responsibility for eroding the community’s trust in Tubbs.
He dubbed the unofficial anti-Tubbs campaign “Operation Icarus,” after the Greek myth about the boy who flew too close to the sun. “The more he buys into his own sense of political celebrity, the more he’s neglecting the fundamentals of why he was elected,” said Sanchez. “All we have to do is show the community what he’s doing and what he is not doing.” (Sanchez ran for mayor in the primary but lost to Lincoln.)
Since its launch in 2017, the 209 Times has amassed nearly 100,000 followers on Facebook and 119,000 followers on Instagram. Its website gets about 100,000 hits a month. In a city of 300,000, that’s a substantial reach. The Los Angeles Times reported that the blog’s influence grew in Stockton in the vacuum left by the city’s local paper, The Record, which has been depleted by layoffs and budget cuts.
“A lot of people are susceptible to this information without a strong local newspaper,” said Daniel Lopez, a spokesperson for Tubbs. “In replacement of that, people have been getting their news online through comments, through shares.” And what sticks, he says, are the negative stories that drum up controversy.
Not all of voters’ misgivings about the mayor were fanned by the site’s biases. While Tubbs made it his goal to reach out to “people that feel they’re disenfranchised by the system,” some residents of the city’s wealthier North side feel that they’re being ignored, said Kurt Rivera, a News reporter for ABC10 Sacramento who grew up in the city and moved back as an adult to cover it.
Eviction protections passed unanimously through city council relieved renters but alienated landlords. An unfounded fear that affordable housing would replace a golf course on the North side of town inspired homeowners to band against Tubbs. And advocacy for some criminal justice reforms have splintered the electorate.
Nationally, Tubbs has drawn a much warmer shade of attention. He grew up in Stockton, and, after graduating from Stanford University and spending a stint interning at the White House, returned in 2012 to run successfully for city council. Winning the mayoral seat in 2016 at 26 years old was a historic victory, making Tubbs the city’s youngest and first Black mayor.
Once in office in January 2017, Tubbs formed the Reinvent Stockton Foundation and launched a series of progressive programs, most famously the first major guaranteed income pilot in the U.S. Funded by private donations, the Stockton Economic Empowerment Demonstration has provided $500 a month to 125 residents for nearly two years.
It’s set to end in January, but Tubbs has been leading a national effort to bring similar experiments to other cities — and next year, places like Pittsburgh, Compton and San Francisco plan to start their own pilots.
The Reinvent Stocktown Foundation also runs the Stockton Scholars program, which gives scholarships to college-bound high schoolers. The program received a boost with a $20 million donation from Snapchat founder Evan Spiegel’s philanthropic fund.
In all, between private donors and government grants, Tubbs has brought in more than $100 million to the city over his four-year term.
Tubbs’ story and accomplishments inspired an HBO documentary, “Stockton On My Mind”; as part of its promotion this summer he appeared on national television shows and did interviews with celebrities like Killer Mike. He endorsed Michael Bloomberg’s 2020 bid to become the Democratic candidate for President, and appeared at campaign events on the former New York mayor’s behalf.
(In 2018, Tubbs also graduated from a Harvard mayoral training program sponsored by Michael Bloomberg, founder and majority owner of Bloomberg LP, the parent of Bloomberg CityLab. The next year, Bloomberg’s philanthropic foundation donated $500,000 to a Stockton education reform group.)
All those national commitments may have distracted Tubbs from the issues on the ground, critics say — an attack that’s similarly been lobbed at other charismatic mayors with higher ambitions, like Cory Booker, Pete Buttigieg and Eric Garcetti.
“When people see him in San Francisco or in Washington or in New York they feel that he’s neglecting his own people here,” said ABC10’s Rivera.
“This guy thinks he’s a big shot nationally,” said Sanchez. “While he’s out on TV talking about macroeconomics, the community is struggling with rampant violent crime, with a homeless crisis that has increased 200%.”
Experts note that because of Stockton’s governance structure, the city manager rather than its mayor actually controls a lot of its operations and policymaking. The role of the mayor is as an ambassador, a fundraiser and a go-between with other government entities and representatives.
Still, there are problems that continue to plague Stockton and have only been made worse by the pandemic. Homicides dropped 40% in 2018, but as of October, the rate was up 40% from last year, mirroring the trajectory of many cities affected by the economic distress of the pandemic. Total rates for violent and property crimes, meanwhile, have dropped nearly 20% this year.
The city had been recovering from the unemployment spike it experienced after the 2008 recession, but the coronavirus has left 11.4% of the population jobless. Stockton’s rate of homelessness has tripled between 2017 and 2019, and its poverty rate is about 20%.
As to the impact of global and national media appearances, Lopez and other supporters say they served to elevate Stockton as much as Tubbs.
For years, the city was known as the largest to declare municipal bankruptcy in the U.S., or the one with the most foreclosures, or simply the most “miserable.” With Tubbs in charge, Stockton’s star rose, too: No longer neglected, it had become a small city to watch.
Funders with deep pockets may be less wary to take a chance on Stockton, Tubbs told Bloomberg Businessweek. Steadying the city’s financial health was also a priority: Stockton will end the year with a $13.1 million budget surplus.
For the community groups Tubbs worked with — like the 125 SEED participants who received monthly cash payments, and the students who got the first round of college scholarships — his rising profile was a reflection of the life-changing effect his tenure had.
“I personally am astounded, for lack of a better word. I am perplexed, it doesn’t make sense to me,” said Janae Aptaker, the director of the Stockton Scholars Program & Strategy, of Tubbs’ loss. “As somebody who works at the foundation I understand the depth of the work that we’re doing. It’s driven by the needs of the community and some of our most needy folks in the community. It is kind of heartbreaking.”
“It’s a sad commentary on information, misinformation, education and the need for an informed citizenry.”
Coverage by the 209 Times of the Stockton Scholars program is one example of how the blog has misrepresented Tubbs’ record.
The blog claimed that the initiative has only given out $44,000 in scholarships to kids, using as its proof a 990 form from 2018, when the program was in its pre-launch phase and only giving out mini-grants.
As of this year, the foundation has spent $750,000 on scholarships of up to $1,000, for 879 students who are eligible to keep receiving grants for four years, according to the foundation. Another 1,420 students are eligible this year, and the foundation plans to support a total of at least 10 graduating classes.
But the articles have led school administrators and counselors to doubt the program, said Aptaker; she’s heard of students who were “unsure if they should apply because they’re not sure it’s real.”
Stories like this spread fast. “It also begs the question: What was so scary, what was so threatening, what was so bad about giving kids scholarships? Or putting the city in a healthy fiscal position?” said Tubbs. “It’s a sad commentary on information, misinformation, education and the need for an informed citizenry that’s given accurate information to make choices.”
Another misleading narrative pushed by the 209 Times is that the city of Stockton had been given $60 million to address homelessness in the city, without results to match. The city has only been given $6.5 million to address homelessness, according to the mayor’s office. (Sanchez says the $60 million figure was cumulative and included money allocated at the county level.)
“The idea that Stockton alone would receive $60 million is outrageous,” Lopez wrote in a statement. “But nevertheless, 209 Times readers, influenced by their fake news, regularly ask where the money went.”
Most recently, articles alleged Tubbs was in on a plan to build a new shelter for unhoused people from within the county and across the state at the San Joaquin County Fairgrounds. Putting emergency services at the fairgrounds had been discussed as part of a homeless task force brainstorming session.
But, Tubbs, City Manager Harry Black, and representatives from multiple state agencies said there was no “secret plan” to create such a regional homeless shelter. The Record ran a story saying as much, but it was too late, Lopez said. Readers believed it.
Sanchez also used the 209 Times to take issue with things like Tubbs spending city money to refurbish City Hall and buy a high-tech video camera, and his use of his own foundation to raise funds for the city. The blog fanned criticism of the city’s Advance Peace program, in which violent offenders are given mentorship and stipends to address poverty as a root cause of crime, saying it disrespected the families of victims.
The controversy over turning a golf course into housing — which ended in Tubbs saving the green and city resources by leasing it out to a private developer — and a debate over whether to cut district funding for school police were particular flashpoints, said Lange Luntao, the executive director of the Reinvent Stockton Foundation.
“Those two issues in my mind really exposed the fact that places like Stockton, while they are in the state of California, are still deeply conservative places,” said Luntao, who has also been unseated from his position on the school board. They were also “proxies for racism,” he said.
Tubbs says he’s experienced “racialized” undertones from his opposition since his city council days, as he spoke his mind and refused to be “docile” as a young Black man. “We actually did things, we actually moved things, we actually changed things,” he said. “And there’s a price that comes with that.”
Tubbs’ opponent is also a candidate of color, a Black and Latino man ten years Tubbs’ senior who, like Tubbs, grew up in Stockton. It is primarily his politics and his age that provide a contrast. Although the race is technically nonpartisan, Lincoln is a Republican who ran on a platform of addressing homelessness, increasing public safety and expanding civic engagement.
The pastor, former businessman and ex-Marine has said he does not support sanctuary city policies, has the endorsement of the police and firefighters’ unions, and in May, advocated for Stockton businesses to open up from Covid lockdowns, saying the state had “crushed the curve.”
“I believe that Mayor Tubbs came in with a huge mandate that I feel he may have squandered,” said Lincoln. Tubbs raised $662,842 for his campaign, much of it from outside the city. But Lincoln ran a successful local media blitz, raising a little over $299,000 and papering the city with flyers.
The foundation Tubbs started, Reinvent Stockton, is privately funded and run, and will live on no matter the mayor. But while Lincoln says that he hopes to continue to support some programs launched under Tubbs, like the Stockton Scholars fund, others will “have to die on the vine.”
Lincoln is not affiliated with the 209 Times, and was actually an early target of the site during Sanchez’s short-lived mayoral run. When the blog invited Lincoln to participate in a debate in January, he released a Youtube video explaining his decision not to attend. “I do not condone any person or media outlet using tactics that divide,” he said at the time, although he’s tempered his criticism in interviews after the primary.
Sanchez is quick to say he is not a “traditional” journalist but rather a “guerilla” one. “We have to do a lot of translating, we connect the dots,” he said. “I designed something that’s brought things like politics and other issues to the masses in a community that was rife with apathy.”
Stockton ranks 99th of the largest 100 cities for college attainment, with only around 18% of residents age 25 and up attaining a bachelor’s degree or higher.
“In general, We’ve seen that when a social media outfit like this gets set up in a civically under-educated community, it can lead to confusion and doubt,” said Reinvent Stockton’s Luntao.
As Stockton’s new leader, Lincoln may soon find himself the subject of the local kingslayer’s scrutiny.
“If he starts getting out of line, we’re willing to hold him accountable the same way,” said Sanchez.
2021 Will Be The Year Of Guaranteed Income Experiments
At least 11 U.S. cities are piloting UBI programs to give some of their residents direct cash payments, no strings attached.
Giving people direct, recurring cash payments, no questions asked, is a simple idea — and an old one. Different formulations of a guaranteed income have been promoted by civil rights leaders, conservative thinkers, labor experts, Silicon Valley types, U.S. presidential candidates and even the Pope. Now, it’s U.S. cities that are putting the concept in action.
Fueled by a growing group of city leaders, philanthropists and nonprofit organizations, 2021 will see an explosion of guaranteed income pilot programs in U.S. cities. At least 11 direct-cash experiments will be in effect this year, from Pittsburgh to Compton.
Another 20 mayors have said they may launch such pilots in the future, with several cities taking initial legislative steps to implement them.
“We are at a moment right now where city leaders, residents policymakers, and activists are all looking for big ideas to begin to chip away at some glaring structural problems in our systems and institutions,” said Brooks Rainwater, senior executive and director of the National League of Cities’ Center for City Solutions.
“This new wave of pilots is different because of the groundswell of support for guaranteed income we are seeing in cities across America.”
These programs are often called UBI, for Universal Basic Income, but with each distributing monthly payments to just some households, they aren’t yet truly universal, and there’s disagreement over whether they should be. Instead, they’re “unconditional,” a contrast to many existing government programs that tie benefits to work requirements, or set parameters on how recipients can use the money. Still, the idea isn’t to replace the existing safety net, but build upon it.
The current wave of city programs was catalyzed in the U.S. with a two-year pilot in Stockton, California, that began in February 2019. Originally slated to sunset in the summer of 2020, philanthropic support allowed the program to continue for six more months during the Covid-19 pandemic.
After gaining a national profile for helping to initiate the program, former Stockton Mayor Michael Tubbs was voted out of office this November — but not before launching a coalition of local leaders called Mayors for a Guaranteed Income, which he will continue to lead in 2021.
“We need a social safety net that goes beyond conditional benefits tied to employment, works for everyone and begins to address the call for racial and economic justice through a guaranteed income,” Tubbs said in a statement.
In the short term, the goal of the nearly 30 mayors in the coalition is to run guaranteed income experiments. The ultimate aim of the mayors coalition is to pass a federal guaranteed income program.
Every city that joins is eligible for $500,000 in pilot funding; they’ve partnered with the University of Pennsylvania School of Social Policy & Practice to produce research reports, and will share best practices throughout.
The effort has gained high-profile philanthropic supporters, including Twitter CEO Jack Dorsey, who donated $3 million to the group in July and another $15 million in December.
The results will be supplemented by other experiments in global cities, past and present. The largest such program is in Maricá, Brazil, where tens of thousands of residents below the poverty line are currently receiving monthly payments.
Although the U.S. programs announced thus far can serve only hundreds of residents per city, advocates say their immediacy, simplicity and emphasis on radical trust are an antidote to the biases and bureaucracies that hinder other welfare programs.
“Cash is the currency of urgency,” said Mayor Shawyn Patterson-Howard of Mount Vernon, New York, at a conference convened by the National League of Cities in November. “People need money right now.”
Recent stimulus payments from the federal government have helped some Americans see the benefit of direct disbursements and may have chipped away at public resistance: A poll commissioned by the Economic Security Project found that 76% of respondents supported “regular payments that continue until the economic crisis is over,” and a Gallup poll found widespread support for additional stimulus.
Proponents hope these local efforts will normalize and popularize guaranteed income in the U.S. for potential future federal action.
As we enter a second year of a pandemic that’s left more than 10 million Americans unemployed and 26 million hungry, most of these programs are geared at low-income residents. But they also expand ideas about what a guaranteed income might look like, with some tailored to more specific groups such as families with children or Black mothers, and more specific goals such as maternal health and racial justice.
In December, Compton in Los Angeles County launched what could become the largest guaranteed income pilot in the U.S.
The majority-Latino city with a poverty rate double the national average is run by Mayor Aja Brown, who was elected in 2012 as the youngest mayor in the city’s history — a distinction she shares with former Stockton Mayor Tubbs.
Called the Compton Pledge, Brown’s guaranteed income project has already started disbursing payments to 30 low-income families. Rolling enrollment will continue through March until nearly 800 families are participating.
Households will get up to $1,000 a month for two years, with payments calculated based on the family’s size. Recipients are randomly selected from a pool of the city’s low-income residents, and the project emphasizes that formerly incarcerated and undocumented people are eligible, even as they slip through the cracks of traditional welfare programs.
The coalition of partners supporting the project is made up of “strong women of color who are not seeing this particular policy as an emergency measure in the wake of Covid-19, but also as the beginning of how we can reimagine community investment, where government invests its money, and who we consider essential,” said Nika Soon-Shiong, the co-director of the Compton Pledge and the executive director of the Fund for Guaranteed Income.
Along with studying how people access the money and then how they spend it, the program has designed a basic income web portal for communications and payments, which other cities could use for future projects.
Compton’s program, like Stockton’s, is geared broadly at residents with lower incomes. Another program in Hudson, New York, will follow a similar model, with $500 monthly payments to 25 low-income residents for an even longer duration: five years.
But many of the other new programs are geared at even more specific populations.
Pursing Racial Justice
“If we offer our families a little bit of breathing room, will they be able to dream about something a little bigger?” That’s the question posed by the Magnolia Mothers Trust, a program launched in Jackson, Mississippi, to provide Black low-income mothers with $1,000 a month.
After a year-long pilot starting in December 2018 with 20 women, some takeaways emerged: Three-quarters of the participants were able to give their families three meals a day, and collectively, they paid off $10,000 in debt.
The women said they worried less, and were more hopeful about their futures. In 2020, the program started its second round, expanding to include at least 110 different mothers in Jackson.
Jackson is one of a number of cities narrowing its guaranteed income program to focus on racial justice, using the funds to address structural inequities. San Francisco’s mayor, London Breed, partnered with local birth equity initiative Expecting Justice to launch a targeted basic income program geared at the earliest phases of motherhood:
“The Abundant Birth Project” will support 150 Black and Pacific Islanders with $1,000 a month throughout their pregnancies and six months after, in an effort to reduce the disproportionate toll of maternal and infant mortality among those communities of color.
Unlike other programs for pregnant women that focus on providing particular services like transportation or medical care, this one empowers women to spend it on whatever comes up each month. Eventually, the hope is to supplement San Francisco mothers’ income for two years postpartum.
“Structural racism, which has left Black and Pacific Islander communities particularly exposed to Covid-19, also threatens the lives of Black and PI mothers and babies,” said Zea Malawa, who works on maternal and adolescent health at San Francisco’s Department of Public Health, in a statement.
“Providing direct, unconditional cash aid is a restorative step that not only demonstrates trust in women to make the right choices for themselves and their families, but could also decrease the underlying stress of financial insecurity that may be contributing to the high rates of premature birth in these communities.”
In Columbia, South Carolina, a pilot will focus instead on Black fathers to “address the fracturing of families.” The program, called the Columbia Life Improvement Monetary Boost, or CLIMB, will provide $500 a month for two years to 100 men chosen at random in partnership with the Midlands Fatherhood Coalition, an organization that works with South Carolina dads.
“Cash is the currency of urgency. People need money right now.”
Pittsburgh’s program has a more complex design, tailored to research on its own city: In 2019, a race and gender equity study revealed that Pittsburgh has some of the highest rates of poverty, unemployment and adverse health outcomes for Black women among U.S. cities.
Based on those findings, and the threat of the Covid-19 pandemic, the mayor’s Gender Equity Commission made several recommendations, among them building out a universal basic income pilot program.
Mayor Bill Peduto took heed, first announcing that he was joining the Mayors for Guaranteed Income group, and then unveiling a pilot program, the Assured Cash Experiment of Pittsburgh, slated to begin in 2021.
Some 200 families that earn less than 50% of the city’s area median income will receive a monthly $500 stipend over two years.
Half of the spots will be reserved for Black women-led households. So far the program is propped up by philanthropic and corporate dollars, but Peduto’s office is reviewing the law to see if the city can match funds for it as well, in hopes of scaling it up.
“From the beginning we thought that the city should have skin in the game, as a show of good faith to show that we’re a part of this program and believe in it. It needs to be piloted to be able to show people what the benefits can be, and then we have to be able to utilize the data in order to create benchmarks,” said Peduto.
“There are a multitude of indicators that we can look at but you’re never going to be able to prove it or see it if you can’t test it.”
Addressing Family Needs
Several other programs are focusing on families with kids. Mayor Melvin Carter launched the “People’s Prosperity Pilot” in St. Paul, Minnesota, to reach 150 families chosen randomly from those who signed up for another city initiative, which gives every newborn a college savings account seeded with $50. These families will get $500 a month for 18 months.
Carter says he’s seen the limitations of existing aid for families firsthand: As a child, his daughter had allergies to milk and peanuts, but because of the strict rules around how Women, Infants and Children benefits can be spent, his family wasn’t able to use the funds to purchase unique essentials like soy milk or almond butter. Already, more than 100 participants have signed up, Carter said.
Richmond, Virginia’s “Richmond Resilience Initiative,” launched by Mayor Levar Stoney this year, had an initial goal of reaching 18 low-income working families with kids who don’t qualify for other forms of government benefits; after Dorsey’s donation, the program has been expanded to reach 55.
Oakland hasn’t yet released details about its planned cash transfer program, but Mayor Libby Schaaf has said it, too, will target families with children upon its launch next year. And as Providence, Rhode Island, Mayor Jorge Elorza plans his city’s pilot, he says he’s been reflecting on the way money struggles “tear families apart.”
Paying For It
Particularly at a time of dire financial challenges for cities, most programs are benefiting from at least some private funding: Stockton’s pilot was entirely philanthropy-funded, though that didn’t insulate it from critiques by skeptical constituents, Tubbs said.
Other mayors have bolstered philanthropic investment with public dollars. Richmond partnered with the local Robins Foundation. Patterson-Howard says that since Mount Vernon’s project would double as a housing stability program, she’s looking to use federal Department of Housing and Urban Development funds and money from the CARES Act Covid relief legislation passed by Congress.
While the pilot is still in design mode, she hopes to target 75 to 100 families, and has already begun talks with the county, faith-based organizations, Black and brown sororities and fraternities and local businesses. For corporations that pledged to support the Black community in 2020, Patterson-Howard says this is a “sexy” opportunity to put those words into action.
Carter started St. Paul’s program with CARES Act dollars, combined with private fundraising. “One individual called me and asked how he could give $90,000 anonymously and when the check came, it was for twice that amount,” said Carter. Business leaders see the value in this kind of project, he said: “They need a stable workforce, who can feed their children and participate in their economy, as well.”
Not everyone is so gung ho. Critics of basic income come from the right and the left, the wealthy and the poor. Some argue that the money will be spent on drugs — in Stockton, on average, most of the $500 researchers tracked was spent on food and essentials each month — or that it will deter people from looking for work, an outcome deflated by a Finland experiment but hard to definitively disprove.
Others are turned off by the original idea of universal basic income that rich people could be included, or frustrated that they were not one of the randomly selected recipients in more targeted experiments.
The narrower scope of the new wave of pilots also has its own drawbacks: By tailoring eligibility to families with children or other specific groups of people, the pilots replicate some of the constraints of the national welfare system.
Means-tested benefits already miss out on a lot of people, either intentionally or accidentally. On the flip side, some people who do get federal benefits like disability or housing may fear that signing up for guaranteed income would make them ineligible.
Dispelling these doubts and building a case for why cash works has been a persistent focus for the mayors who are leading these projects. To many city leaders, the most enduring effect of these experiments may be to erase notions of “deservedness” from the welfare conversation entirely.
“We don’t tell banks how to use their money when we bail them out, we don’t tell companies how to use their money when we bail them out,” said Patterson-Howard. Essential workers deserve to spend their money on their own terms, too, she said.
“This space is full of racist tropes about what ‘those people’ will do if you give them money,” added Carter. “None of them are based in fact, statistics or real data. We have the opportunity to disprove some of those.”
Can A ‘Guaranteed Income’ For Black Entrepreneurs Narrow The Wealth Gap?
To tackle barriers to capital for Black businesses, an Oakland project is trying a new strategy: Monthly cash payments, no strings attached.
As dozens of cities roll out or contemplate “guaranteed income” pilot projects to give residents money with no strings attached, a program in Oakland, California, is testing a similar model to help small businesses.
Runway, which calls itself a “financial innovation firm,” originally helped Black women entrepreneurs mainly through small loans. But in 2020, Runway began gifting its business-owner clients — which it calls its “family” — with a monthly $1,000 stipend, no strings attached.
The Rapid Emergency Fund project is a pilot, which Runway is billing as a “universal basic income” experiment for Black business owners, to see if this kind of supplemental income could be curative for the racial wealth gap. It started in March when all non-essential businesses were ordered to close to stop the spread of Covid-19.
The experiment is the brainchild of Jessica Norwood who before co-founding Runway, studied the problem of why Black businesses fail as a research fellow for several organizations including the Nathan Cummings Foundation and the Center for Economic Democracy.
She arrived at the often-cited reason that financial institutions don’t finance and capitalize Black entrepreneurs like they do white ones. But digging deeper, she found that many African Americans also don’t have a family-and-friends network to rely on for backup even if they do get financing.
A 2016 Bank of America study found that more than a third of business owners received a financial gift from friends and family to help launch their companies. Because of the racial wealth gap — the median net worth of white families is an estimated $171,000 compared to the $17,150 median net worth of Black families — there’s just not a lot of disposable money laying around among Black parents, aunties and loved ones for them to help out kindred Black entrepreneurs when they need it. So Runway became the family Black entrepreneurs needed.
The firm launched in 2018, by providing low-interest loans of between $2,500 to $20,000 to a small group of Black entrepreneurs in Oakland, as part of its Runway Friends & Family Loan Program. To qualify, the awardees didn’t need an unblemished credit score or tall history of triumphant businesses.
They only needed to be “capital ready” — meaning having a strong business plan and having completed a local business training program. The current crop of loanees were nominated through Runway’s technical support partner, the Uptima Entrepreneur Cooperative. Once awarded the loan, its clients were only responsible for making interest payments of 4% for the first two years.
In the spring of 2020, Runway’s rapid emergency fund began giving these loan recipients direct cash infusions of $2,000 upfront, and then a $1,000 monthly stipend through October to keep them afloat, also providing them with free business and marketing consultancy services.
After the first year of the experiment, some results are already clear: Not one of the 30 businesses in the Runway consortium had to close up shop due the pandemic shutdowns. Considering the dry run a success, Runway began a second round of guaranteed income funding to its clients in November.
Candace Cox, who runs the Oakland-based artisanal jewelry and home decor store called Candid Art, thought it might be time to hang it up when cities and states first started ordering businesses to close last year. She had run out of fabric so she couldn’t even make face masks. The emergency stipend allowed her to purchase the bulk fabric she needed to change her fate.
“I was already in my head like, ‘I have to find a job or do DoorDash,’ but with the [Runway funding] I was able to pivot quickly,” said Cox.
The funding has been especially helpful given that many Black businesses were reportedly left out of the federal pandemic relief funding from earlier this year. There is incomplete data on the demographics of loan recipients from the Paycheck Protection Program, because the Small Business Administration did not require race data on its loan applications, according to the Center for Public Integrity.
However, of the 10% of loans where race was reported, 78% went to white business owners compared with 3% for Black owners, according to the report. Far more PPP loans went to businesses in majority-white congressional districts in the first round of funding compared with loans made to businesses in majority-nonwhite districts — though there was more parity by the second round of funding.
Runway sees its loan and guaranteed income work as part of a mission to build “emergent financial practices and infrastructure that close the racial wealth gap for good.”
While Norwood describes the cash payments as a sort of “universal basic income,” it differs from other such projects because the money is coming from a private organization and donors, not the government.
To fund their own project, Norwood and her fellow co-founders — all women of color — approached investors and donors who’ve been inquiring in the past few years about what they could do to help with anti-racist work and addressing the racial wealth gap problem. Several banks and financial institutions, including Berkshire Bank and the Self Help Federal Credit Union in Oakland, have also signed on as investors in Runway.
“This is a unique model where we try to put the entrepreneurs first and they all in fact see themselves as a cohort, helping to grow each others’ businesses,” said Norwood. “They know underneath all of this is a common set of values and that is what keeps them working as a community.”
Runway is currently developing a new cohort of Black businesses to finance in Boston. Norwood said she’s also fielding demand from many other cities, but cautioned that they weren’t looking to do a rapid expansion, mindful of the “violence of rapid capitalism” that she says has actually destroyed many Black communities.
“The history of capitalism has been predatory and violent for Black people, so we want to make sure that doesn’t happen with us,” said Norwood. “Capital needs to move, but it has to be the right kind of capital with the right kind of money. It can’t be episodic and it has to be deeply, deeply generous.”
Universal Basic Income Could Be Coming For Kids
Tax-credit proposals would send almost every parent $250 or more a month.
Entrepreneurs, intellectuals and presidential candidates have in recent years touted “universal basic income,” a cash stipend to everyone with no strings attached, as the answer to poverty, automation and the drudgery of work. It has never gotten off the ground in the U.S.
Instead, something similar in spirit but cheaper and more practical may be in sight. Both President Biden and Sen. Mitt Romney (R., Utah) have proposed significantly expanding the child tax credit and dropping many of its restrictions, in effect turning it into a near-universal basic income for children.
The main aim of their proposals is to reduce child poverty, which is higher in the U.S. than in most advanced countries. Both would slash the number of children in poverty by around 3 million, or a third, according to the Niskanen Center, a center-right think tank.
In the process, it may also become the only major benefit in the U.S. that achieves near universality—testing traditional American notions of the safety net. “It would be a huge change in how we think about delivering benefits,” said Elaine Maag, principal research associate at the Urban Institute.
Federal benefits usually require the recipient to meet some criterion of need: poor (for food stamps, welfare and Medicaid), unemployed (for unemployment insurance), working or looking for work (the earned-income tax credit and some programs with work requirements), or disabled (Social Security Disability Insurance). Only Social Security and Medicare approach universality: Almost all elderly are eligible.
While some 90% of households with children qualify for the current child tax credit, many don’t get the full $2,000 because they don’t owe enough tax. At most, they can receive back $1,400 more (the refundable portion) than they owe.
Mr. Biden’s plan, as detailed in legislative language unveiled by House Democrats last week, would boost the credit to $3,600 for a child under 6 and $3,000 for a child aged 6 to 17 and make it fully refundable, meaning even a parent with no income would receive the full amount.
The boost would start to phase out for individuals earning $75,000 a year and couples earning $150,000. The remainder would phase out starting at incomes of $200,000 a year for individuals and $400,000 for married couples, as it does under current law.
Mr. Romney would raise the credit for children under 6 even more, to $4,200. He would match Mr. Biden’s $3,000 for older children and start phasing out the full amount at $200,000 a year for individuals and $400,000 for couples. He would also replace the current earned-income tax credit, which is more generous for people with children, to a standard amount per family.
The upshot is that under Mr. Biden’s plan, families with two children would typically receive $6,000 to $7,200. Under Mr. Romney’s plan—$6,000 to $8,400. That’s less than the $12,000 per adult in universal basic income proposed by Andrew Yang, former Democratic candidate for president and now candidate for mayor of New York City.
But it’s a lot of money to a lot of parents, regardless of whether they work and (almost) regardless of how much they earn.
Almost as important is how the plans are administered: Both Mr. Biden’s and Mr. Romney’s proposals would pay the credit each month, instead of once a year when the recipient files his or her taxes. Mr. Romney goes further by entrusting the job to the Social Security Administration, which already sends monthly checks to Social Security beneficiaries. Mr. Biden would leave it to the Internal Revenue Service.
Ms. Maag said the IRS is better positioned to administer the plan right away; it already delivers some kind of benefit to 95% of families with children and has shown it can quickly send out checks as it did with last year’s pandemic-relief legislation.
But Melissa Kearney, an economist at the University of Maryland, thinks calling the benefit an allowance and administering it through Social Security would underline that this isn’t just another provision of the tax code. While academics consider a tax credit and an allowance “mathematically equivalent, in practice, they are not,” she said.
Just as Social Security represents a commitment to end elderly poverty, a child allowance would do the same for child poverty, she said. “We should set our priorities as a nation and then commit to spending on them.”
Universal basic income for kids costs a lot less than UBI for everyone. Ms. Kearney has estimated UBI for adults, depending on the design, would cost $1 trillion to $2.5 trillion a year.
By contrast, Mr. Romney’s plan would add $66 billion to current costs, which he would finance by ending several tax provisions and federal welfare block grants. Mr. Biden’s would cost $105 billion. He has yet to identify a permanent funding source.
UBI could discourage a lot of able-bodied adults from working, although experimental evidence is inconclusive. By contrast, the National Academy of Sciences estimates a $3,000 annual child allowance would reduce employment by only about 100,000 workers (compare that to the 1.4 million jobs a $15-an-hour federal minimum wage would cost, according to the Congressional Budget Office).
Moreover, those who work less are probably spending more time raising their children, a trade-off most Americans can relate to.
UBI for kids is also easier to sell politically. Many liberals like that most of UBI for kids goes to those on lower incomes without robbing other parts of the safety net. Some conservatives like that it’s pro-family. The two may be enough to make it happen.
Can A Guaranteed Income Help End Poverty?
A Q&A with former Stockton, California mayor Michael Tubbs on why giving Americans cash is an idea whose time has come.
Romesh Ratnesar: As the mayor of Stockton, California, you became a prominent advocate of guaranteed income — the idea that the best way to expand economic opportunity is to give people money, no strings attached, and allow them to spend it as they see fit.
Last week, a study of the guaranteed income program you launched, the Stockton Economic Empowerment Demonstration (SEED), found that among the 125 people who received the $500 monthly direct payments, the rate of full-time employment increased by 12 percentage points in one year. Receiving this stipend appeared to encourage work, rather than the opposite. Did that surprise you?
Michael D. Tubbs, founder, Mayors for a Guaranteed Income: Based on my own lived experience with poverty, I know that the issue is not that people don’t want to work, or that people are going to work less. So many people are trapped in dead-end jobs, which is compounded by poverty and economic scarcity.
People can’t afford to take a day off to interview for a better job, or pay for an outfit for the interview, or to fix their car so they have reliable transportation to get to the interview. So these findings weren’t a surprise at all.
And I hope they put to bed the notion that if we provide people with an economic floor, then they will forget to be industrious, forget to contribute or forget to be productive. In fact, the counter is true. We lose so much productivity and so much potential in this country because of economic scarcity.
RR: We now have the results of the first year of the SEED program, which preceded the pandemic. How has this crisis changed the conversation about guaranteed income and the need to rethink the social safety net?
MT: It’s highlighted the fact that a guaranteed income is not just part of pandemic response, it’s also part of pandemic preparedness. We live in a time of pandemics; it’s a question not of if but when. Covid-19 has been the most drastic example, but we’ve also had the energy crisis in Texas, we’ve had wildfires, hurricanes, all of which cause massive economic disruption.
The guaranteed income findings show that even before Covid, the $500 people received helped them build up a degree of economic resilience. When the pandemic happened, those that had guaranteed income were able to weather the shocks better than those who didn’t have it. And we see that reflected in the conversation right now in the halls of Congress, the need to provide cash relief to the American people.
We’ve had bipartisan support for sending out one-time money to the American people three times already. It’s sad that it takes a pandemic to get that level of empathy — particularly because so many folks were living in an economic pandemic before Covid-19.
RR: As you mentioned, there’s growing openness among leaders of both parties to provide more Americans some form of guaranteed income – whether through the stimulus checks or an expanded child tax credit, like the one proposed by Senator Mitt Romney, which would last beyond the duration of this crisis. What should Congress learn from the Stockton example?
MT: They should learn that you can trust the American people. You can trust that investing directly in the American people will yield dividends. You can trust that the American people are deserving of the dignity that comes with economic security. The best way to build back better is to give people the tools and resources to do so.
As for the specific proposals, I think the child tax credit is a step in the right direction, in terms of understanding the work of caregivers and the work of parenting — as someone with a 17-month-old, I can tell you, parenting is the hardest job I’ve ever had, and that includes being mayor.
But I think that people who don’t have children also deserve some form of recurring monthly checks. One reason we need a guaranteed income is because there are a lot of Americans who are choosing not to have children because of their economic situation, because they can’t pay for it, because they’re trapped in dead-end jobs, or because there’s so much student-loan debt.
RR: One of the criticisms of guaranteed income schemes is that we don’t have enough evidence that they work, because the sample size has been too small. The SEED program in Stockton only involved 125 people. Can we really generalize based on such a limited data set?
MT: This isn’t about the data; it’s really a question of political will. If data alone drove decision-making, we wouldn’t have the governor of Texas telling people not to wear masks. We’d have smarter policies on the climate; we’d have smarter gun policies.
All the data in the world is not enough to push political will on some issues. But the data is important. We designed a study with a sample size that is large enough to generalize — that was the point of the pilot. And to answer people who say this just happened in Stockton with 125 people, there are a bunch of pilots now happening all over the country.
Compton is doing guaranteed income for 800 residents. St. Paul is doing guaranteed income for 125 residents. Yolo County, California, is doing a basic income demonstration. So is Gary, Indiana. So there will be enough data. There’s also international data going back decades that speak to the same fundamental truths about the efficacy of a guaranteed income.
RR: How should the government pay for these programs?
MT: We gave $2 trillion dollars in tax cuts four years ago. If you reverse those tax cuts, that’s enough to pay for a guaranteed income for every household making $100,000 or less for a year. So that’s one way. We can legalize cannabis and use that tax revenue.
We can create a data tax or data dividend and allow everyone to own some of the wealth they generate through their online actions. We could defund the Space Force and other unseemly bloated military expenditures and use that to fund a guaranteed income. The issue is not whether we can afford to pay for it. The question is whether there’s a will to pay for it.
RR: You were elected mayor in 2016 at the age of 26, becoming the youngest big-city mayor in the country. You then launched this highly ambitious project to give people a guaranteed income, which hardly had a massive constituency behind it. Why did you decide to do that?
MT: For me, leadership is about the verb versus the noun, meaning leaders have to do something. And for me, having lived experiences with poverty and knowing so many people who are economically insecure, I felt a mandate to do something that was different. It would make no difference who was mayor if we weren’t solving the tough challenges and even being provocative about how we did so. It was also driven by my faith.
I’m a self-described church boy who grew up hearing that the righteous care about justice for the poor and that we’re judged, at least in my faith tradition, by how we treat the least of these. Being mayor was great, but I didn’t become mayor to be mayor. I became mayor to do things. I wanted to change lives, to change policies, change the conversation. I’m also a data person. I like to know what works, and I like to do it. And now we know, guaranteed income works. So let’s do it.
RR: You lost re-election last November. A lot of factors affected that outcome, but is there anything you would have done differently in terms of how you talked about the guaranteed income program and sold it to the citizens of Stockton? Could you have done more to convince people this was something they should support?
MT: I think the context in which we did this guaranteed income experiment bears mentioning. We were the first mayor-led guaranteed income demonstration in the history of this country. There was no template. It was new, and there wasn’t a pandemic to point to. Activation energy is always more difficult. Plus, disinformation is real. There’s a reason why we have an economy that works for the few and not the many.
There’s a reason why, 300 years after Thomas Paine and 60-plus years after Dr. King, who both called for a guaranteed income, that we’re just now having that conversation very seriously in this country. It’s not because Michael Tubbs can’t message. It’s because we’re going against a status quo that has a lot of interest in keeping things as they are.
And I was the first Black mayor of the city. It doesn’t mean that there weren’t other Black people in the 200 years of Stockton’s history that could have been mayor — it means there’s also some institutional bias and racism at work.
RR: Since leaving office, you’ve been focused on trying to build a national network, Mayors for a Guaranteed Income. What role can cities and mayors play in moving the needle on this issue?
MT: Mayors are the moral authorities and the real leaders in our democracy. They’re at ground zero for every major challenge. They have an understanding of what their constituents need. And mayors aren’t ideological. We’re very pragmatic. We’re very much about what works and how come we’re not doing it already. I formed Mayors for a Guaranteed Income because I knew that it would take some time to get the federal government to act.
But if we could get the mayors who represent the cities that these members of Congress and senators need to win their elections, then we would see more traction. And in seven months, we have 42 mayors who have signed on who are interested in the policy and want to test it. I can’t think of any other policy in this country right now where 42 cities have said, “We’re really going to try to do this.” And I think it’s incredibly exciting.
RR: What can these mayors say to the business community to build support for guaranteed income programs? What’s in it for employers?
MT: If you’re an employer, you do better when everyone does better — when consumers have more ability to spend, when people are healthier, when communities are safer. Guaranteed income is a massive investment in R&D, in the future prosperity of your company, your customers and your employees. The data says that you’ll have folks who are better able to contribute and be productive at work, so productivity increases.
And the pool of candidates to choose from increases. A guaranteed income allows people to have the agency to make decisions about how they spend their time, who they work for and to invest in training and upskilling if that’s what they need. And it also makes people healthier, less stressed, less anxious, better people and better employees, which is an overall win for all of us.
RR: What’s the bottom line? What is it going to take to make guaranteed income a reality for the Americans who can most benefit?
MT: Well, it’s going to take a majority of votes in the House of Representatives and a majority of votes from the Senate. It’s all political will. We know it works. The data in Stockton shows it works. The data from Mexico, Brazil, Kenya, Canada all shows that it works. The real question is, What else do our lawmakers need besides data to enact the policy? I think that’s where we’re at.
L.A. Set To Be Largest City To Offer Guaranteed Income For Poor
Los Angeles Mayor Eric Garcetti is proposing a guaranteed income program for poor residents, making it the largest U.S. city to test such a policy.
Garcetti will ask the City Council on Tuesday to set aside $24 million in next year’s budget to send $1,000 monthly payments to 2,000 low-income families in America’s second-largest city, the mayor said in an interview. Funds from council districts and other sources could bring the total to $35 million.
Candidates for the one-year program would be selected from the city’s 15 districts, based on each area’s share of those living below federal poverty guidelines. Garcetti is targeting households with at least one minor, and suffering some hardship relating to the Covid-19 pandemic.
While the movement is nationwide, the magnitude of Los Angeles’s poverty, where one in five of Los Angeles’s nearly 4 million residents are barely able to make ends meet, puts a national spotlight on the program.
“How many decades are we going to keep fighting a war on poverty with the same old results,” Garcetti said. “This is one of the cheapest insertions of resources to permanently change people’s lives.”
The idea of the government providing poor residents with some basic level of income has been floated by a number of prominent people over the years, including civil rights leader Martin Luther King Jr., libertarian economist Milton Friedman and Republican President Richard Nixon.
Businessman Andrew Yang made the idea a centerpiece of his unsuccessful bid last year to be the Democratic presidential nominee, and he’s continuing to advocate for the policy in his campaign for mayor of New York City.
Los Angeles would join a handful of other cities experimenting with a guaranteed income program. They include Stockton, California, Saint Paul, Minnesota, and Chelsea, Massachusetts. In many cases, the programs are funded by philanthropic organizations.
The coronavirus has accelerated plans for the program. In the past year, the Mayor’s Fund for Los Angeles, a non-profit affiliated with Garcetti’s office, has given out $36.8 million to 104,200 residents through a prepaid debit card called the Angeleno Card.
The city will be the recipient of more than $1.3 billion in federal stimulus funds from the recently passed American Rescue Plan, which could be used to fund the payouts. Los Angeles had a budget of roughly $10.5 billion in the current fiscal year.
“There’s no question the pandemic is proof that this works,” Garcetti said. “Small investments have big payoffs.”
Garcetti, a Democrat in his second term, is co-chair of Mayors for a Guaranteed Income, which has been advocating for the policy at the federal level and funding local programs. The group, which has 43 elected officials as members, was founded last year by then-Stockton-mayor Michael Tubbs.
It has received $18 million in seed money from Twitter Inc. co-founder Jack Dorsey as well as $200,000 from Bloomberg Philanthropies, the charitable arm of Michael Bloomberg, founder and majority owner of Bloomberg News’s parent company.
California cities have been taking a lead with these programs. Compton, just south of Los Angeles, fully rolled out its program last week, with 800 families getting between $300 and $600 a month. Oakland and San Francisco also recently outlined details of their projects.
In San Francisco, grants and some revenue from hotel taxes will fund monthly payments of $1,000 to about 130 artists for six months beginning next month. Organizers said the pilot is the first to solely target artists. Oakland will tap private donations this summer to fund its guaranteed income program, providing $500 monthly to about 600 poor families.
Still, a majority of Americans oppose the federal government providing a guaranteed basic income, according to a survey last year by the Pew Research Center. Support for the policy is much higher among Democrats, younger people, Blacks and Hispanics. Nearly 80% of Republicans and Republican-leaning independents oppose the idea of the federal government providing a basic income of $1,000 a month proposed by Yang.
Stockton, about 80 miles east of San Francisco, distributed $500 a month for two years to 125 families. Research from the first year found that recipients obtained full-time employment at more than twice the rate of non-recipients, according to a release from Mayors for a Guaranteed Income. They were also less anxious and depressed, compared with a control group.
Beneficiaries of the Los Angeles program, which Garcetti is calling Basic Income Guaranteed: L.A. Economic Assistance Pilot, or Big:Leap, will be asked to participate in studies to evaluate the impact of the payments on their lives. The mayor said he was targeting $3.5 million in additional funding to study the results.
Ultimately the costs of such programs will be too big for cities to finance alone, he said. But with data proving it works, Garcetti said states and the federal government could be inspired to fund them.
“Everybody said: ‘You give people money, they’re going to buy even bigger TVs,” Garcetti said. “Stockton showed that’s just not true. Low-income Americans know what to do with additional resources to build health and wealth, but too many of them are caught in the cycle of poverty.”
Los Angeles Takes An Oprah Approach To Guaranteed Incomes
The city’s program looks more like “You Get a Car” than a transformative attack on local poverty.
Los Angeles understands publicity and trendiness. Its leading industries depend on grabbing attention and conjuring desire. Its culture celebrates storytelling.
So it’s fitting that in his recent State of the City address, Los Angeles Mayor Eric Garcetti announced plans to give 2,000 local households $1,000 a month for a year. He boasted of his role as a founding member of Mayors for a Guaranteed Income and touted his program as “the largest Guaranteed Basic Income pilot of any city in America.” The $24 million plan will also be the first paid for with taxes — funds from the federal American Rescue Plan — rather than private donations.
The idea is alluring in its apparent simplicity: The solution to poverty is reliable cash. Let’s give everyone a regular check.
“Everyone deserves an income floor through a guaranteed income, which is a monthly, cash payment given directly to individuals” without strings or work requirements, declares Mayors for a Guaranteed Income. The advocacy group has established a center at the University of Pennsylvania School of Social Policy and Practice to conduct and track research on the idea.
Guaranteed-income programs have become the must-have policy accessory of the season. There are pilots in the works in Newark, Atlanta, Pittsburgh, New Orleans and St. Paul, among others. In December, Twitter CEO Jack Dorsey gave Mayors for a Guaranteed Income $15 million to fund such efforts. Having one in your city marks you as progressive, upbeat and visionary.
Like all glamorous visions, however, the general concept of a guaranteed income hides many details and difficulties — from where the money is supposed to come from to what the long-term effects might be. There’s a huge difference between the golden dream of money for everyone and the reality of small pilot programs.
That doesn’t mean pilot programs are useless. There are three possible reasons to run one. The first and most obvious is to help poor families. “This is one of the cheapest insertions of resources to permanently change people’s lives,” Garcetti told Bloomberg News.
The second is to learn more about details that could make a difference in a full-scale policy. How does a guaranteed payment change people’s behavior? Would a child allowance be better? How large should the payments be? Should they come as larger lump-sum amounts, say, quarterly or smaller, more frequent sums? How does cash compare to in-kind payments such as food stamps? A well-designed pilot can serve as a social science experiment, aimed at answering such important questions.
Or it can simply be a publicity stunt, serving to attract attention and garner good will for both the idea and its proponents. So far, that’s what L.A.’s appears to be.
In context, Garcetti’s plan looks more like Oprah’s “You Get a Car” moment than a transformative attack on local poverty. Los Angeles has about 1.4 million households, and about 18 percent of its residents are poor. 1 That means about a quarter million poor households. The plan, which will be limited to families with minor children, covers less than 1% of them—for a single year.
A lucky few get a short-term windfall.
Catalyzed by the federal government’s cash programs of Covid relief, the L.A. program follows an attention-getting two-year experiment in Stockton, in California’s Central Valley. There, 100 residents received $500 a month for two years with no strings. Another 25 “served as a politically purposive, or storytelling cohort,” who got the payments and talked to the press. A control group of 200 received nominal compensation for participating in the research but no regular payments.
Not surprisingly, the dependable money reduced participants’ income fluctuations and their stress. Compared with the control group, they were more likely to have full-time jobs after a year, possibly because the guaranteed income gave them the freedom to take time from part-time gigs to hunt for work. And, no, they didn’t spend the extra money on frivolities.
In his Bloomberg News interview, Garcetti touted those results, which garnered headlines at the time and made former Stockton Mayor Michael D. Tubbs a political celebrity. “Everybody said: ‘You give people money, they’re going to buy even bigger TVs,” he said. “Stockton showed that’s just not true. Low-income Americans know what to do with additional resources to build health and wealth, but too many of them are caught in the cycle of poverty.”
But the Stockton results didn’t surprise social scientists who’ve kept up with decades of research on what happens when people get unrestricted cash, whether through government programs, inheritances, lotteries or other sources.
“There’s often this idea that everyone is going to quit their jobs, and everyone is going to use drugs and alcohol and cigarettes,” says economic sociologist Stephen Nuñez, the lead researcher on guaranteed income policy at the Jain Family Institute. “That’s just not true, and you don’t need more studies to show that.”
New York City Experiment Will Give Cash Payments To Homeless Young Adults
The project joins a growing list of local experiments in no-strings-attached payments to residents.
New York will become the latest U.S. city to start a pilot giving out monthly cash payments to residents, joining a growing number of others this year that are trying out guaranteed income experiments. But the city’s program is particularly small and focused, giving monthly payments of $1,250 to up to just 40 unhoused people between 18 and 24.
The “Trust Youth Initiative” is targeted at a population with distinct policy needs, and designed with their input, in an attempt to test whether cash improves their housing outcomes.
Counts of homelessness among young people in the U.S. vary dramatically, from 36,000 people under the age of 25, according to a 2018 Department of Housing and Urban Development count, to 3.5 million youths according to a 2017 study by Chapin Hall, a policy research center at the University of Chicago.
That’s partly because youth homelessness “exists in much more hidden forms,” with many choosing to crash with friends instead of living on the streets, or moving in and out of family homes due to rejection or loss, said Matthew Morton, a research fellow at Chapin Hall and the principal investigator on the forthcoming cash transfer study.
Chapin Hall is co-leading the pilot with the city of New York and Point Source Youth, a homelessness advocacy organization.
There’s little research on how to prevent or reduce homelessness among young adults, and the existing systems aren’t doing enough to address long-term housing needs, says Morton. That’s where the pilot comes in.
New York City has a right to shelter policy and the city has expanded programming for youth crisis services, but these facilities aren’t designed to be pathways to permanent housing. Long-term stable housing and homelessness prevention are the areas in need of improvement, says Cole Giannone, senior advisor for Youth Homelessness at the NYC Office of the deputy mayor for Health & Human Services.
“Young people have always said, ‘I might need shelter right now, but shelter is not all I need.’ So what else?” Giannone said. “These young people don’t have generational wealth to fall back on when they’re experiencing homelessness. Sometimes the answer is, it could just be cash.”
Youth who are homeless are also much more likely to be Black and brown and LGBTQ than older counterparts; Chapin Hall found that 95% of youth who are homeless in NYC are people of color.
Participants in the new program are set to be enrolled starting late fall and will receive payments for 24 months. The amount of money individuals will get each month, $1,250, is tied to the cost of living in shared housing in New York City. And recipients will have flexibility in how they’re paid: They can access the cash at the beginning of the month or every two weeks, or get a three-month lump sum to cover larger costs — like moving expenses and a deposit — upfront. Additional supportive services, like job training and mentorship, are optional and available, too.
“Youth are experts on their own lives,” said Larry Cohen, the executive director of Point Source Youth, who echoed a mantra that has been used in the AIDS awareness campaign and in disability activism: “nothing about us without us.”
“There’s a tremendous amount of money spent on the youth homelessness crisis,” Cohen said — it costs $130.63 per day per individual to run an NYC shelter. “If that money was placed in the hands of young people, we’re excited to show better outcomes.”
The project will cost $2.5 million, with $300,000 coming from the NYC Mayor’s Office for Economic Opportunity, $205,000 from the city’s privately-donated Covid fund, and the rest from a network of nonprofits and organizations.
This hybrid of public and private funding is similar to the approach of pilots launched in other cities this year, several of which are also targeting their cash payment experiments to specific populations, like Black mothers and low-income families with children.
NYC’s pilot will also include a control group of 30 to 40 young people, who will be compensated for their participation in surveys but won’t receive payments. The organizers hope the outcomes will inform future phases of the program that could expand to include more unhoused young people, including in other cities.
Andrew Yang Hopes To Ride His Free-Money Plan To NYC’s City Hall
Yang wants to launch the largest basic income program in history. But would it work?
When Andrew Yang said he was running for mayor of New York City in January, people were thrilled. This spring he’d do something like deliver a speech outside a Brooklyn catering company, and a passing jogger would see him, stop, and jog in place for half an hour just to listen to him talk.
He’d be outside a food hall in Hell’s Kitchen when a young woman would approach him and, her voice shaking with nervousness, ask him to sign the back of her cellphone case. On a subway platform, a teenage girl squealed when she saw him, then apologized for being too young to vote.
“Andrew Yang is pretty sick,” Alex Arce, 20, a student at New York University, told me in April. Arce and a friend had happened upon Yang as he stood outside a boarded‑up restaurant in Manhattan’s East Village and called for a full reopening of New York’s bars.
“We need commonsense regulations!” Yang was saying. “I don’t know about you, but I miss sitting next to people in bars!” At the time, less than a third of the city had been fully vaccinated.
I asked Arce why he liked him.
“I don’t know, he’s just a cool guy,” he said.
What about his policies, anything that he stood for?
Arce thought a minute. “The universal income thing?” he finally offered. “That’s pretty great.”
For someone who has never held government office and has campaigned only once before, when he ran for president in 2019, Yang is extraordinarily adept at getting people to like him. Early this year he was bumping elbows with strangers and leaning in close for photos—which may explain how he contracted Covid-19 in February, just weeks into his campaign.
When the weather was still cold he wore the same thing wherever he went: dark overcoat, blue and orange Mets scarf, and a black face mask with “Yang” printed in big white letters, a sort of Where’s Waldo approach to getting his name out there.
It’s the same trick he used while running for president, wearing a lapel pin that said “MATH” to the Democratic debates and tying himself to one signature idea: that every American should get a basic income of $12,000 from the government, no strings attached.
Yang dropped out of the presidential race in February 2020, but more than a year later, 85% of New Yorkers still knew who he was and what he stood for.
“I love it! Basic income! Stimulus checks!” said Glen Kelly, outside the Mets’ Citi Field, where Yang was meeting fans before the first home game of the season.
“That income idea,” echoed Ramon Guadalupe, a few days later, when he ran into Yang at the reopening of Coney Island. “I like that he’s for regular people.”
The irony is that under a Yang mayorship, most New Yorkers wouldn’t actually get any money.
The concept that made Yang famous, the thing people love him for, isn’t something he’s proposing for New York. He can’t—the city couldn’t afford it. Instead, he’s running on “ cash relief,” a payment one-sixth the size of his presidential proposal, targeting only the poorest 6% of New Yorkers.
“I want to be the antipoverty mayor,” Yang told me. “I’m very excited about it.” He led in the polls for months after he entered the race, and although he’s recently been slipping, he could still win the Democratic primary on June 22 under the city’s new ranked-choice voting system.
If he does—and presumably goes on to win the general election in the heavily Democratic city—his plan would, as his campaign flyers proudly proclaim, make New York City the site of “the largest basic income program in history.”
The Question Is, Would It Be Enough?
Andrew Yang is easy to talk to. There’s something familiar about him, something that makes people want to be his friend. When he speaks, his remarks come peppered with bursts of self-conscious laughter, a sort of guttural huh-huh-huh that erupts whenever he says something too personal or serious or that he thinks the other person might not like.
In the two months I followed him around New York, he was almost always in a good mood—“Tell me more! Tell me more!” he once giddily exclaimed as a grocer in Queens explained the difference between city and state dining regulations—except for a few times when it was very obvious he was not.
Yang grew up a slightly nerdy kid, the son of Taiwanese immigrants, in mostly White suburban neighborhoods in Schenectady and Westchester County. He played Dungeons & Dragons and Atari and did well enough in school to both skip a grade and get a scholarship to the prestigious Phillips Exeter Academy.
From there it was on to Brown University, Columbia Law School, then the corporate law firm Davis Polk & Wardwell, where it took only a few months for Yang to discover he didn’t want to be a lawyer after all. “They’d sit you at a desk and say, ‘Here are a bunch of documents. Go,’ ” Yang says. “I said, ‘OK, that is not what I want.’ ”
He was looking for something else to do when a friend he’d made at the firm, Jonathan Philips, came to him with an idea: What if, instead of wasting money on black-tie galas, a charity could hold an online auction for almost nothing, freeing it up to put more money toward its actual cause?
“Andrew immediately perked up,” Philips says. “I remember his eyes just lit up. He’s a problem solver, and he very much wanted to solve this problem.” The two men quit their jobs and launched a company, Stargiving, an online platform for auctioning off celebrity meet-and-greets.
It didn’t work. For one thing, they didn’t know any celebrities. Also, the first dot-com bubble had just burst. “It failed miserably,” Yang says. “I will never forget how that felt.”
He spent the next few years hopping between jobs. He was in his early 20s and had $100,000 in student loan debt. He couldn’t afford rent in New York, so he slept on friends’ couches and ate a lot of free bread samples at the sandwich chain Così. For extra money he became the first instructor at a small GMAT test-prep company called Manhattan Prep.
Yang got the job because he knew Manhattan Prep’s founder, Zeke Vanderhoek. In 2006, Vanderhoek left to start a charter school; he asked Yang to replace him as chief executive officer. Soon after that, Yang met his wife, Evelyn.
“Things really clicked into place for a number of years,” he says. “They were, I think, some of the happiest years of my life.” He ran Manhattan Prep for about five years, taking it from $2 million in revenue to more than $17 million. In 2009 he sold the company to Kaplan Inc., a deal that earned him several million dollars, but stayed on as president.
Over time, though, a problem began to nag at him. The Great Recession had just happened, and yet here were all these college kids taking out massive loans for an MBA, even though there wouldn’t be many jobs available when they graduated.
At the same time, Yang was touring colleges across the U.S., visiting parts of the Midwest and South he’d never seen before. He was shocked at how economically depressed the regions were. He wondered if he could figure out a way to get college graduates to work in Middle America, boosting local economies.
Yang left Manhattan Prep in 2011 to start his attempt at a solution: Venture for America, a nonprofit modeled on Teach for America that would place college graduates at startups in cities such as Detroit and New Orleans. VFA fellows, as they were called, would get work experience and maybe go on to found companies of their own.
Yang launched VFA with the ambitious goal of creating 100,000 jobs in smaller U.S. cities by 2025. The nonprofit was immediately popular; Tony Hsieh, the late e-commerce entrepreneur, donated $1 million so VFA could help revitalize his hometown of Las Vegas. President Barack Obama named Yang one of his “Champions of Change” before the first class of VFA fellows had even been placed in their cities.
“The fundamental problem that VFA was trying to solve wasn’t something most people were talking about,” says Ethan Carlson, a former VFA fellow who graduated from Yale and was matched with a tech company in Providence. “By pointing it out and saying, ‘I’ve designed a solution for it,’ it felt very compelling. Of course, the real story is much messier than that.”
VFA never achieved what Yang wanted it to, at least not on the scale he envisioned. The economic forces that had hollowed out the middle of the country were too big, too intractable, to be fixed by plopping a few hundred Ivy League graduates in Cleveland.
Earlier this year the New York Times reported that only 150 people work at companies started by VFA fellows in their original cities. The Yang campaign disputes this figure; it says VFA created 4,000 jobs, though not necessarily in smaller cities. When contacted by Bloomberg Businessweek, Venture for America said it no longer tracks job creation as a metric of its success.
VFA’s shortcomings bothered Yang. In 2016 he was driving across northwest Michigan, passing through small towns with boarded-up storefronts, when he stopped at a diner to eat. “I just thought, ‘How am I talking about entrepreneurship?’ ” Yang says. “The scale of need for changes to the economy is so massive, it gave me a sense of how hollowed out communities really were.”
He started reading books about job loss and automation. He fretted about the growing number of working-age adults receiving disability payments in lieu of a job. But it was Raising the Floor, written by Andy Stern, the former head of the Service Employees International Union, that pushed Yang into politics.
In his book, Stern argued that a $12,000 universal basic income could help offset the wage stagnation and job loss so many Americans faced. He called for a “huge public awareness advertising campaign” for the idea and said the best way to do that was for someone to run for president. Yang liked the book so much that he went to hear Stern talk and, when the event was over, asked him to lunch.
“He said, ‘I’m going to make you an honest man. You said someone should run for president in 2020 on basic income, and I’m going to do that,’ ” Stern recalls.
“Andy was like, ‘Who are you again?’ ” Yang says.
The idea behind basic income is simple: People need money to live, so the government should give it to them. Ideally, a thriving economy allows people to prosper on their own. But there are always some who are left behind. A basic income would ensure that everyone could afford food, shelter, and other necessities, no matter what.
The U.S. has never implemented a national basic income program, though it did come close. In 1969, Richard Nixon included what he called a “guaranteed minimum income” of $500 per adult (about $3,600 today) and $300 per child in his Family Assistance Plan; it passed the House of Representatives twice but died in the Senate and never became a law. A few cities launched pilot programs; the largest, in Denver, ran from 1971 to 1982 and involved 4,800 families.
But by the time Ronald Reagan took office in 1980, Washington was looking to curb welfare programs rather than expand them, and the political momentum for a minimum income petered out.
For the next 35 years, it was relegated to a niche idea occasionally floated by academics and policy wonks but rarely taken seriously. “You’d go to these conferences for basic income enthusiasts, and you’d be lucky to get 20 people in a room,” Stern says. “And you’d never see a politician there.”
Then, in 2016, two things happened: Chris Hughes, one of the co-founders of Facebook Inc., created the Economic Security Project with the goal of funding what he calls “guaranteed income” programs, and Michael Tubbs, then the 26-year-old mayor of Stockton, Calif., decided to try it in his city.
Hughes and Tubbs were attracted to the idea as a way to alleviate poverty. Tubbs came to it from a practical standpoint—“I grew up poor, I saw how hard my mom worked and still didn’t have enough money to pay the bills”—while for Hughes it felt more like a moral imperative.
He looked at wage stagnation; the long decline of the middle class; that the U.S. was home to 40% of the world’s millionaires yet still had the highest poverty level of any developed country. “We have the tools and wealth to eradicate poverty in the United States and stabilize much of the middle class in the process,” Hughes says. “I think there is an ethical responsibility to do that.”
In 2017, Stockton became the first U.S. city to announce a basic income program in almost 40 years. Partially funded by Hughes’s Economic Security Project, 125 people were randomly chosen (given a few parameters) to receive $500 a month. Payments didn’t start until 2019. Giving money to people, it turned out, was more complicated than it looked.
Some recipients didn’t have a bank account, so the money was delivered on debit cards. Many of them were already receiving welfare, usually housing vouchers and food stamps, both of which had income limits.
Stockton’s experimenters had to figure out how to give them cash without kicking them off other programs. “The goal wasn’t to remove something they were already receiving,” says Sukhi Samra, director of the Stockton Economic Empowerment Demonstration (SEED). “If you do that, you aren’t benefiting anyone.”
Because the money came on a debit card, researchers could track how it was spent. About half went toward groceries and household supplies. Utilities and auto repairs came next. Then there were little things, small purchases that meant much more than they cost. One parent was able to afford a birthday cake for his child for the first time in years.
The payments also helped people find work. At the start of the program, only 28% of recipients had a full-time job, but by the end of the first year, 40% of them did.
Some people bought suits for interviews. One man had been eligible to get his real estate license for more than a year but couldn’t take the test because he couldn’t afford to miss a shift at his hourly job. With an extra $500, he took—and passed—the test.
The Stockton experiment had just gotten under way when Yang ran for president; not many people knew about it yet. But he wasn’t proposing a supplement to existing welfare programs. He envisioned something that could replace the “vast majority” of welfare altogether.
Yang called his version of basic income the Freedom Dividend because the name polled well with conservatives. (Liberals liked the idea no matter what it was called.) It looked an awful lot like what Stern proposed in Raising the Floor: a monthly payment of $1,000 for every American between the ages of 18 and 64, pegged to rise with inflation.
“It will help lighten up the bureaucracy of the 126 welfare programs we currently administer,” Yang explained in a 2019 interview at LibertyCon, a convention for libertarians. As an example, he said that someone could choose between food stamps and the Freedom Dividend, but he stopped short of saying he wanted to eliminate food stamps completely.
This didn’t make a lot of sense. For one thing, according to a 2013 Cato Institute analysis of the maximum amount of welfare available in the U.S., even Mississippi, the state with the paltriest programs, offered $17,000 in potential benefits. Most poor Mississippians were only getting a fraction of that, of course, but Yang wasn’t necessarily offering a better deal.
On top of that, the program was going to cost $1.3 trillion. Yang’s primary method of financing it was to institute a value-added tax similar to those found in Europe. He was, and remains, vehemently against raising income taxes on the wealthiest Americans.
“I think an income tax is a poor way, an inefficient way, to generate revenue,” Yang told LibertyCon in 2019, explaining that it penalizes people for working hard and earning money.
“Giving people $2,000 or $3,000, you’re not lifting huge numbers of New Yorkers above the poverty line”
But a VAT, like a sales tax, is regressive. Poor people spend almost all of their income on goods and services because they have to, and a VAT would therefore capture a larger portion of their money, which means Yang would essentially be financing the Freedom Dividend by taxing the very people he was trying to help.
Rob Hartley, an assistant professor at Columbia’s School of Social Work, analyzed the Freedom Dividend and found that while it would bump many people above the poverty rate, it actually increased the number of children living in deep poverty, because their families would be getting fewer benefits and would be paying more in taxes to finance the program.
This kind of nuance was hard to parse when Yang was running for president. He got enough donations to make the Democratic debate stages, but as a minor candidate he was rarely given time to talk at length. It was only at places like LibertyCon or on Joe Rogan’s podcast that he had time to elaborate beyond his elevator pitch.
In those venues, he took some unusual positions. He said he wanted to appoint a White House psychologist and turn April 15 into a holiday to “make taxes fun.” At one point he told Rogan that he was most concerned about male unemployment figures because “men deal with joblessness very, very poorly,” whereas “women are more adaptable” and can more easily find work.
“Joe put Andrew into another dimension,” says Brian Yang, one of Yang’s lifelong friends (they’re not related) who worked with him at Stargiving and raised money for his presidential run.
“The day after he went on the podcast, the donations started pouring in.” Yang raised more than $40 million during his campaign, inspired a #YangGang community on Reddit, and at one point had 3% of voters supporting him, which made him a little less popular than Pete Buttigieg but much more appealing than Amy Klobuchar and Kirsten Gillibrand.
Yang dropped out of the presidential race having achieved his goal: to teach Americans about basic income. He quickly formed a nonprofit called Humanity Forward, through which he planned to further advocate for the idea.
“His exposure, his ability to grab people’s attention, his almost single-minded focus on basic income as his major policy proposal took the idea to a completely different level,” Stern says. “A lot of people set the table for basic income. But Andrew served the meal.”
Basic income might have faded into the background again, Yang’s candidacy relegated to a Trivial Pursuit question, if it weren’t for the Covid pandemic. The first lockdown orders came less than a month after he ended his presidential campaign.
Huge sectors of the economy were shuttered overnight, pushing millions of Americans out of work. And New York City wasn’t just hit hard—it was gutted. More than 20,000 New Yorkers died from Covid that spring, so overwhelming hospitals that they ran out of places to store the bodies.
The number of payroll jobs in the city dropped almost 14% last year, more than twice the national decline, according to a study by the New School Center for New York City Affairs. Nearly 70% of the newly unemployed were people of color, and two-thirds of them were making less than $40,000 a year.
Affluent New Yorkers fared better, of course, but many of them did it somewhere else: More than 330,000 people fled the city during the pandemic. Yang was one of them, moving his family from their Manhattan apartment to their second home outside the city. (“Can you imagine trying to have two kids on virtual school in a two-bedroom apartment, and then trying to do work yourself?” he later asked, essentially describing the living conditions of millions of New Yorkers.)
But he hadn’t given up on basic income—or politics. He stumped for Democratic candidates in Georgia. His nonprofit, Humanity Forward, repositioned itself as a Covid-relief organization, donating $1 million to 1,000 families in the Bronx and lobbying Congress on cash relief for Americans.
Yang doesn’t take credit for the three rounds of stimulus checks Congress ultimately approved, but he does consider it an extension of his original idea. “We’re essentially running a very, very large trial” for basic income, he says, pointing out that while the checks aren’t likely to continue past the pandemic, they are a rare example of the U.S. government giving people cash simply because they needed it.
Yang is cagey about why he decided to run for mayor. New York magazine reported that Bradley Tusk, who ran Michael Bloomberg’s 2009 mayoral campaign and is now a venture capitalist and a political strategist for clients such as AT&T Inc. and Uber Technologies Inc., had been casting about for a candidate who’d be amenable to his business interests and landed on Yang after his first choice fell through.
(Michael Bloomberg is the owner of Bloomberg Businessweek’s parent company.) Yang puts it slightly differently. “My team talked to the Tusk team, and then we did an evaluation and figured out what the process would look like and a bunch of other things,” he says, an answer so vague it’s almost nonsensical. Either way, by January he’d returned to the city and announced his candidacy. Tusk Strategies would run his campaign.
Things got goofy almost immediately. Policies touted on his campaign website included luring TikTok stars to the city by letting them live in “hype houses” and throwing “The Biggest Post-Covid Party in the World.” When he delivered the necessary signatures to the Board of Elections to officially get on the ballot, he broke into a song from Rent.
At the beginning, the silliness paid off. “He’s very upbeat and positive, I think that’s resonating with voters,” says Christine Quinn, who ran for mayor in the 2013 Democratic primary but lost to Bill de Blasio. “It’s been such a dark time, I think people want to know things are going to get better.”
Yang knew people saw him as the basic income guy. He also knew that in New York, basic income wouldn’t work.
“My first thoughts were, ‘OK, we can’t do the Freedom Dividend,’ ” he says. Most cities and states are required by law to balance their budgets—something the federal government doesn’t have to do—and the Freedom Dividend would cost more than New York’s entire budget. “So what can we do instead? What’s a realistic commitment?”
He tasked Sasha Ahuja, a social worker and progressive activist who’d joined his campaign as co-manager, and another staff member, Jesse Horwitz, with crafting his official proposal.
They settled on $1 billion, about one-tenth of New York’s projected 2022 budget. If they divided it up into average payments of $2,000, they could reach about half a million New Yorkers. Their goal is to bump “every New Yorker up to within 50%” of the city’s poverty threshold, Horwitz says. Homeless people, undocumented residents, and the formerly incarcerated would all qualify.
Getting money to people in these groups isn’t easy, though. Many of them don’t have bank accounts; Stockton got around this with debit cards, but Yang wanted to create what he called the People’s Bank, a city-run system through which New Yorkers could use a municipal ID card to open an account and access their payments.
And how would the city find the 500,000 recipients? Ahuja says they’d work with agencies such as the Human Resources Administration, which administers many existing programs, to figure out who gets money and how much. But that’s about as specific as she can get.
Then there was the question of how the money would interact with other welfare programs. “I only talked to them once, and it was to reemphasize to them that this has to be supplemental to existing benefits,” says Samra, who designed Stockton’s experiment.
They took her advice; Yang’s cash-relief proposal will supplement state and federal welfare. This is a major ideological shift from his original Freedom Dividend, but Yang insists it isn’t a big deal to him.
“I know that people took me as being very anti-helping-people with the current safety nets, but really I’m anti-bureaucracy more than anything else,” he says. “I think targeted cash relief to alleviate extreme poverty is great! I’m very excited about it.”
Once Yang and his team settled on a plan, they had to figure out how to fund it. This is where things get hazy. Yang says some of the money will come from private donations, but he won’t say how much or from whom. “I’ve talked to various individuals and philanthropists that led me to believe that we could have more resources,” he says. The $1 billion figure is just what he expects the city to pay.
New York is home to 112 billionaires and an additional 7,700 people who have at least $30 million, but Yang still eschews raising income taxes, which for millionaires are already the highest in the country; a hike would require the state government anyway. Instead he’d target vacant commercial property, which is currently taxed below its assessed value.
Early in his candidacy he also suggested that the city raise money by putting a casino on Governors Island—that is, until he learned it was prohibited by a federal deed. Then he floated the idea of eliminating tax breaks offered to places like Madison Square Garden, though, again, the state is in charge of that.
Yang assured me he could find $1 billion somewhere. “Am I confident that I’m going to find all sorts of things in the budget where I’m like, ‘I could get rid of this and no one would notice?’ ” he asks. “Like spending $3 million on a city bathroom when you could get the same bathroom for $1 million?”
He estimates it will take as long as two years before his cash-relief program is up and running, mostly because he has to create the People’s Bank first. So it will be a while before anyone benefits.
And while 500,000 recipients sounds like a lot, that’s still less than 6% of New Yorkers. By the city’s own estimate it entered the pandemic with 41% of its population at risk of falling into poverty—and that was considered a good thing, because the figure used to be even higher.
To reach 500,000 people, Yang’s offerings have to be relatively small. An average payment of $2,000 a year works out to just $167 a month. That’s a third of what residents got in Stockton. In a city with one of the highest costs of living in the country, $2,000 is practically nothing. Yang’s cash-relief plan is essentially offering the equivalent of a monthly MetroCard for the subway plus an extra $40.
Hartley, the Columbia professor, points out that the people Yang is targeting have so little money that even a seemingly negligible amount can improve their lives. “For some people it doubles their disposable income. That’s substantial.
That means something,” he says. A recent analysis of Census Bureau studies showed that the federal stimulus checks, which provided as much as $3,200 per person, helped people buy food and pay their bills during the pandemic, reflecting just how close to the bone millions of Americans live.
Surprisingly, New York has tried something similar before. In 2007 the city launched what it called a “cash transfer” pilot program for 4,800 low-income families, who received about $2,900 a year for three years. It wasn’t a basic income, because the cash was conditional; parents had to “earn” money by participating in job-training programs, for example.
“In hindsight it was a huge headache,” says Kristin Morse, then the executive director of the NYC Center for Economic Opportunity, which oversaw the program. “But families did earn the money. They spent it on food and rent and electric bills. In that sense it was a success. But giving people $2,000 or $3,000, you’re not lifting huge numbers of New Yorkers above the poverty line.”
This is the harsh reality of basic income. Giving money to people who need it really does work, but to do it on a grand scale is almost prohibitively expensive, especially for a city. “No city in the United States can afford a guaranteed income for its residents without support from other levels of government,” says the Economic Security Project’s Hughes.
“Even with the fuzziest of fuzzy math, it still requires an economic investment at the state or federal level. I think it would be better for people if we’re clear about that.”
That’s not to say a cash-relief program isn’t worthwhile, or that it wouldn’t work, just that the vast majority of New Yorkers won’t notice its effect. Just as Venture for America was a noble but ineffectual answer to a struggling Middle America, so is cash relief a small gesture, one that gnaws away at the edges of poverty but doesn’t come close to solving the deep, intractable inequities that cause it to endure.
Yang knows this. “Is a billion dollars enough? No,” he admits. His cash-relief program needs to operate in tandem with other efforts.
That’s why he wants to equip homeless shelters with broadband internet so the children in them can do better in school; expand mental health services and inpatient psychiatric beds to reduce street homelessness; and give a $1,000 annual voucher to families with children who are living in poverty, are English language learners, or have a disability that requires specialized instruction.
But these are all small programs, one-off ideas that are unlikely to be enough, and Yang seems reluctant to make the kind of sweeping changes necessary to really be the “anti-poverty candidate,” as he calls himself. New York’s public school system is one of the most racially segregated in the country and serves 100,000 kids who are homeless.
Although the city uses a weighted model that drives more money to schools with lots of low-income students, most of them aren’t fully funded according to what the formula says they deserve. But Yang rarely talks about desegregation. “An extra $1,000 is important and good,” Morse says, “but if families aren’t getting their kids’ needs addressed by the public education system, $1,000 isn’t going to fix it.”
Basic income has a life beyond Andrew Yang. Tubbs is no longer mayor of Stockton, but before he left office he created Mayors for a Guaranteed Income, a coalition of leaders interested in re-creating Stockton’s experiment in their own cities. Samra is now director of MGI, helping municipalities design their own programs.
“We’re doing this to feed into one comprehensive agenda to make the case why this should be policy at the federal level,” Samra says. “It’s expensive, but budgets are just lists of a government’s priorities. If you can’t make a financial commitment to the most vulnerable communities, that’s a moral problem. Not an economic one.”
In fact, the idea is so popular that some of Yang’s opponents have proposals of their own. His rival, Brooklyn Borough President Eric Adams, wants to do it through the earned income tax credit, raising the city’s contribution in a plan that he says would cover 900,000 New Yorkers and get them $3,000 a year.
Kathryn Garcia, the former head of the city’s sanitation department, proposes free day care for babies and toddlers whose parents make less than $70,000 a year. That’s certainly not basic income. But private day care costs close to $2,000 a month in New York; she’d be saving even some middle-class parents more than $10,000 a year.
Garcia’s campaign is the polar opposite of Yang’s. She can be awkward and stilted in speeches; she’s never been, and probably never will be, a Reddit meme. But she knows what levers to pull to make the city’s slow, bureaucratic machine come to life. Yang admires her so much that he said he wanted to hire her, until she began to eclipse him in polls.
Yang is not an expert on the mechanics of how the city operates, and as the mayoral campaign has intensified, he’s increasingly seemed out of his depth. Speaking at a virtual forum dedicated to homelessness in May, he suggested the city should create shelters for victims of domestic violence, prompting the event’s moderator to point out that they already exist.
At a press conference he’d called to discuss police reform, he appeared unfamiliar with a recently repealed law that had shielded officers’ disciplinary records from public view.
Maybe Yang was just having an off day at the homelessness forum. Maybe his mind went blank when asked about the records law. Mistakes happen. But that doesn’t explain the press conference he held in late May outside the headquarters of the Metropolitan Transportation Authority, which oversees New York’s subway, bus, and regional rail systems. Yang announced that as mayor he’d wrest control of the MTA away from the state, but he couldn’t articulate how.
“The plan is to take the case to Albany and the people of New York,” he said. “The plan is to ask for mayoral control.” The MTA is a complex network of different transportation systems that collectively employ 75,000 workers and have an operating budget of $17 billion. It’s also one of the largest issuers of municipal debt in the country.
When pressed for more specifics, Yang deferred to his policy adviser, who said details weren’t important. “It doesn’t make a lot of sense to ask Andrew Yang or me or anybody else out here exactly how they’re going to unwind the financing structure,” said Jamie Rubin, the former director of operations for New York state.
When the press conference ended, Yang looked deflated. He knew it hadn’t gone well. Hecklers had started to disrupt some of his events; a few days after the MTA debacle, I’d witness a woman call him names as he tried to eat his lunch.
Yang came in fourth in one June poll, behind Adams, Garcia, and progressive civil rights attorney Maya Wiley. But the city’s new ranked-choice voting system—in which the least popular candidates are eliminated and their votes reallocated to supporters’ second-choice candidates—means that if enough New Yorkers pick him second, he could win. Not because of anything he promises to do or not do as mayor, but because of what he represents.
“I met him a couple years ago when he was running for president. He really impressed me,” Jenny Kam, one of the NYU students I met back in April, told me. She liked Yang’s cash-relief plan fine, she said, but disagreed with a lot of his other positions, and as an Asian-American woman she was unimpressed by his plan to combat the rise in hate crimes with yet another police task force.
But she still liked him. He seemed honest and kind, and you couldn’t say that about most politicians. “I think he could be something really great,” she said. “Or he could turn into something disastrous.”
There was only one way to find out.
What A National Guaranteed Income Could Look Like
A new proposal pitches expanding the earned income tax credit in the U.S. to take monthly cash payments national.
Over the last year, a wave of new “guaranteed income” programs has emerged that experiment with providing people no-strings-attached cash every month. The general goal is to lift people out of poverty, but many of these programs also function to eliminate the income gap between white and non-white families.
While these localized projects are already showing signs of promise, they only cover a small fraction of the people in need. The ultimate goal for proponents of such pilots is to build toward a comprehensive federal guaranteed income program that could fill these gaps. But what would that look like?
A proposal for a new federal guaranteed income program published by the New School’s Institute on Race and Political Economy, and funded by the advocacy organization Economic Security Project, offers one potential path. The experts propose modifying the U.S. tax code to expand the existing earned income tax credit program.
This change would mean including people who are not earning an income at all, and who are so low on the income scale that they are not currently eligible for the funds.
Essentially, it would be a negative income tax, which would refund every adult making less than the national median household income with a sum of up to $12,500 a year, calculated on a sliding scale based on earnings. It would also provide families up to an additional $4,500 per child. All told, researchers estimate the program would cost roughly $876 billion annually.
In tandem with other guaranteed income projects, such as an expanded child tax credit or baby bonds, this could bring Black and Latino families substantially closer to financial parity with white families.
“People are beginning to realize that for people to have real agency in their lives, to really be self-determining in their lives, they need resources,” said Darrick Hamilton, a co-author of the plan, an economist and the founding director of the Institute on Race and Political Economy at the New School. “And that’s what this program is about. It’s a recognition that poverty is rooted not in deficient attitudes, behaviors and norms. But rather, poverty is rooted in deficient resources. And this aims to empower people.”
To those who might argue that the federal government is not set up for such an expansive program: The feds showed they were capable when they sent two rounds of stimulus checks to every American family for Covid-related relief. This month, the federal government will begin paying families $300 a month through an upfront refund of the child tax credit, which is expected to last for six months, though advocates hope to extend it.
For years, the dream of a national basic income has been deemed too radical or just impossible. A Pew study conducted in 2020 showed that a slim majority of people opposed offering a federal guaranteed income for all adults. But new polling shows that the idea of monthly cash transfers, at least for the lowest income, is gaining traction with the public.
In a poll released Thursday of 1,137 likely voters by Data for Progress and Mayors for a Guaranteed Income, 55% of people said they would support universal payments of $500 to $1,000 per month. That support is still divided across familiar lines: Three quarters of polled Democrats say they’d support this kind of program, while only 31% of Republicans would.
However, the majority of likely voters in all parties believed in the overarching ability of such a policy to help them prepare for financial emergencies. Black and Latino respondents were more enthusiastic about a guaranteed income than white respondents.
“The results speak to the fact that the pendulum has swung,” said Michael Tubbs, the founder of the Mayors for a Guaranteed Income coalition and the former mayor of Stockton, California. He said when he first started the pilot program in Stockton in 2017, “it was seen as radical to think that folks deserve a guaranteed income. Fast forward to 2021, now it’s a very mainstream position. The majority of voters agree.”
“Despite all the rhetoric of, ‘what’s good for the corporate sector would trickle down to us all in a way that lifts all boats,’ that empirically has not happened.”
Researchers behind the Guaranteed Income for the 21st Century proposal estimate that it could elevate the nearly 14 million U.S. households who lived in poverty before the pandemic above the federal poverty line. It claims even more profound effects on Black households, which are disproportionately represented under the poverty line.
“We know that poverty is not race-neutral. We know that employment interactions are not race-neutral,” said Hamilton. By structuring the tax to benefit those with the fewest resources, it “will have heroic effects on addressing some racial inequities,” he said. “We know that there are dramatically disproportionate shares of Black and white people in poverty, particularly Black children. So what this does is say, well, we’re going to eliminate it in its entirety.”
A negative income tax has been proposed in the past, most famously by conservative economist Milton Friedman during the Nixon administration. “A negative income tax has always been something supported by both sides of the political spectrum,” said William Lee, the chief economist for the Milken Institute.
“The way it’s often proposed that gets the broadest support is to say we need a complete replacement of the existing benefits program in the U.S. with a basic minimum level of income.”
That’s where this proposal diverges from past iterations: It wouldn’t be a replacement of other elements of the social safety net, or an answer to calls for reparations or universal health insurance. Instead, it would flip the existing tax code — which is designed for “poverty maintenance, rather than income mobility, or income maintenance, rather than income mobility,” Hamilton says. Because the plan is linked to the median income of the country, indexing such support structurally would mean that “in perpetuity, we are trending families towards the middle class.”
Other economists have proposed strengthening other welfare programs, like the child tax credit, or Social Security; or paying for monthly checks from other sources, like closing capital gains tax loopholes or introducing new taxes on carbon. But having a plan like this to present to legislators in Congress will be helpful for the broader mission of implementing national policies, says Tubbs.
“The mayors, we’re not economists, we are pragmatic political leaders trying to serve our constituents,” he said. “And we are all through the moon and excited by the proposal by Dr. Hamilton because it speaks to what we know is possible — that there’s a way to structure this.”
Basic, Not Universal
There’s one thing this national basic income plan isn’t: what’s come to be known as “universal basic income.”
The original idea of UBI is that everyone in the U.S. would receive a monthly cash payment from the government. The concept’s universality has been heralded for its potential to fight stigmas that have become associated with welfare programs in the U.S. But the structure of a universal program could actually be inequality-enhancing, Hamilton says.
“If you give a wealthy person an income, a smaller share of their income goes towards consumption, so they end up saving it and promoting wealth inequality,” he said. “Whereas by definition, those that are at the low end will consume it.”
It could also have inflationary effects, he added.
Enter the concept of a “guaranteed income,” which hews more closely to the ideals set out by Martin Luther King, Jr., Shirley Chisholm, and the Black Panthers — Civil Rights-era leaders who viewed economic redistribution as a tool for fighting racial inequities. It’s targeted, not indiscriminate, and has clear goals in narrowing income gaps for the lowest earners.
One of the biggest critiques of any such broad cash transfer program — and one of the barriers to its implementation so far — has been the fear that it will distort other incentives for individuals to enter and stay in the labor force. “The big drawback of negative income is if you give people enough money, they’re not going to want to work,” said the Milken Institute’s Lee.
Some of the early results from city-level guaranteed income studies in Stockton, California, and Jackson, Mississippi, have shown that the extra cash — $500 and $1,000 a month, respectively — didn’t lead to sustained unemployment, instead resulting in better health, less anxiety and even more employment opportunities.
Research found that the stimulus checks sent out as part of December’s Covid relief bill and March’s American Rescue Plan substantially eased food insecurity and mental distress, especially among the poorest recipients — but the payments and enhanced unemployment benefits have since proven divisive.
It’s been a challenge for some businesses to hire unemployed workers, a dynamic that some critics have attributed to safety-net payments. Rather than a reflection of a labor shortage, however, economists say it shows people are holding out for better wages and conditions in a Covid-transformed country.
To those who fear that such a transformative restructuring of how the country thinks about income will change the way capitalism works forever, Hamilton says: good.
“Despite all the rhetoric of, ‘what’s good for the corporate sector would trickle down to us all in a way that lifts all boats,’ that empirically has not happened,” he said. “The fact that the program puts pressure on the corporate sector so that they can’t exploit and extract from workers with low wages, because of the threat of being destitute and unemployment — that is exactly what government should be doing.”
Baby Bonds For Wealth
A basic income is geared at poverty and income inequality. But what about wealth? Nestled in the proposal is a call for a federal baby bonds program, where the Treasury would deposit a sum between $2,000 and $50,000 into a bank account for every U.S. child. That money couldn’t be touched until the child turned 18 years old, which they could then withdraw with interest accumulated.
The proposal comes from City University of New York professor Naomi Zewde, Hamilton’s co-author on the guaranteed income paper. In 2018, Zewde’s research found that if the U.S. had instituted a baby bonds program in the mid-1990s, it would have dramatically narrowed the Black-white wealth gap today.
In 2015, the median net worth of white Americans was nearly 16 times greater than the Black median net worth. Had the baby bonds program been put in place, the median net worth for young white adults would have only been 1.4 times greater.
The state of Connecticut is giving the baby bonds plan a run: In June, it passed a program to deposit $3,200 in an account for every baby born to a family participating in the Medicaid program.
When these babies turn 18, they could withdraw an estimated sum of nearly $11,000 due to interest accrual, which by law they will only be able to use for college, buying a house or opening a business. Zewde’s research was cited in passing the legislation.
While that state program is earmarked for low-income families, Zewde’s would be nationwide and go to every family, though the deposit would be tiered so the poorest families would get the maximum amount while the wealthiest families would get the minimum. For baby bonds to really be effective for low-income families, though, Zewde says they need to be paired with something like a guaranteed income.
“The guaranteed income is just more about [addressing] the trauma that comes out of poverty, and just giving people a little bit of breathing room to just make ends meet,” says Zewde. “If you don’t have those basic needs covered, and then you get a lump sum from something like baby bonds, then you might not be able to use it to really change your life. If [baby bonds] just have to go to paying the rent you can end up depleting it.”
Minneapolis Joins Guaranteed Income Experiment Using Federal Aid
About 200 families will get as much as $500 a month for two years in the latest city program to test unrestricted cash payments.
Minneapolis is joining a slew of cities across the country testing out guaranteed income as a way to ease the disproportionate economic effects of the Covid-19 pandemic.
The Minneapolis City Council approved a $3 million guaranteed basic income pilot program this month as part of the city’s plans to spend its share of the federal American Rescue Plan funds. About 200 families will get as much as $500 a month for two years, with no restrictions on how they can spend it. The guaranteed basic income (GBI) program seeks to address a widening wealth gap in the wake of the economic fallout from Covid-19.
“The pandemic exacerbated disparities between white people and people of color in educational attainment rates, wages earned, and unemployment or underemployment in Minneapolis,” Mayor Jacob Frey said in an emailed statement. “Addressing these disparities with a GBI program like this would help stabilize Black families and provide for opportunities to grow generational wealth.”
Minneapolis plans to spend its $271 million portion of the $350 billion in federal aid for states and local governments in two phases. The measures passed on July 2 allocate more than $100 million to projects focused on addressing housing and business instability.
To qualify for the city’s pilot program, participants must be Minneapolis residents and have a household income that is 50% or less than the city’s median income, which is $104,900 for a family of four in 2021. Families facing housing insecurity due to high rent or mortgage burdens will be given priority, along with those in job training or educational programs that may drop out because of financial hardship, and households headed by young people, according to council documents.
Minneapolis based the proposal off of data coming out of other cities, according to Frey. Similar programs have been launched in cities like St. Paul, Minnesota; Long Beach, California; and even a smaller one in New York City. These programs have been bolstered by organizations like Mayors for a Guaranteed Income, a coalition of 56 mayors that advocate for federal guaranteed income.
“Whether it’s food, housing, fixing your car or assistance with childcare, people are best equipped to utilize resources made available to them and that’s exactly what this program is all about — trusting people to make the best decisions for them in their time of need,” Frey said.
The city will work with organizations that can place households into the program and then act as a resource for them through the two years to help make and meet individualized financial goals. Data on employment status, household income, and demographic information will be collected from participants before, during and after the pilot to determine its success, according to the council documents.
“We are still providing targeted funds like emergency rental assistance and small business support but the flexibility of direct payments shows great promise and I expect we will learn a lot from this pilot,” City Council President Lisa Bender said in a statement.
Will New Mexico Prove A Universal Basic Income Can Work?
A statewide “stability stipend” under consideration there would provide the perfect laboratory to test the pros and cons of government cash benefits.
Americans are talking again about the possibility of some form of universal basic income. In the past, talk has died down with little action, but this time the idea might have legs. Individual states make a perfect laboratory for experimenting with basic income — and New Mexico could lead the way.
New Mexico’s government is considering giving everyone in the state a so-called “stability stipend.” The amount hasn’t been decided, but $400 is a number being thrown around, since that’s the amount that some Santa Fe, New Mexico, residents are getting in a pilot program in that city.
The price tag for the whole state would be $800 million — about 11% of New Mexico’s current annual budget. If the state goes forward with the plan, it will be a landmark experiment that could eventually lead to the transformation of the entire U.S. welfare system.
The idea of a guaranteed basic income has a long history, but different people have supported it for different reasons. Some, like pamphleteer Thomas Paine, saw it as a recognition of social equality. Others, like Martin Luther King Jr., Richard Nixon and George McGovern, saw it as a way to alleviate poverty. In recent years, some figures from the technology industry and elsewhere have suggested cash payments to citizens as an insurance policy against the possibility of mass unemployment due to automation.
This multiplicity of justifications might have made a universal basic income seem like a solution in search of a problem. Without a clear idea of why it should exist, it was more difficult to justify the inevitably large price tag — and some conceptions of a basic income would carry a very large price indeed.
If a basic income was designed as a full substitute for a job, it would have to be budget-bustingly enormous. Also, if the payments were substantial enough to replace a low-wage job, it seems likely that many people would stop working, lowering national productivity.
Recently, supporters have been converging on a more modest goal for a basic income — not as a replacement for a job, but as a way of providing a bit of extra money to help ease all the bumps and risks of our financial lives. For poor people, the ability to make car repairs, pay parking tickets or cover an emergency medical expense can be a lifesaver, but even for the middle class, having a few hundred extra dollars a month can make life a lot easier.
Basic income experiments like the one in Stockton, California (on which Santa Fe’s experiment is modeled) have achieved promising results with modest monthly sums. Most encouragingly, recipients worked more rather than less, consistent with the idea that a modest stipend represents a hand up instead of just a handout; extra monthly cash gave them the time and mental space to focus on long-term self-betterment.
A few hundred extra dollars a month is also unlikely to hurt labor supply; something that’s borne out by economic evidence. And while still somewhat expensive, it’s at least within the realm of fiscal possibility.
States are the perfect place to try out this new, scaled-down basic income. Unlike cities, they have the money to carry out these experiments at a truly universal level; Stockton or Santa Fe can hand out money to a few people, with the help of private foundations, but states have far deeper pockets.
On the other hand, states generally have balanced budget amendments that prevent them from funding the programs with debt. That’s important, because essentially everyone believes that a federal basic income would have to be funded by taxes in the long run. States are good political laboratories for testing the public’s tolerance for paying the taxes that would be needed to sustain a cash benefit over a period of years.
Crucially, carrying out such stipend experiments at the state level will allow researchers to get a better feel for any downsides. Opponents are going to worry that even a small basic income will reduce work participation or productivity. But by comparing counties within states that offer a stipend with similar nearby counties in non-stipend states, economists will be able to get a very good idea of the program’s impact on local labor markets.
If New Mexico ultimately decides not to go through with the plan, other states should try it. Then, if a universal basic income is shown to have unambiguously positive results at the state level, it can more easily be scaled up to a national program. This is too important of an idea to leave it untested yet again.
Missouri Mayor Suggests Giving Residents Up To $1K In Bitcoin
Jayson Stewart hinted Cool Valley residents could be required to HODL the funds for five years.
The mayor of Cool Valley, Missouri said he was exploring giving more than $1 million in Bitcoin (BTC) to the city’s 1,500 residents.
In a Thursday interview with St. Louis news outlet KSDK, Mayor Jayson Stewart said he wanted to see “every single household in my city receive some level of Bitcoin.” Stewart said the funds would likely come from some “very supportive donors” but did not rule out using money from the government’s pandemic relief response to launch the venture.
The mayor did not specify how much Bitcoin the city would be able to distribute to each resident but suggested it could be any amount up to $1,000 — roughly $1.5 million — more than 30 BTC at the time of publication. However, he also hinted the funds could require Cool Valley residents to HODL for five years.
“My number one concern is that someone just sells their Bitcoin to pay their car note, and then when Bitcoin is sitting at like $500,000 all these years later, they’re going to really regret that,” said Stewart.
“I feel that fundamentally, this is the best way to meet [everyone’s] basic needs — to get Bitcoin into the hands of people who can use it the most.”
Stewart’s Bitcoin initiative is similar to that proposed by Andrew Yang, a candidate in the 2020 United States presidential election. Yang supported giving every American $1,000 a month in universal basic income, or UBI. Though he failed to receive the Democratic party nomination, UBI was often in the media spotlight and had seemingly strong support.
Lawmakers in other U.S. cities have also taken a pro-crypto policy stance. Francis Suarez, the mayor of Miami since 2017, has proposed allowing residents to pay taxes with Bitcoin and said he was aiming for the city to have the “most progressive crypto laws.”
As data from Cointelegraph Markets Pro shows, the price of Bitcoin is $48,710 at the time of publication, having briefly risen to more than $49,000 earlier today.
Mexico’s President Revamps Welfare, Handing Out Cash To Millions
Overhaul leaves some of the poorest households with limited healthcare access and reduced aid for fighting childhood malnutrition.
President Andrés Manuel López Obrador has drastically revamped Mexico’s welfare system—distributing more money to more people. But development experts say the new programs overlook some of the country’s neediest families.
Mr. López Obrador’s leftist government has lifted overall welfare spending by about 20% compared with the previous administration, including payments to eight million elderly, apprenticeships for a million out-of-work youths, and money for a million university students and farmers.
The handouts are popular in a country where the poor often felt overlooked.
“There really is a change,” said María del Carmen Chan, who lives in a community of people of Mayan descent in southern Campeche state. “Other governments provided little or no help.” She and her husband are renovating their house with some $230 in monthly handouts for one of their two children and for planting trees on their farm.
As part of the overhaul that began after Mr. López Obrador took office in late 2018, however, the president also dismantled what was once the country’s flagship antipoverty program, known as Prospera, or Thrive. Different administrations kept the program going for 20 years.
It gave cash to mothers of the country’s poorest households, but only if the families kept their children in school, got regular health checkups and attended programs such as family-planning workshops.
The López Obrador administration said it wanted to broaden welfare beyond families in extreme poverty and give the money with no strings attached.
“The idea is to advance towards the universality of all programs” by eliminating conditions, Cristina Cruz, who until June was in charge of welfare programs in Mexico City, said in a 2019 interview. She couldn’t be reached for comment.
While many state officials and development experts welcome the new aid programs, especially the support for the elderly, they are upset about the end of Prospera, which has been credited with lowering infant-mortality rates, malnutrition, cognitive-development problems and teen pregnancies. Development experts said undoing the program puts those gains at risk.
Prospera was copied by more than 30 countries, said Susan Parker, a professor at the University of Maryland’s School of Public Policy. Advocates say it empowered women and created a culture of co-responsibility: The government helps, but you do your part.
“This was an innovation for the world, not just Mexico,” Ms. Parker said. To eliminate the program “seemed unthinkable,” she added.
In getting rid of Prospera, the government is also distributing less money to households in extreme poverty. Half of Mexico’s poorest households were getting government handouts in the first quarter of this year, down from 61% back in 2018, according to an analysis of government data by Gonzalo Hernández Licona, the former head of the country’s agency in charge of measuring poverty.
Nearly a million primary-school-age children from the poorest families lost their access to cash scholarships, according to government data.
“López Obrador’s government didn’t act carefully,” said Mr. Hernández Licona. “He used the chain saw instead of the scalpel, and that has resulted in some poor being poorer than before.”
Mr. López Obrador’s spokesman, Jesús Ramírez, didn’t respond to detailed questions about the new programs and the reasons for canceling Prospera.
Griselda Trejo, a mother of two who lives in a poor suburb north of Mexico City, is now getting about half as much money as she did in the past.
“I don’t think López Obrador is the president of the poor, as he always says,” Ms. Trejo said. The decline in money comes at a time of hardship for the family. Ms. Trejo faces breast cancer, and her husband works two jobs to pay the medical bills.
Mr. López Obrador has said he got rid of Prospera because it had corruption under previous administrations, including cases in which officials claimed benefits of nonexistent families in the program. “They falsified the signatures and stole the money,” the president said in early 2019 after announcing he would abolish the program.
Congressional auditors uncovered evidence of fraud in years past, but nothing systematic. In 2015, auditors couldn’t trace what happened to about $30 million in Prospera money sent to state governments, out of a budget of $4 billion.
“There was no corruption on a meaningful scale,” said Miguel Székely, who helped oversee the program in the early 2000s. The World Bank and others praised the program’s transparency, which included regular audits by congress.
While Prospera targeted women and children in extreme poverty, the new handouts go almost exclusively to voting-age Mexicans of all classes, regardless of income.
The money is distributed by the Servants of the Nation, a group Mr. López Obrador created to get out the vote in the 2018 presidential election. Opposition parties and analysts say the new programs are now linked in voters’ minds with AMLO, as Mr. López Obrador is known, instead of the Mexican state.
“People see these as AMLO’s checks, and that pays enormous political dividends,” said Duncan Wood of the Wilson Center in Washington.
Under the new programs, cash payments for families with school-age children are capped at one student a family until high school, meaning less money for families with several children in school. In Ms. Trejo’s neighborhood, for instance, The Wall Street Journal found five other families also getting less aid.
Mothers also lost cash transfers to buy food intended to fight childhood malnutrition, as well as access to free medical checkups and other services linked to Prospera, such as sexual-education workshops for teenagers.
Rocío Martínez, a 36-year-old homemaker in Campeche, said she misses Prospera. During the program’s medical checkups, doctors detected mild malnutrition in two of her children and provided free nutritional supplements, helping them recover.
Doctors also found Ms. Martínez had kidney stones and transferred her to a larger hospital in the city of Mérida for surgery. “The program really helped me a lot,” she said.
In the 20 poorest municipalities of Chiapas, Mexico’s poorest state, more than 45% of former Prospera recipients said they no longer take their children for the checkups or get medical attention if they get sick, according to a survey of 1,000 households commissioned by Mexicans Against Corruption and Impunity, a civic group.
More than two-thirds of former Prospera recipients there said they no longer receive vitamins or nutritional supplements for their children. Seven out of 10 said they had to cut down on sources of protein such as chicken because of reductions in cash transfers.
“In the end, the most affected are the most vulnerable: children,” said Sonia Ramírez, who led nutritional programs for Prospera in Campeche.
The Welfare-State Reality Americans Aren’t Debating
Biden’s budget plan would create a vast new network of European-style government entitlements that would inevitably lead to European-style taxes.
It may be in 2022 that we transform the U.S. economy, but not for the better. House Democrats passed a $3.5 trillion budget resolution for its Build Back Better Agenda — a step in the budget reconciliation process that would make the bill law without Republican support.
There are trade-offs to doing something so large and fiscally risky, and Americans are getting distracted from a critical debate we should be having.
What’s getting most of the attention is the politics: how moderate holdouts in the Senate will vote, and whether the $1 trillion plan, which got bi-partisan support, will be passed first. Getting far less attention is how the legislation will alter the role of government in American’s lives.
The budget takes a big step toward transforming the American welfare state to resemble Europe’s, while somehow promising Americans they won’t have to pay European-level taxes.
The Fiscal Year 2022 budget sponsored by Senator Bernie Sanders doesn’t just include infrastructure investments as it advertised, it’s a major expansion of our entitlement state. Some pundits and law makers argue that investing in people is “infrastructure” too. But from a spending perspective it’s different.
Repairing a bridge or building an airport has fairly limited scope, it takes a few years to complete and most of the costs are a fixed amount of money.
Adding a new benefit for citizens is an open-ended commitment to spending every year, and one that — once people become accustomed to it — is very difficult to take away. Even if the benefits are deemed temporary in the initial bill, they tend to become permanent. The budget already extends the life of Biden’s child tax credit that was only supposed to last one year.
Paying benefits also has bigger implications for the economy because it impacts behavior, how people decide to work, educate themselves, and how they spend. A new road or canal has some impact on behavior, but not nearly to the same degree.
The time may be right to reassess our welfare state. The economy is always changing, creating new winners and losers. And big shocks like the pandemic expose weaknesses and holes in the safety net. We realized our unemployment insurance program didn’t reach as many people as it should, and that it was very difficult to disburse rent relief.
But it’s not clear that the Democrats’ budget addresses any of these weaknesses, or if it’s a good use of tax-payer money. More entitlements aren’t necessarily better; the details matter. The budget creates a larger cradle-to-grave welfare state, where everyone, even the middle and upper middle class, receive substantial benefits.
To name just a few, the budget includes universal pre-kindergarten for three and four year-olds, free community college, a jobs corps, lowering Medicare’s eligibility age to 60 and adding dental, vision, and hearing benefits, and long-term care.
Many of these programs sound great, but our resources are finite, and there’s valid questions that should be asked, such as whether we could get more bang for our buck by offering benefits only to people who need them instead of more broadly.
Other programs could be structured more effectively to help Americans succeed in the modern economy and escape poverty. For example, the evidence that universal pre-k improves educational or emotional outcomes is mixed — it helps some students more than others and can even leave some children worse off.
Community college does not have a great track record when it comes to building skills and making people more employable. The child tax credit goes to families earning nearly twice the median income who don’t need it. The evidence on guaranteed infrastructure jobs is that they keep people from earning more than in the private sector and forgo important skill training.
Medicare is already underwater and can’t afford its current obligations, let alone new ones. Adding dental care is expensive and unnecessary.
Reasonable people can disagree on the size and scope of the entitlement state. But it’s ludicrous to think that we can expand it to this level while no one earning less than $400,000 will pay for it. The budget even lowers taxes by expanding subsidies and offering upper middle class tax cuts.
The proposal is that very high capital gains taxes on high earners and corporate taxes will pay for most of it. This assumes no one will take evasive measures when faced with higher taxes. Workers also tend to bear the brunt of corporate taxes in the form of higher prices and lower wages.
But even assuming tax increases bring in the promised revenue, they won’t cover the cost. The Committee for a Responsible Budget estimate the plan will cost at least $1.5 trillion more than the projected $3.5 trillion. And that’s just over the next 10 years — entitlements tend to last much longer and grow over time. That would leave America committed to running enormous deficits each and every year.
That might be fine when interest rates are low, but who can guarantee that will be the case 20 or 50 years from now? If rates go up even 1 percentage point more than predicted it add will $30 trillion to our debt over the next 30 years, and that’s based on our current budget and entitlement programs.
It’s one thing to deficit finance one-off spending on infrastructure when interest rates are low, but adding entitlements is especially risky. If rates ever increase it leaves very little room for any discretionary spending, let alone bailing out the whole population from the next pandemic — or whatever kind of crisis — as we did last year.
Our politicians need to level with the public that if we want a European-style welfare state we’ll need to pay European style taxes, including higher income taxes for all and double-digit consumption taxes. Again, there is an argument to be made for more welfare or even a bigger government role in our lives.
But doing so changes our relationship with government, the risks we take, and what our future spending can be. That is the debate we should be having now, instead of focusing on the Washington Sturm und Drang of how the budget gets passed.
eToro Commits $1M To GoodDollar Universal Basic Income Project
Crypto-focused charities continue to grow. Through GoodDollar, eToro is targeting financial inclusion and literacy through a global UBI program.
Cryptocurrency investment platform eToro has committed $1 million to the GoodDollar universal basic income protocol, supporting the nonprofit’s effort to bridge the global wealth gap through DeFi and smart contract technology.
The additional capital will aid GoodDollar in expanding its protocol and introducing more recipients to cryptocurrency, eToro announced Wednesday. The GoodDollar system works by capturing the interest generated by staking donors’ contributions in leading DeFi protocols such as Aave and Compound. That interest is then distributed to a global community via GoodDollar tokens.
GoodDollar token, which is marked under the ticker symbol $G, is described as a reserve-backed cryptocurrency that is distributed daily to registered users as a form of UBI. The UBI model is supported by donors who deposit assets on the platform. A portion of the accrued interest via staking is returned to the donors, with the rest collateralized in the form of new G tokens.
GoodDollar was founded by eToro in 2020 to help solve systemic inequality and create more transparency around how money is created. Originally, eToro had committed $58,000 to the protocol before upping its stake to $1 million after GoodDollar published promising results for its proof-of-concept.
During the initial trial run, the protocol distributed $16,000 worth of UBI in the form of GoodDollar tokens to more than 225,000 people.
The cryptocurrency industry has generated significant wealth for early adopters, and many of those pioneers are giving back through charitable contributions. As Cointelegraph reported, four industry veterans — Ryan Selkis, Dan Matuszewski, Qiao Wang and Haseeb Qureshi — pledged to donate at least 1% of their wealth to charities each year through a new initiative created by The Giving Block.
Meanwhile, at least two NFT-focused cryptocurrency projects have recently announced generous donation plans. American business magazine Fortune recently launched a philanthropic fund for journalism on Ethereum alongside NFT artist Pplpleasr.
Separately, the Trippy Bunny NFT project has donated 100% of its mint proceeds to a suicide prevention foundation.
The crypto donations industry is growing rapidly as more nonprofits begin accepting contributions through Bitcoin (BTC), Ether (ETH) and other digital assets. In January, the American Cancer Society launched a Crypto Cancer Fund that accepts digital donations. More recently, the New York-based Hearts & Homes for Refugees announced it would accept donations in nearly a dozen cryptos to support those displaced by the Taliban takeover of Afghanistan.
One Of The World’s Poorest Countries Found A Better Way To Do Stimulus
In two weeks, Togo designed and launched an all-digital system for delivering monthly payments to millions of people—and made the U.S. program look like a “dinosaur.”
Atani Bamaze was working his small plot of land, scything weeds down to the rust-colored soil, when he received a lifeline in the form of a text message.
It was late 2020, and though Bamaze still didn’t know anyone sickened by Covid-19, the pandemic had disrupted his life all the same. The village in Togo where he lives with his wife and infant daughter relied on trade and travelers from nearby Benin. When the border closed after the first recorded infection that spring, prices of basic foodstuffs began climbing precipitously.
The 31-year-old typically earned money tutoring, but then local schools shuttered, depriving him of his main source of income. To make matters worse, the seeds he’d sown had baked in the sun instead of taking root because there’s been too little rainfall.
Now, reading from his handset, he learned the Togolese government would be sending him a cash stipend for the next five months. The first payment from the program, called Novissi, was instantly available via his mobile phone.
The eldest of eight children, Bamaze says his parents expected him to stay in the village and care for them in their old age, but he yearned to break away. Although this windfall wasn’t enough to make that possible, he would use it to pay rent as well as the fees for his wife’s secretarial course, saving the rest to buy maize for the coming year’s planting. “If you don’t have anything and then somebody gives you a little,” he says, “you have to be grateful for the little that you receive.”
The pandemic has been a catastrophe in just about every sense, claiming over 5 million lives and plunging more than 100 million people into extreme poverty. It also traced a new high-water mark in terms of government spending on social assistance—a large share of which arrived in the form of cash payments. According to a running tally from the World Bank, 186 countries have sent a combined $1.25 trillion directly to their citizens. About 1 in 6 human beings worldwide has been a recipient.
Wealthy countries were able to rely on tax data and unemployment rolls to identify and pay people in need and were able to offer more generous benefits. The first round of stimulus payments the U.S. made as part of the Cares Act was the largest such distribution in absolute terms and kept almost 12 million people from falling into poverty, according to the Census Bureau.
But, empowered with a growing array of digital technologies, poorer countries were able to set up payment systems that overcame daunting obstacles and surpassed, in some ways, those of their wealthier counterparts.
In Togo, a nation of about 8 million people where the average income is below $2 a day, it took the government less than two weeks to design and launch an all-digital system for delivering monthly payments to about a quarter of the adult population.
People such as Bamaze, with no tax or payroll records, were identified as in need, enrolled in the program, and paid without any in-person contact. According to Anit Mukherjee, a policy fellow at the Center for Global Development, “the U.S. program looks like a dinosaur” in comparison.
Novissi, which means “solidarity” in the local Ewe language, is the brainchild of Cina Lawson, who heads the Ministry of Digital Economy and Digital Transformation. Lawson was born in Togo but didn’t grow up there.
Her father, the scion of a wealthy family, was forced into exile in 1979 by Gnassingbé Eyadéma, the country’s longtime president, who regarded him as a political rival. Lawson, just a child at the time, has trouble distinguishing her own memories of the family’s midnight flight from those recounted by relatives. “For a long time, I said that my life started at 6 or 7,” she says.
Lawson grew up in Paris and went on to earn degrees at the Institut d’Études Politiques and Harvard. After her studies, she worked in telecommunications in New York. Her feelings toward Togo were mixed, but she had a growing desire to be of service to the greater African continent. An opportunity presented itself unexpectedly when Eyadéma died in 2005 and his son Faure claimed the presidency.
Togo’s new leader set out to make peace with his father’s opponents and, after meeting Lawson on the sidelines of the United Nations General Assembly in 2009, invited her to take charge of the country’s postal and telecommunications systems, a domain that would eventually encompass all things digital. At 37, she would be among his cabinet’s youngest members.
Fresh to her post, Lawson struggled to learn local codes of conduct while applying a perspective shaped largely abroad. “Not growing up in Togo, you’re an insider and an outsider,” she says. Many of the young Togolese staff she hired were part of the same global diaspora, having been born or lived outside the country.
Over the coming years, the nation—one of the poorest on the planet—made strides on some important metrics. From 2018 to 2020, the ease of doing business in Togo, as measured by the World Bank, rose faster than in any other country. The poverty rate, 62% in 2006, fell to 46% by 2019.
The coronavirus threatened to reverse that progress. In the days after the country’s first case, the government closed land borders to travelers, canceled most mass gatherings, and imposed a curfew on greater Lomé, home to about a quarter of the population. This may have been the appropriate policy response from a public-health perspective, but it spelled disaster for many of Togo’s citizens.
What could be done to lessen their suffering wasn’t immediately obvious. The government waived fees for electricity and water, and several cabinet members advocated distributing free food, Lawson recalls. But she and Shegun Bakari, a close adviser to the president, wanted to send cash instead, and they envisioned doing it digitally, removing the need for in-person contact.
Togo had run some cash transfer programs in the past, but they were small-scale and typically involved registering households one at a time and distributing physical money by hand.
According to Bakari, other cabinet members objected to the idea of using mobile technology, arguing that many in rural areas didn’t have access to phones or identification, and even those who did might lack the wherewithal to navigate a digital system.
Yet in fact, Togolese— like people across Africa—had for years been using “mobile money,” stored on and transferred from their mobile phones. The president quickly embraced the proposal.
The idea of alleviating a crisis by giving people cash was far more radical 10 years ago than it is today. In 2009, when Michael Faye co-founded the New York-based nonprofit GiveDirectly, whose mission is to alleviate poverty by providing unconditional cash transfers, skeptical development experts and philanthropists told him the sums would be misspent.
But in the following decade, evidence has accumulated that in many circumstances, cash improves the life of poor people more than equivalent spending on aid programs or goods.
Ugo Gentilini, the global lead for social assistance at the World Bank, has been tracking the blossoming of research and real-life applications of cash transfers on a personal website and through a weekly newsletter for several years.
The effectiveness of cash is reason enough to take an interest, he says, but he’s also fascinated by the subtle but important shift in authority that it conveys, away from development professionals and toward beneficiaries. “Cash transfers empower people to make their own decisions,” he says.
Lawson says that is what resonated with her about the idea, too. “It’s a strong belief of mine that just because someone is poor doesn’t mean he’s irresponsible—he’s just poor,” she says. “So if you give him money, there’s no way he’s going to waste it. For me, it’s linked with dignity.”
Covid pushed countries to move quickly beyond age-old debates over who is deserving of government aid and whether transfers should be unconditional. The sheer breadth of suffering undercut the paternalistic attitude that the poor brought their suffering upon themselves.
Sophie Tholstrup, a policy coordinator at the Cash Learning Partnership, a consortium of humanitarian organizations that promotes the use of cash, says, “This year we’ve all become victims of circumstance.”
Even with the president’s support, Lawson’s team faced big challenges. For starters they didn’t know which Togolese were most in need: Tax rolls were no help in a country where four out of five working-age people toil in the informal economy. The last national census, conducted almost a decade earlier, hadn’t gathered information about households’ wealth or income.
To ensure payments were made only to verified individuals, the team sought to build the platform off an existing database. Few Togolese possessed a driver’s license or national ID card, but 3.6 million adults are registered to vote, according to the country’s electoral commission, which requires potential voters to indicate their occupation and address. This electoral database was thought to represent somewhere between 83% and 98% of the adult population.
Lawson and other members of the cabinet decided to focus the first round of support on anyone with an address in greater Lomé who had listed an informal occupation, including shopkeepers, seamstresses, maids, hairdressers, and drivers. With the funding allocated by the government, they could provide each beneficiary one-third of the minimum wage, about $20 per month.
Lawson insisted that the platform be able to offer an instantaneous payoff; otherwise, she warned, Togolese would doubt the promise of “free money” and fail to enroll. “You register, the platform determines you’re eligible—because once you enter your voter ID, the platform knows your profession and your geographic position—and bam! You receive an SMS with the money,” she says.
The task of building the platform fell to 38-year-old programmer Morlé Koudeka. Most of his colleagues were already staying at home and working remotely, but because the electoral database was confidential, he and a couple of subordinates had to report to the ministry’s empty building.
The team held Zoom conferences as late as midnight and brainstormed via WhatsApp. “We all became beta testers,” Lawson says. A project that would typically have taken months was largely complete in 10 days.
On the day Novissi began, April 8, there were millions of registration attempts, and tens of thousands of calls poured in to telephone operators contracted by the ministry to help troubleshoot. According to the call center’s managing director, Sylvie Kokuvi, some of the reports helped improve the program.
When a swell of callers said they couldn’t enroll because their voter ID numbers had already been registered, the ministry realized that some fraudsters had harvested the numbers from lists posted at polling places and were working their way through them. In response the ministry added another verification step that could be completed only by a person in possession of the physical voter ID card.
Although the platform strained and briefly buckled under the crush, it largely worked. In that first round of disbursements, more than 567,000 people received payments—and now the government had a way of dispensing relief that could be adjusted to the shifting pandemic.
In August, when cases spiked in a rural canton, the country’s smallest administrative unit, the ministry made all the residents there eligible, pushing money out to more than 5,000 people.
The government also authorized funds specifically for intercity bus drivers and out-of-work teachers. Han Sheng Chia, GiveDirectly’s vice president for innovation, says he was impressed by how deftly benefits could be targeted in response to changing conditions, noting “this could be a model for the future of crisis response.”
In part because Novissi proved so successful, the ministry teamed up with GiveDirectly and researchers at the University of California at Berkeley to fund a round of payments for the 200 poorest cantons. To find them, the researchers trained an algorithm to identify impoverished communities based on their urban layout and housing materials, using satellite images.
The researchers couldn’t pick individual beneficiaries by occupation because many rural residents didn’t have differentiated professions; instead, they created a second algorithm that used data from mobile phones—including the frequency and timing of calls, texts, and data use—to identify the poorest users.
Over the next few months, this round pushed funds out to 138,000 more beneficiaries. “I don’t need to know your name to know that you need support,” Lawson says. “That’s revolutionary.”
Besides providing economic help, the program fostered sentiments of solidarity. Operators at the call center, young professionals accustomed to telemarketing on behalf of European clients, found themselves in conversation with fellow Togolese living in far different circumstances.
Kokuvi recalls how one caller from the far north of the country thanked her personally for the disbursement, as if she had sent the money herself. “He offered to bring me some yams,” she says. Some callers who didn’t meet the eligibility criteria would still linger on the phone, pouring out their troubles. “You just have to listen and understand,” Kokuvi says.
In their evaluation of the program, researchers found that targeting urban workers based on their occupation and rural residents based on mobile phone data both did a reasonably good job of identifying the truly poor—and were probably as targeted as possible in Togo’s data-limited environment. And they found no evidence that the program favored certain ethnicities or genders or geographic areas.
But Nathaniel Olympio, who heads an opposition party, raised concerns that the program excluded people based on their political views.
He observed that in 2018, the president’s political opponents had boycotted the election to highlight restrictions on personal freedom and violence against protesters—and Novissi required electoral cards issued in 2018 or after. “Novissi [was] a weapon of political retaliation against conscientious objectors,” Olympio wrote in an email.
Felix, a 51-year-old taxi driver in Lomé, says he wasn’t eligible for Novissi for that very reason: A detractor of the current president who declined to give his last name out of fear of reprisals, he says he would never seek to obtain an electoral ID under the current political conditions. “This government doesn’t want the people to develop,” he says. “They don’t want the people to get rich and disturb them.”
International development experts involved in the project defended the integrity of the Togolese staff they worked with. “They’re really trying very hard to do things in a more meaningful way,” says Tina George, a regional task team leader at the World Bank.
Others shared concerns about building the system on an electoral database but ultimately decided the benefits outweighed them. A spokesperson for GiveDirectly wrote in an email, “We believe you have to operate with the options in front of you, especially during an emergency.”
The rapid expansion in benefits that Novissi made possible is undeniable. Mukherjee, of the Center for Global Development, pointed out that Togo’s previous government-to-people cash transfers had never included more than 60,000 households, whereas the combined rounds of Novissi reached almost a million people. “The order of magnitude and the speed with which that happened, it’s kind of mind-boggling,” he says.
Even though it was cobbled together to address a crisis, the program may become permanent. In June the World Bank approved a $20 million grant to Togo for additional emergency relief, most of it to be distributed as cash transfers through the Novissi platform.
To improve the accessibility of future disbursements, Lawson is building a database that will collect biometric and socioeconomic data on all the country’s citizens; an additional $72 million in development assistance from the World Bank will support it. She credits Novissi with generating the political will to take these further steps. “Prior to that it would have taken me a century,” she says. “Now we are very aligned.”
Novissi has attracted attention outside the country. According to Lawson, several African countries have expressed interest in replicating it. Some experts say programs such as this could represent a new way of delivering aid in emergencies.
For example, in July 2020, when forecasts showed the imminence of what would be record-setting floods in Bangladesh, the World Food Programme distributed what it called “anticipatory humanitarian assistance” in the form of mobile money to 145,000 people in the flood’s projected path.
A subsequent evaluation found that households receiving the cash did more to prepare for the disaster, including evacuating the area.
Stefan Dercon, the former chief economist of the U.K.’s Department for International Development, who studied the Bangladesh program, envisions a world where poor countries have such systems set up in advance of the next earthquake or hurricane.
“Whenever a need arises, even if we can’t predict it, we can reach them—in ways we could never do with the same speed and cost-effectiveness,” he says.
The enthusiasm for cash assistance has ballooned. GiveDirectly raised more than $300 million in 2020, disbursing money to twice as many beneficiaries as it had in all previous years combined. Gentilini, of the World Bank, wonders whether the expansion of cash assistance during the pandemic will outlast the public-health measures that inspired it. “I see momentum for a new social contract between state and citizens,” he says.
Like Basic Income, But For Transportation
Several U.S. cities are piloting “universal basic mobility” programs that subsidize bus rides, e-bikes and scooters in the hopes of sparking an economic boost.
If you’re a young person looking for work in Bakersfield, California, some of your best bets are likely to be in the warehouse and retail jobs on the fringes of town. But getting there can be a challenge if you don’t have a car.
That helps explain why some 18,500 people between the ages 16 and 24 in this Central Valley city of 400,000 were neither in school nor working in 2019. Bakersfield is saddled with one of the highest rates of youth disconnection in the U.S., which the pandemic has likely made even worse.
An experimental program aims to close some of those gaps, as well as others around the country. Later this month, 100 vulnerable young Bakersfield residents will be selected to participate in a year-long study about how free access to public transit, e-scooters and e-bikes affects their lives.
It’s one of several pilots in U.S. cities testing the concept of “ universal basic mobility.” In Oakland, up to 500 residents will receive prepaid $300 debit cards for transit and shared mobility services later this month. Pittsburgh plans to launch a year-long study with a 50-person cohort next spring. Los Angeles is preparing a similar grant-funded program focused in south L.A.
The goal of the experiments is to understand how having a minimum guaranteed level of transportation could change outcomes for people who have previously gone without it. Across the U.S., poorer households spend far more on transportation as a percentage of their incomes than more affluent ones.
Angela Sanguinetti, a research environmental psychologist at the University of California, Davis, is overseeing survey-based studies of the pilots in California. She’s interested in which modes participants chose for getting to different destinations, and how the programs affect their economic standing, quality of life and health.
“We know that access to mobility has an impact on people’s overall sense of security,” she said. “If you don’t have reliable access to places you need to go, that can cause a lot of anxiety.”
Why Mobility Matters
In Bakersfield, participants will receive free passes for Golden Empire Transit’s local bus lines and five free rides per day on Spin’s shared e-bikes and scooters. The participants will be recruited by and from the Dream Center, Kern County’s resource hub for current and former foster youth, many of whom are homeless, said Jayme Stuart, a child and family services coordinator.
Pandemic service cuts left holes in a public transit system that was already failing to reach key job centers, Stuart said. Many Dream Center youth who are employed often rely on Uber and Lyft to get to work, taking big chunks out of small paychecks.
“A lot of them start to feel defeated because they’re only working part-time to begin with,” she said. Between rent, bills and groceries, the financial pressure is enough to make a lot of them quit, she said, or simply not pursue other opportunities. The UC Davis study will help officials understand the role that transportation expenses play, Stuart says: “If we remove the transportation barriers, will they be more successful?”
Among the Dream Center’s first recruits is 21-year-old Star Carrigan, who believes that having access to an e-bike will allow her to make the 12-mile commute from her home in east Bakersfield to an Aldi grocery store that advertises $18 hourly wages.
That’s more than she’s making in her work for the county’s youth conservation corps, which requires her to get a ride or pay for a Lyft to remote destinations.
“Just biking there would be exhausting,” she said. “But the e-bike could help me cruise for a good distance.”
The model could also benefit local employers struggling with a national hiring crunch, too, if subsidized mobility can make it easier for people to take jobs in areas otherwise inaccessible.
Interest is expected to be strong. In Oakland, officials received more than twice as many applications than it could take for that city’s grant-funded pilot, according to Sanguinetti. There, participants will be able spend debit cards on public transit, car share, bikeshare and scooters from multiple operators, including Spin, for as long as the $300 lasts.
That will likely be no more than a few months, said Quinn Wallace, the Oakland transportation planner who originally designed the program in part to strengthen access to a new bus rapid transit line. Now the goal is to experiment with how even a small amount of extra wallet padding can change how, and if, people opt to travel.
“Increasingly this project is about reducing financial barriers to accessing opportunity and transportation in general,” she said. “So if we give you $300 on a prepaid card and you turn around and put it all on a transit pass, that’s great. If you use it to replace just a few vehicle trips by using bikeshare five days a week instead of three, that’s a win as well.”
The programs come in the wake of guaranteed income pilots in cities such as Stockton, California, and Jackson, Mississippi, that support the benefits of guaranteed cash flow for vulnerable residents; Oakland recently launched one such study focused on low-income families of color, separate from its $300 mobility pilot.
Research has shown that steady transportation is closely tied to economic success in the U.S., and the idea of providing discounted access to multiple services beyond public transit for disadvantaged riders is something that’s been discussed in the field for years. The advent of mobility apps is now making it possible, said Michael Smart, an urban planning professor at Rutgers University.
The Car Question
Yet there are reasons for skepticism. Smart warned that the integral role of the automobile in most American cities could limit the economic impacts of universal basic mobility pilots that do not include any element of car access.
“Providing access to just transit and other wonderful-yet-slow modes like bikeshare may not meaningfully change the accessibility landscape for people who are receiving it,” he said. “It probably changes their budget, and that’ll have some good impacts, but any of these programs that don’t acknowledge the role of the automobile in almost everyone’s life in the country — including the very lowest income people — is really missing the point.”
That risk could play out visibly in car-centric Bakersfield, where transit service is limited and fewer than 1% of households walk or bike to work. Cycling infrastructure, while expanding, is still relatively lean, and the city ranks as one of the country’s most dangerous for pedestrians.
While Pittsburgh and Oakland’s programs include access to car-sharing services, Bakersfield’s currently does not. Asked whether those factors could minimize the benefits of its UBM program, Sanguinetti said that her research could shed light on that question.
“Part of why this is a pilot is to determine how useful these services are and to see what are the gaps and needs that remain,” she said. “We’ll see how far this takes us and what could be enriched if the city were to adopt something more permanent.”
Spin, which has been a unit of Ford Motor Co. since 2018, said that it will work closely with Dream Center to ensure that fleets are available near key destinations like work and school, and that all participants — who will be between the ages of 18 and 24 and have existing transportation needs — have functioning smartphones and know how to ride bikes and scooters.
For Spin, which is fully funding the Bakersfield pilot and is closely involved in programs in Oakland and Pittsburgh, the pilots are also a chance to press the case for more government support.
The pandemic put a spotlight on shared bikes and scooters as an open-air alternative to public transit that offers access to essential destinations, but low-income riders can’t always afford the premium.
“An inherent conflict that operators face is a misaligned incentive where cities want services to deploy to areas of need, but there’s an economic disincentive to do so,” said Spin CEO Ben Bear. “Subsidies can take that away and that’s what we’re already seeing in Bakersfield,” where the city’s existing bikeshare program is partly grant-funded.
Bear said the company was inspired by the wave of UBI pilots that point to the mental and physical health boosts of having basic expenses covered. He sees mobility as directly connected to that equation and hopes to spread the UBM model to cities that are also pursuing UBI.
“We’re looking to pattern our approach off of them,” he said. “If you give people no- or low-cost access to efficient and sustainable transportation, we think that’s a big part of them being able to meet their potential in society.”
33 Basic And Guaranteed Income Programs Where Cities And States Give Direct Payments To Residents, No Strings Attached
The concept of a “universal basic income” has inspired widespread interest in recent years.
More than interest — when former US presidential candidate Andrew Yang announced that a UBI program of $1,000 direct payments to citizens every month would be the keystone policy of his platform, he drew an unexpected amount of grassroots support in a crowded primary year.
Guaranteed income programs have been gaining even more traction during the pandemic, which took a particular toll on low-wage workers and threw many Americans into poverty. At least 11 direct-cash experiments went into effect this year, Bloomberg estimated in January.
Former Stockton, California mayor Michael Tubbs, took the idea to the next level by launching the Mayors for a Guaranteed Income network. As of this year, there are 60 mayors in the program, advocating — and launching pilot programs for — guaranteed income for their residents.
California recently launched the first statewide guaranteed income program in the US, providing up to $1000 per month to qualifying pregnant people and young adults leaving the foster care system.
The basic income program that Tubbs launched in Stockton in 2019, the Stockton Economic Empowerment Demonstration, has been considered the model for other cities that have followed in its footsteps, offering low-income residents hundreds of dollars a month and measuring their job prospects, financial stability, and overall well-being afterward. According to SEED, participants improved in all those metrics.
Nika Soon-Shiong, a co-director of the Compton, California, guaranteed income program Compton Pledge, told Insider in November that basic income programs help people who are typically shut out of welfare programs.
“Guaranteed income makes a case for investing in our undocumented neighbors and formerly incarcerated residents,” Soon-Shiong she said. “In doing so, it addresses the reality of the nation’s fragmented, punitive welfare structure.”
This kind of program isn’t a new idea, however. The Eastern Band of Cherokee Indians Casino Dividend in North Carolina has been giving tribal members annual funds since 1997, for instance. Alaska has been paying residents out of its oil dividends since 1982.
Canada ran basic income experiments in the 1970s. The general idea of providing people with a universal basic income is itself hundreds of years of old.
Here’s a look at all the active or recently active guaranteed income programs in the US, in no particular order.
The Year Basic Income Programs Went Mainstream
Local guaranteed income pilots have given more than 5,400 U.S. families direct cash payments since 2018, as momentum has grown for UBI-style programs.
At least 20 guaranteed income pilots have launched in cities and counties across the U.S. since 2018, and more than 5,400 families and individuals have started receiving between $300 and $1,000 a month, according to a Bloomberg CityLab analysis.
If all these programs complete their pilot periods as planned, they’ll have given out at least $35 million.
These figures mark the close of a year of rapid growth for U.S. programs that give some residents direct cash payments, with a half-dozen other pilots promised to launch in cities next year.
For many advocates, the concept of “basic income” has evolved from the more expansive UBI — a universal basic income to all residents — to more targeted guaranteed income programs that have the goal of narrowing inequality and dismantling poverty.
As local programs sprouted up in cities across the U.S. in 2021, more than 60 mayors joined a coalition to advocate for the policy in their cities and nationally.
Among Democrats, at least, it is no longer considered radical to propose giving low-income residents money with none of the traditional strings of welfare attached. And at the national level, Congress engaged in its own temporary mass cash distribution program, in the form of stimulus checks to the vast majority of Americans.
Still, the local programs are small in scale and duration, and the nationwide push to expand them comes as the quest for a federal guaranteed income policy has not yet succeeded. The fate of the closest thing to it — the child tax credit — hangs in the balance.
Since July, the U.S. government has sent eligible parents between $250 and $300 a month for each child they have.
With Congress in a stalemate on the federal spending bill, the chance of extending the benefit, which is set to expire at the end of December, looks unlikely.
And there is still significant debate among those on the left over whether the massive government investment it would require to take basic income national should be a higher priority than other social programs like universal health care or affordable housing.
So if 2021 was the year of guaranteed income experiments launching and capturing the national imagination, 2022 will be the year we’ll see if these local, targeted experiments can translate into long-term shifts.
“Five years ago, we were talking about robots; we were talking about the future of work; we were talking about jobs in theory just disappearing altogether because machines were going to take over,” said Chris Hughes, an original co-founder of Facebook (now Meta) and the co-founder of the Economic Security Project, during a December panel discussion hosted by the nonprofit.
Now, he said, “we’re talking about a new social contract; we’re talking about basic questions of deservedness, of racial and economic justice, of what we owe one another.”
Research Findings Grow
As the first phases of many of these pilots come to a close in 2022, advocates will have a growing body of research from which to draw policy.
But these initiatives aren’t the first test cases of how basic income works. So research is expanding in scope, beyond the question of whether regular cash assistance helps — proponents are already convinced that it does.
“I think personally that the body of knowledge that we have is already sufficient to push for change in the safety net,” said Stephen Nunez, the lead researcher on guaranteed income at the Jain Family Institute. “This is a market economy and if you give people money, they’re going to be better off almost by definition by having money. The better question is better off compared to what.”
Evidence from other countries and from U.S.-led cash assistance programs has found that the monthly support sometimes reduces work hours slightly, Nunez said, and increases positive health outcomes.
Early research on the 2021 U.S. child tax credit shows that families overwhelmingly spent their extra cash on food and utilities; the Census Bureau also found that the first payment alone corresponded with a drop in food insecurity in households with kids.
In Stockton, California, where a basic income trial ended at the beginning of this year, the research group also reported mood improvements, less income volatility, and more full-time employment than before the money — and compared to the control group.
But critics worry that the limited duration and scope of these programs mean they’re not test cases for expansion. Among the most persistent concerns is that a guaranteed income will deter people from working at all — an outcome undercut by a Finland experiment but hard to definitively disprove.
Many of the newer pilots are designed to test optimal designs for these programs — things like the best disbursement methods, the most effective ways to combine them with other social safety net programs, and how to communicate their worth to the public, said Nunez.
Some are designed as randomized controlled trials, where researchers track outcomes for both control and recipient groups.
Others are experimenting with different payment methods and periods: Compton compensates families between $300 and $600, on a sliding scale based on their size; Newark, New Jersey, which is starting its second phase this month, is paying half its participants $250 on a bi-weekly basis, and the other half twice a year, in two $3,000 installments.
Time ranges vary, with San Francisco’s $1,000-a-month for 130 artists lasting 6 months, while Hudson, New York, is paying a random selection of 25 low-income residents $500 a month for 5 years.
And unlike a universal program, which would include everyone, regardless of class, many of these guaranteed income pilots are laser-focused on specific communities that have experienced historic disinvestment, or have been most impacted by Covid, such as Black mothers and fathers, artists and low-income families. Other programs still in their design phase will target unhoused youth and foster youth.
Still, advocates emphasize that they don’t view guaranteed income as a replacement for other components of the safety net, but a supplement.
“We’re not UBI maximalists,” Nunez said. For the uninsured, for example, he believes insurance would go a lot further. “Cash is not a solution to market failures.”
Shifting Poverty Narratives
The other goal of these guaranteed-income pilots is to shift narratives about how to address poverty in the U.S., which advocates say has failed to recover from Reagan-era notions about “welfare queens.”
The Nixon administration piloted and almost passed a national basic income policy for all but the wealthiest Americans that was supported by even conservative economists.
“If you go back and you read the research on that, and try to understand why it didn’t happen, it really does feel like it came down to this human instinct of fear, or lack of trust, or doubt, in how an individual might behave if you just give them cash,” said Jill Shah, president of the Shah Family Foundation, which funded a guaranteed income program in Chelsea, Massachusetts, that gave 2,040 households up to $400 per month during the worst of the pandemic. “Like, how could it be so simple?”
It’s not enough for progressive circles just to talk about the toll of economic inequality and the promise of guaranteed income, said Aisha Nyandoro, the CEO of Springboard To Opportunities, a nonprofit organization that runs the Magnolia Mother’s Trust, a program out of Jackson, Mississippi, that is now giving its third cohort of Black mothers $1,000 a month.
“It cannot be work that is typically only held by organizations that are led by brown and Black individuals,” she said at the Economic Security Project panel.
Nyandaro remembers being asked what she wanted the headline to be if the Magnolia Mother’s Trust was successful. “I want the headline to be ‘we were wrong,’” she said. “Meaning that individuals recognize that the narrative that they tell themselves about Black women is wrong.”
Ramaphosa Advisers Divided Over Implementing South African Basic Income Grant
* South Africa Is Considered The World’s Most Unequal Nation
* Panel Members Warn Failure To Offer Grant May Trigger Unrest
A panel of economic advisers appointed by South African President Cyril Ramaphosa is divided over whether the country should implement a basic income grant to ease poverty in the world’s most unequal nation.
A report by 11 of the about 18 advisers cautioning the president against implementing such a program, saying it would be a “policy error” that would curb growth, was leaked last week. A separate report by four other advisers, seen by Bloomberg, warns that not doing so could lead to a repeat of last year’s riots and looting in which more than 350 people died.
“The state cannot turn a blind eye to this simmering discontent,” the authors of the latter report said. They called for the state to extend protection for the vulnerable beyond existing social grants.
The divisions within the Presidential Economic Advisory Council mirror those in government. While Finance Minister Enoch Godongwana and his predecessor, Tito Mboweni, have said an income grant is currently unaffordable, Ramaphosa and Social Development Minister Lindiwe Zulu have said the measure — which would be the biggest of its kind globally if implemented — should be considered to alleviate poverty.
Business organizations have said it would be ill-advised.
On Saturday, Ramaphosa’s office acknowledged the leak of the initial report, saying it was being used to “support various agendas.” The advisers “hold a range of diverse and nuanced views” that are valued by the president, his office said. The Johannesburg-based Sunday Times newspaper earlier reported on the second document.
South Africa, which at 3.3% of gross domestic product allocates a greater proportion of its revenue to welfare than most countries, is projected to spend 222 billion rand ($14.3 billion) on social grants in the year through February.
More than 18 million people, or one in three South Africans, receive monthly payments, mostly in the form of pensions or child support.
Expanding welfare is seen as the ruling African National Congress’s single biggest achievement in tackling inequality. There is no permanent provision for the unemployed. More than a third of South Africans are jobless and the figure rises to almost 80% among those aged 18 to 24.
Calls for the introduction of an income grant from civil society organizations and labor unions have increased after the government agreed to a temporary 350-rand monthly payment to the unemployed to mitigate the impact of the Covid-19 pandemic.
The Thomas Piketty-backed World Inequality Lab said in a study that inequality in the country hasn’t improved since the end of apartheid in 1994 and the richest 3,500 South African adults own more than the poorest 32 million people. The advisers who authored the report advocating additional welfare spending said it would increase consumer demand.
“Debate is corralled into a narrowing enclosure, where any rise in social spending, be it through a basic income grant, improvements in existing grants or a more comprehensive social package, is thought to displace investment and jobs,” Ayabonga Cawe, one of the authors of the report, said in a column in Johannesburg’s Business Day newspaper on Monday. It should be looked at “as a critical feature of our post-democratic compact to build a society based on solidarity and compassion. Or as a critical feature of our growth story.”
The cost of a basic income grant, depending on what level it was set at, could range between 157 billion rand to 519 billion rand a year, according to a study by consultancy Intellidex.
Jack Dorsey On UBI: Bitcoin Encourages Transparency, Long-Term Thinking
Dorsey’s Start Small initiative has invested over $55 million across the United States and overseas to experiment on universal basic income.
Twitter co-founder and Block (previously Square) CEO Jack Dorsey discussed the implications of a Bitcoin (BTC)-powered universal basic income (UBI) strategy with US congressional candidate and a full-time elementary school teacher, Aarika Rhodes.
“Obscurity of information forces and incentivizes people to negative (financial) behaviors that don’t work for them, their community or family,” said Dorsey while pointing out the lack of transparency within the existing centralized financial system.
“If there’s one thing to focus on in Bitcoin — the operations are transparent, the code is transparent, the policy is transparent.”
This base foundation of BTC is what Dorsey believes has the potential to solve numerous use cases and problems as a direct result of using fiat currency. Through business initiatives including Start Small, the entrepreneur has invested over $55 million across the United States and overseas to experiment on UBI.
“We’re about to do a test of the UBI-like concept with Bitcoin as well.”
Dorsey’s BTC-powered UBI experiment will involve creating a small-scale closed-loop community of sellers and merchants that adhere to the Bitcoin standards. Based on the happiness quotient and willingness to participate, he intends to identify use cases for wide-scale implementation.
Rhodes Strongly Believes That Involving Bitcoin Will Reduce The Costs Related To Banking Fees:
“When you have something like Lightning (network), where you can transact at very low fees is a benefit for everyone. It doesn’t matter where are economically.”
In terms of financial literacy, Dorsey said that adopting the Bitcoin standard inculcates long-term thinking, however, his skepticism toward a BTC-powered universal basic income will reduce based on the results portrayed by the ongoing experiments:
“Just that action of owning it (BTC) will change people’s mindsets in fundamental ways that are net positive and compounds throughout their communities, and encourages other actions like sellers and merchants around them doing similar things.”
Along with the benefits that come with the Bitcoin standard, Dorsey is also vigilant about its negative impacts. On an end note, he highlighted the inefficiencies within the government policies and how UBI helps address some of the challenges:
“If you intend to help people by giving them money directly is far better than the money that the governments (federal and local) spends on these existing support structures. It’s not helping people.”
In a recent interview with MicroStrategy CEO Michael Saylor, Dorsey opined that Facebook (later rebranded as Meta) should’ve used an open-ended protocol like Bitcoin rather than attempting to create its own currency, Diem.
As Cointelegraph reported, Dorsey added that making BTC more accessible would also benefit many of Meta’s instant messaging and voice-over-IP services such as Facebook Messenger, Instagram and WhatsApp.
Massachusetts To Send $500 To 500,000 Low-Income Workers
Half a million low-income earners in Massachusetts will receive a $500 check by the end of March, in a program aimed at frontline workers on the job since the Covid-19 outbreak.
Individuals will be eligible for the check if their income is at least $12,750 while their total earnings is below 300% of the federal poverty level. Those who received unemployment compensations in 2020 will not be included in the first round of payments.
“This program will support those workers who served our communities, especially early in the pandemic,” Massachusetts Governor Charlie Baker said in a statement.
The checks are part of a $4 billion Covid relief program that Baker signed in December, which allocates $500 million of premium pay for low-income essential workers. The state said it will provide details on subsequent rounds of funds in the future.
Ramaphosa Extends Grant For Poor Amid Jobs-or-Welfare Tussle
* South Africa Extends 350 Rand Monthly Stipend By One Year
* Handouts Could Boost Support For Ruling Anc Before 2024 Vote
South African President Cyril Ramaphosa extended the payment of a stipend for the poor by a year, deferring a contentious decision on whether to introduce permanent income grants.
About 10.3 million people signed up for the 350-rand ($23) monthly handouts, which were dispensed to cushion them from the fallout of the coronavirus pandemic and were due to expire at the end of next month.
A debate is raging in South Africa over whether the government should continue bolstering welfare spending or focus on creating jobs for the 35% of the workforce that’s unemployed by fostering investment and economic growth.
“It must be recognized that we face extreme fiscal constraints,” Ramaphosa said in his state-of-the-nation address to lawmakers in Cape Town on Thursday. “It remains our ambition to retain a basic level of support for those in the greatest need.”
The extension of the grant comes three months after a municipal vote in which support for the ruling African National Congress slipped below 50% for the first time since it took power in 1994, a backlash against rampant poverty and its slipshod management of towns and cities.
More payouts could help shore up the party’s support ahead of national elections in 2024, but will place further strain on the nation’s finances at a time when the Treasury is trying stick to its expenditure ceiling and reduce the budget deficit.
Ramaphosa is meanwhile set to seek re-election as ANC leader at a conference in December and is likely to encounter a challenge from a party faction that is loosely aligned to his predecessor, Jacob Zuma, and advocates for the redistribution of the nation’s wealth.
The extension of the stipends, which can be funded using windfall revenue from a commodities boom, will deprive his detractors of a potential source of ammunition against him.
Detailed technical work is underway to evaluate options to replace the stipends and “any future support must pass the test of affordability, and must not come at the expense of basic services or at the risk of unsustainable spending,” Ramaphosa said.
The president recommitted the government to implementing structural reforms needed to grow the economy and draw investment, including reducing red tape for business, making ports more efficient, opening up access to freight rail lines to private operators, auctioning broadband spectrum and easing visa requirement for skilled workers.
Ramaphosa also said the government is making headway in developing a green hydrogen industry, with projects worth 270 billion rand in the pipeline. It will industrialize the production of cannabis, with a view to creating 130,000 jobs.
Energy shortages that have plagued the country since 2005 and continue to result in rolling blackouts are also being addressed, according to Ramaphosa, an assurance he has given several times before.
He announced plans to soon open up a sixth round of bids from private producers to supply an additional 2,600 megawatts of renewable electricity to the grid, and that requests for proposals to supply 3,000 megawatts of gas power and 500 megawatts of battery storage capacity will be sought this year.
Ramaphosa reiterated his commitment to tackling corruption that became endemic during Zuma’s nine-year rule and which a panel headed by Acting Chief Justice Raymond Zondo has spent almost four years investigating.
Zondo’s third and final volume of findings is due to be submitted by the end of next month, along with a plethora of recommendations on how to prevent a recurrence of the looting of taxpayer funds.
“We are standing together against corruption and to ensure that those who are responsible for state capture are held responsible for their crimes,” Ramaphosa said, adding that he will respond to the graft probe by June. “The fight against corruption will take on a new intensity.”
A Basic Income Pilot Demonstrates The Power Of Trust
A study of one of the largest U.S. pilots to provide direct cash payments finds some of its greatest benefits were intangible.
An independent study of a basic income pilot in a disadvantaged part of Washington, D.C., adds to a growing body of research on the benefits of direct cash transfers to communities in need. The study by the Urban Institute, a policy think tank, highlights the material as well as emotional improvements that such payments can create, particularly when they’re provided by a trusted community group.
“Intangible assets such as trust are critical to providing help in disinvested places,” the report states.
One of the largest privately funded cash transfer programs in the U.S. to date, the THRIVE East of the River partnership provided $5,500 in cash plus additional services to 590 D.C. households during the first year of the pandemic. The goal was to stabilize families from the economic crises of closures and lockdowns and foster greater mobility.
Most participants lived in Ward 8, a majority-Black district where nearly 34% of residents live in poverty. And all had incomes below 50% of area median income.
They were selected through their existing connections to one of the four local community-based organizations — Martha’s Table, Bread for the City, 11th Street Bridge Park and the Far Southeast Family Strengthening Collaborative — that fundraised and launched the program in collaboration.
In its evaluation, the Urban Institute studied how the cash infusion during a particularly unstable period affected recipients’ lives. Compared to people with low incomes in the wider D.C. area and nationally, THRIVE participants reported better rates of food security and mental health.
Before the cash transfer, 34% of participants said they sometimes did not have enough to eat, and 60% said they dipped into personal savings to meet their household needs. Those rates dropped to 19% and 50%, respectively, after the payments.
Also striking were the lower rates of depression and increases in positive outlook that participants reported, compared to peer groups, said Mary Bogle, the study’s lead researcher.
The money itself may not have been the only factor. When participants first received calls informing them they were eligible for the cash, they responded with a common sequence of emotions, starting with deep suspicion, moving to shocked surprise, and ending in joyful, sometimes tearful gratitude.
“I think it ties to the dignity and trust they were being extended,” Bogle said. “Folks who live in neighborhoods that are disinvested in are used to being treated badly by systems — everything’s an ineligibility limit or they’re getting hit by a scam. I think their extraordinary reactions in this case say a lot about the barriers these folks usually encounter.”
The implicit trust placed in participants — that the money was theirs to spend however they wanted, no strings attached — was core to the set of values the four partner organizations adopted early on in the program.
They pledged to value the decision-making power of community residents, to maximize their personal choices (for example, by giving the option to receive the cash all at once or in installments) and treat them with integrity and respect.
The trust also had to go both ways. Because all of the community-based organizations had worked in the area for many years — providing social services or doing equity-focused community development work — they were able to set up the cash transfer program and recruit and enroll people relatively quickly.
If an outside nonprofit had parachuted into the neighborhood to do the same, they might not have been able to, Bogle said.
One of the four partners, the 11th Street Bridge Park, is set to convert a disused freeway bridge into a park over the Anacostia River. As part of that project, the organization has created and funded $86 million in equitable development strategies focused on preserving affordable housing and supporting local businesses in the surrounding area.
It had been meeting with the other local community organizations before the pandemic arrived; collectively, their leaders knew the Ward 8 area would be hard hit by pandemic job losses and school closures.
“One way to build trust is to be there for folks in need,” said 11th Street Bridge Park Director Scott Kratz. “When you’re hitting a rough spell, it’s your friends who will help you out, and we anticipated that.”
Amy Beth Castro, a professor at the University of Pennsylvania’s School of Social Policy and Practice and a lead investigator on the Stockton Economic Empowerment Demonstration, a basic income pilot in California, praised the D.C. program (which she was not involved in) for fostering regular contact between the organizations and the residents, which she said encourages trust and participation.
“We know that if that careful work of relationship-building isn’t done with these programs, there won’t be good take-up in the end,” she said.
The study found some limitations in the THRIVE program. The cash transfer only had a minimal impact on participants’ feelings of concern about their children’s well-being, and virtually no effect on their confidence of being able to make rent payments or the possibility of an eviction.
Other studies have shown that payments can create such benefits when provided on a longer-term basis, however. In addition to well-known basic income initiatives in Stockton and Jackson, Mississippi, that predated the pandemic, at least 49 pilots have been announced since the start of Covid-19 using private or public funds, or both, according to the Urban Institute report.
The greatest lesson of the D.C. pilot for other social services groups and agencies may be in the principles that guided it.
Whereas many nonprofits aim to “help people,” the THRIVE collaborators aimed to be a partner, Bogle said.
“To be trusted is to have power,” she said. “To have choice is power. And most of our mechanisms for helping people are so disempowering.”
A Once Radical Idea To Close The Wealth Gap Is Actually Happening
How economist Darrick Hamilton brought baby bonds from Bed-Stuy to U.S. statehouses.
Darrick Hamilton grew up shuttling between two worlds. Each morning during the 1970s and ’80s he and his sister would travel three miles to Brooklyn Friends, the elite private Quaker school that their parents had scrimped, saved, and sacrificed to afford. Then the kids would return from downtown Brooklyn to Bedford-Stuyvesant, which was overwhelmingly Black, largely poor, and one of New York’s most dangerous neighborhoods.
At the time, pundits and politicians frequently talked of a “culture of poverty” or a “pathology” in Black “ghettos.” That didn’t compute for Hamilton. “I could see the vivid inequality,” he says, but “I could see fundamentally people were not different.”
The neighbor he played football with who was later incarcerated for robbing an armored car didn’t seem essentially different from the classmate who might be an investment banker today.
By the standards of Bed-Stuy, Hamilton was privileged. His family owned their home, and in Brooklyn Friends he had a place where he could thrive. A precocious and popular student, he took to heart the Quaker emphasis on social justice and morality.
Most of all, he had parents who were devoted to getting their children ahead, no matter the cost.
Now 51, Hamilton is a professor at the New School in New York, a leading scholar in the emerging field of stratification economics, and a policy adviser to senators, governors, and presidential candidates. One of his cornerstone ideas, to give “baby bonds” to each child, is being embraced and implemented by governments across the U.S.
He insists, though, that this success shouldn’t be celebrated as a triumph over adversity. He despises the way classic rags-to-riches stories can be used to cast blame on those who can’t climb out of poverty. Such narratives ignore the economic stratification that can make success possible only with extraordinary luck or inhuman levels of personal sacrifice.
Hamilton’s triumph came at a traumatic cost. In 1988, a few months before he turned 18, his mother passed away after a long struggle with health issues. A month after Hamilton’s birthday, his father died, too. He blames their untimely deaths on their incessant striving.
“I saw their struggles and I saw their brilliance,” he says. But despite their creativity and entrepreneurship, they could never achieve the same security as his classmates’ parents.
Basketball became Hamilton’s solace. Despite standing just 5 feet, 8 inches, he became a star at Brooklyn Friends. The school rallied around him, and he finished his senior year tuition-free. He followed some close friends to Oberlin College, where he chose economics as his major.
“I didn’t want to be poor,” he explains. He thought the subject might be a bridge to law or business school, but, in keeping with his alma mater’s Quaker ideals, he decided he could do some good in economics, with a focus on the racial disparities he’d grown up observing.
After getting a Ph.D. from the University of North Carolina, Hamilton became a leading researcher of the U.S. racial wealth gap and a font of policy proposals to address it, advocating ideas such as reparations and a federal job guarantee as part of a broader set of economic rights.
In 2018 he appeared onstage at an “Inequality Town Hall” with Senators Bernie Sanders and Elizabeth Warren and filmmaker Michael Moore. Two years later, at Sanders’s behest, Hamilton served on the Biden-Sanders Unity Task Force, an effort to iron out policy differences among Democrats and help shape the party’s platform.
It was his advocacy of baby bonds, though, that brought his academic work off progressive wish lists and into the real world. Hamilton developed the idea a dozen years ago, proposing to give each baby born in the U.S. a trust fund established and guaranteed by the federal government. The goal is to narrow the vast inequalities that exist at the moment of birth, particularly those related to the wide and persistent racial wealth gap.
The bonds could give any disadvantaged 18-year-old resources to catch up to wealthier peers. “The fundamental point is providing people with capital at a key point in their life, so they can get into an asset that will passively appreciate over their lifetime,” Hamilton says.
And, because race correlates so closely with wealth in the U.S., the policy can be officially race-neutral while still giving a substantial boost to Black Americans who for centuries have been denied opportunities to build intergenerational wealth.
Propelled by the Black Lives Matter protests that took place after the murder of George Floyd, lawmakers in Connecticut and the District of Columbia recently established programs that will set aside money for thousands of babies. Washington state is taking steps toward a similar program that could launch in 2024. New Jersey’s governor has also pushed a plan to issue them.
And Massachusetts’ treasurer is launching a “baby bonds task force” this spring. “There’s so much happening fairly quickly and suddenly at the state level,” says Shira Markoff, policy fellow at Prosperity Now, a nonprofit pushing the idea around the country.
The state initiatives depart from what Hamilton envisioned in key ways, but he argues that they’re a “big giant first step” that will help recipients, demonstrate baby bonds’ political appeal, and allow states to experiment with different ways of implementing them. “What these programs do is create the political infrastructure by which the federal government will act,” he says.
Early in Hamilton’s career, whenever someone in academic or policy circles asked him about the racial wealth gap, he would bring up the possibility of the federal government paying reparations to Black Americans for slavery and other historical wrongs. The median White family in the U.S. has eight times more wealth than the typical Black family, according to the latest Federal Reserve data, from 2019.
And a 2020 study by Naomi Zewde of the City University of New York found that the median White adult has 16 times the wealth of her Black counterpart. A substantial reparations program could do a lot to close the gap, but Hamilton’s listeners rarely wanted to hear it. “People [were] basically telling me to shut up,” he says. “There he goes again.”
Then he was asked at a forum convened by the Ford Foundation to come up with a more politically feasible way of building up Black wealth. “Give us something that can actually happen,” he recalls being told.
The answer would be baby bonds, laid out in a 2010 academic paper by Hamilton and his graduate adviser and then-frequent co-author William Darity Jr., who’s now an economics professor at Duke University.
The basic notion of giving cash to people when they reach the age of maturity is hundreds of years old. Decades after advocating for the American Revolution, Thomas Paine published a pamphlet in England in 1797 arguing that, as compensation for unfair land distribution, every person should be granted £15 (about £2,000, or $2,600 today) at age 21. “It is a right, and not a charity, that I am pleading for,” Paine wrote.
The term “baby bond” eventually came to be used to refer to savings accounts for children that were seeded with small amounts of money to encourage their parents to save. Britain took a big step toward creating a government-run baby bond program, the U.K. Child Trust Fund, for each baby born after September 2002, but it stopped contributing new money in 2011 after budget cuts. And when Hillary Clinton ran for president in 2007, she briefly floated the idea of giving each American newborn a $5,000 bond.
Like these ideas, Hamilton-style baby bonds aren’t technically bonds, which in finance are debt securities sold by companies or governments and traded among investors. They’re really trust funds, ones Hamilton thinks should be guaranteed by the federal government, like Social Security.
At age 18, kids could tap into the accounts for certain wealth-building purposes, including education, homeownership, small-business startup costs, and retirement savings. While all or most babies would get a bond, the poorest kids would get the largest stakes—as much as $60,000 each.
Hamilton, Darity, and other scholars spent decades laying the intellectual foundations for the idea, publishing research that stressed the importance of focusing on wealth and not just income or education. “Wealth provides financial agency over one’s life,” Hamilton told the National Economic Association in a 2017 speech. “Wealth gives you choice. It provides the economic security to take risks and shield against financial loss.”
With wealth, you can afford the best health care, live in the safest neighborhoods, get the best education, and hire the best lawyers to fight for your interests. Wealth lets you innovate and try new things, like opening a business. Most of all, once you have wealth, it can be invested and grow exponentially over your lifetime. And you can pass this wealth and all its advantages down to the next generation.
“Maybe I’m naive, but if you see a problem you directly redress it”
The racial wealth gap hasn’t significantly narrowed since 1983, the year it started being consistently tracked, despite hopes that it would shrink as discriminatory laws were repealed and Black Americans made gains in income, education, and other areas. Too often, Hamilton says, Black people have been blamed for this lack of progress. But the gap can’t be closed solely with hard work, better education, and saving more.
Fed data for 2019 show that the median Black household with at least one college graduate had less than half the wealth of the median White household where the highest level of education is a high school diploma. And several studies suggest that Black people save more as a percentage of their incomes than White people do.
The larger problem, in Hamilton’s view, is that Black families are starting from too far behind, because they inherit so much less from their parents. The goal of baby bonds is to tackle the wealth gap they and other poor families face head-on, by giving young people capital when they’re on the cusp of adulthood.
“Baby bonds would be almost an automatic stabilizer,” Hamilton says. It’s “a mechanism to redress some of the inheritable advantages or disadvantages that go along with families and life.”
Hamilton finds it difficult to talk about his teenage years. His parents’ deaths aren’t a talking point in his frequent testimony or public appearances. Usually loquacious, he tells the story of his childhood haltingly, through tears.
His father, Charles, was a community leader, an entrepreneur who “could literally make a dollar out of fifteen cents.” To earn the money that put Hamilton and his sister into private school, Charles worked as a property manager for Brooklyn landlords, often in high-crime areas. At a tenants’ meeting one day, he was attacked.
He took out a gun he carried for protection and shot and killed his assailant. Hamilton’s mother, Norma Jean, used some money she’d come into from a medical malpractice settlement to hire a good lawyer for her husband, but he was still convicted of manslaughter and spent several years in prison.
Hamilton says his father’s hard work and creativity “never put him in a place where he could remove himself from the vulnerabilities that, in my mind, led to his incarceration.” With Charles in prison, the burdens of raising two children fell on Norma Jean: “She was going to make sure that we were going to get through school.”
They did, but not before she was diagnosed with a serious liver condition that Hamilton believes was stress-induced.
After being released from prison, Charles had trouble rebuilding his life. Drugs “became part of coping with things,” Hamilton says. Charles eventually contracted HIV, but he was at his wife’s bedside when she died in May 1988 following an unsuccessful liver transplant. He died of AIDS the next October. “It was quick,” Hamilton says. “I didn’t know about it until he got really sick.”
His parents had been relatively fortunate to own their house, bought in the 1970s after his father’s father drew on a veterans loan program that effectively excluded many other Black vets. But after their deaths, the family lost the home in a foreclosure. Hamilton says that if he’d received a baby bond around that time, he might have been able to save the home, which went on to multiply in value as Bed-Stuy gentrified in subsequent decades.
It’s easier still to imagine how the bonds might have helped his parents. His mother might have avoided the financial insecurity and stress that led up to her death. His father might have built a portfolio of properties rather than managing them for others.
The forces that pulled and pushed at Hamilton’s parents are still keeping Black families poorer than other Americans. The broader problem, according to Hamilton and other scholars in the field of stratification economics, is that racial discrimination has staying power.
Traditional economists often assume that something as irrational as racism will fade away in a capitalist economy, as market forces narrow the disparities among groups. Stratification scholars say economics needs to be more aware of the power dynamics that undergird racism, arguing that discrimination is driven by dominant groups trying to preserve or enhance their position in the social hierarchy.
Through this lens, understanding the economy means taking into account the U.S.’s extraordinarily brutal history and how it distributed wealth to some families and not others. As Hamilton frequently points out, the legacy of slavery is just one example of how the White wealth of today was created by the policies of the past.
A forthcoming paper he co-authored considers agricultural policies following the post-Civil War period, when Black farmers managed to acquire millions of acres of land.
Over the course of the 20th century, the research found, the U.S. Department of Agriculture worked with banks and White elites to discriminate against Black farmers seeking loans and other aid, ultimately causing them to lose almost 90% of their land. Hamilton and his co-authors put the compound value of this lost land at roughly $326 billion.
He often reminds audiences that the U.S. government also gave White families an overwhelming advantage in how it distributed free land to settlers in the 19th century, how it set up the New Deal safety net in the 1930s, and how it doled out GI Bill mortgages and education benefits to veterans.
In addition to denying millions of Black Americans these wealth-building entitlements, the government at times allowed and even encouraged the theft and destruction of Black property, sometimes in acts of terror—the 1921 Tulsa Race Massacre is just one example of many.
To address the resulting disparities, Hamilton has advocated many policies that fall under the category of “inclusive economic rights,” among them a guaranteed income and single-payer health insurance. He’s also backed ideas, such as debt-free college and student loan forgiveness, that would benefit many White Americans.
“Coming up with the policies is not as esoteric and difficult as it may seem,” he says. “Maybe I’m naive, but if you see a problem you directly redress it.”
Stephanie Kelton, another economist and Sanders supporter who served on the Biden-Sanders task force, says Hamilton’s advantage in policy circles is that “he’s a very fierce advocate and at the same time a very affable person.” He’s also “not afraid to put big ideas on the table.”
Hamilton has lately been chatting with major philanthropic foundations about baby bonds, suggesting that they try giving out grants to a group of high school seniors to test the concept. “Why wait 25 years to see if these accounts are going to work?” he asks. And for that matter, “Why should baby bonds be limited to the United States?”
Baby bonds came to wider public attention in the U.S. in 2019, when New Jersey Senator Cory Booker ran for president on a platform that featured a federal baby bonds program. Hamilton had helped craft the proposal; his tireless advocacy for the idea prompted Booker to dub him, aptly, “the intellectual father of baby bonds.”
But the momentum for the idea really gathered after the murder of George Floyd by police in May 2020, sparking a reckoning that saw lawmakers scrambling for policies that might address the striking disparities between Black and White Americans.
The first state to adopt a Hamilton-style baby bonds program was, by some measures, the country’s richest and least equal.
Connecticut can boast one of the highest average incomes in the U.S., thanks to the hedge fund billionaires and other finance professionals who live in Greenwich and other suburbs of New York City. But its cities contain pockets of deep, persistent poverty.
“Connecticut is ground zero for wealth disparity as well as income disparity,” says Shawn Wooden, who grew up in the impoverished North End of Hartford, the capital, and was elected state treasurer in 2018.
Wooden brought his baby bonds proposal to Connecticut’s legislature in early 2021, and by July it was law. The District of Columbia moved about as quickly, beginning debate in May and passing its law in December.
Wooden says the combination of widespread pressure to tackle racial disparities and Hamilton’s “intellectual framework” prompted advocacy groups and legislators in Connecticut to line up swiftly behind an idea that was new to most of them.
To broaden the coalition, proponents argued that baby bonds wouldn’t just heal racial divisions but regional ones, helping poor, largely Black and Democratic urban neighborhoods and poor, largely White and Republican rural areas alike.
Wooden tried to demonstrate to lawmakers that there were families in every one of the state’s 169 towns, including Greenwich, that could qualify for baby bonds. “Part of the messaging around this is it’s not race-based,” he says. “This is a program that is antipoverty regardless of your race or ZIP code.”
Governments are keeping costs down by covering only the poorest children, those eligible for Medicaid. In Connecticut, that’s more than 16,000 babies a year, about half of all births in the state. They’ll start with $3,200, which could grow to more than $10,000 by the time they’re 18, depending on investment performance—the state will put the initial capital pool into a broad range of asset classes, much like a pension plan.
To ensure stable funding, Connecticut will issue about $50 million in bonds annually. The District of Columbia will spend $32 million over four years on its program, with qualifying babies starting with $500 and receiving as much as $1,000 extra for each year their parents’ income is below three times the poverty level.
To those wary of government spending programs, advocates argue baby bonds are inherently conservative—money set aside to meet future needs. “We’re not creating debt, we are just investing,” says Washington State Treasurer Mike Pellicciotti, who’s championing a baby bonds program that would be called the Washington Future Fund.
“This is a way to bring capital to those communities, wherever they are, that are denied capital or have had capital drain.” The bill the state is debating would have it spend approximately $128 million a year for a program covering about half the babies born annually in Washington. As in Connecticut, each would have $3,200 to start, with growth dependent on investment performance.
And as in Connecticut, the sponsors of Washington’s bill have been surprised by the initial enthusiasm. The state’s legislature recently allocated money for a committee to develop a detailed baby bonds proposal by December. “A really bold idea in such a short time got more attention than I expected,” says Monica Stonier, a Democratic representative from the western part of the state. “The goal is broadly supported, it’s just a matter of how we get there.”
The bill also attracted a couple of GOP co-sponsors. Another Republican state representative, Mike Volz, from Spokane, sponsored a constitutional amendment that would allow baby bond funds to be invested in a wider array of assets, though he says he doesn’t know what he’ll do when the main bill comes up for a vote next year. “I did commend the treasurer on his creativity,” he says. “It’s not the worst idea ever.”
The “baby” part of “baby bonds” may be what gives them uniquely broad political appeal, Hamilton says. The idea of granting a birthright to each child avoids the typical and often racially loaded debates about who’s deserving and undeserving of help. It’s hard to attack a baby for being lazy, he points out.
Along with not being federal, the state programs depart from Hamilton’s vision by being far less generous. Only the U.S. government has the resources to give poor kids the amount of money they’d need to launch themselves into the middle class, he says.
According to Zewde’s 2020 study, a Hamilton-style $80 billion-per-year universal federal baby bonds program—amounting to almost 2% of the pre-pandemic federal budget—could narrow the racial wealth gap between the median White and Black young adult from a factor of 16 to a factor of 1.4.
Although the state programs are much smaller than Hamilton’s original proposal, Wooden points to the intangible benefits the bonds will bring. When children know they’ll be receiving baby bonds, he says, they may study a little harder, save their own money, and make plans for the future. “When you have hope, it changes everything,” he says.
Some progressives worry about overselling the benefits. Darity, Hamilton’s co-author on the paper that first floated the baby bonds concept, has expressed concern that even a full-scale federal program wouldn’t have a significant impact on the overall racial wealth gap.
Baby bonds may narrow disparities when you compare the median Black and White recipients, Darity says, but focusing on the median misses the huge amounts of wealth held by the richest White families. “It’s a great idea to provide each newborn child, as a right, an asset that they can access when they come of age,” he maintains.
But reparations are still needed to address the damage to the wealth of Black families across generations. “From the standpoint of justice and a debt that is owed, the entire racial wealth gap needs to be erased,” he says. He pegs the total cost at about $14 trillion.
Hamilton says both baby bonds and reparations are necessary, referring to them as “complements, not substitutes.” But he and Darity have split on, among other things, how to calculate the cost of reparations. Hamilton says using the entire racial wealth gap as the benchmark is too simplistic. The government needs to do a detailed historical accounting of “the present value of what was lost.”
His ultimate goal of a federal baby bonds program remains far away. Just 15 other senators have publicly backed Booker’s baby bonds bill, also introduced in the House by Massachusetts Democratic Representative Ayanna Pressley. It was never considered as part of Biden’s now-stalled economic agenda. But Hamilton remains optimistic, almost as a matter of principle.
“The thing that will definitely get in the way of this occurring is pessimism,” he told a group of advocates at a virtual conference on baby bonds last month. “We shouldn’t wait on the federal government.” By starting at the state and local level, he said, “we make them do it, we build up momentum.”
Hamilton isn’t religious, but he can still sound like the Quakers who educated him. “I’m for economic justice, or justice more broadly. I pursue justice as a matter of faith,” he says. “I’ll go back to my theology: Do it because it’s the right thing to do.” He doesn’t want it to be as difficult for others as it was for his parents to set their child up for success.
“If I had that choice, I would not have given up their life in order to have the access I had,” he says. “That drives me, because I saw the pain firsthand and I don’t want people to experience it. I think it’s profoundly unjust.”
500 New Mothers In New York Will Soon Get Monthly Cash
A New York City guaranteed income pilot is geared at easing the burdens of pregnancy and new motherhood. Early data show women spent the money on essentials like diapers and child care.
As a single mother of a young boy and a baby, Kassandra Hernandez has spent a lot of brainpower thinking about how to stretch every last dollar.
Juggling a part-time job in medical billing with child care made even more spotty by Covid quarantines meant income trickled in unpredictably. Her grocery trips are subsidized by the government, but food wasn’t the only thing her family needed.
Sometimes, she said, a carton of yogurt purchased with food benefits would rot in the fridge while she scrambled to buy other essential baby items and pay her rent.
“There’s days that I have too much of what they give me and not enough diapers,” said Hernandez, who also has type 1 diabetes. “I’m grateful for it, of course. … But sometimes that’s not the help we really need.”
What Hernandez really needed, she said, was cash. And after pushing aside her skepticism and responding to an ad her friend spotted in the Inwood neighborhood of Manhattan for a mysterious new program, cash is now what she’s getting — every two weeks, $500 at a time.
Since July, Hernandez has been part of a new guaranteed income pilot called the Bridge Project, designed for pregnant women and new mothers in high-poverty, heavily Black and Brown New York City zip codes making less than $52,000 a year.
She’s using half of the money for diapers, baby wipes, swim lessons for her eldest child and monthly family “adventures.” The other half, she’s trying to save. “Having that extra money, now I have something to fall on,” she said. “I don’t have to stretch my $20.”
The Bridge Project, funded by $16 million from the New York City-based Monarch Foundation, is the latest in a series of local cash pilot programs that provide no-strings-attached money to select populations in need.
Early research on the first six months of the project, released this month, shows that women were able to access child care at higher rates and buy essentials for their babies.
Its focus on new moms is shared by a similar program in San Francisco, with both programs geared toward easing the new stressors and expenses of childbirth — and providing economic stability early in a child’s life, which can lead to better educational attainment and health outcomes.
A recent study that sent monthly cash payments of $333 a month to 500 mothers found that their babies’ brain cognition was faster than babies in a comparison group, whose mothers were getting only $20 a month.
“What we’re starting to see from research more broadly is that investments in the earliest years do actually have the biggest payoff,” said Megha Agarwal, the executive director of the Monarch Foundation. The question they’re trying to answer is, “if you were to put something in that’s a cash investment, how can that be different than more typical programmatic supports?”
New York’s first cohort of 100 recipients from the northern Manhattan neighborhoods of Washington Heights, Inwood and Central Harlem started getting $500 or $1,000 a month in July 2021 — assigned a monetary amount at random — and will continue to receive monthly payments for three years.
Applications opened on April 1 for the second round of women, this time 500 of them, from an expanded list of zip codes that includes South and Central Bronx, and all of whom are currently pregnant.
After applications close on April 13, the first 250 will get their payments starting in June, and the second 250 starting in July.
Adama Bah, 33, is one of the more than 2,500 women who have applied for this second phase. Bah has two kids and is expecting another. She’s been unable to work through her pregnancy because of a medical condition called hyperemesis, which makes her vomit constantly.
After a circuitous, 16-year fight to gain U.S. citizenship, navigating government benefits has been challenging. Short-term disability assistance has been hard to access, too, she says, because her condition is not a common one. A program like this would come at an opportune time.
“This money would help in a lot of ways,” Bah said: It would cover the unexpected expense of a third child, while furthering her goal of going back to school.
Six months in, researchers already know some things about how the money, which is disbursed on debit cards, is helping the first round of women. The majority of the money researchers were able to track was spent on merchandise like strollers, cribs, wipes and clothes; the next most common expenditure was food.
Almost half the money was not trackable because it was withdrawn as cash. But responses indicate some of that cash was spent on savings and child care: Among both cohorts of women, participants who reported that their baby had another regular caretaker besides a parent increased by 63% after half a year.
“The cost of child care is one of the biggest drivers of poverty in the United States alongside the cost of housing,” said Amy Beth Castro, the co-founder of the Center for Guaranteed Income Research at the University of Pennsylvania, who is leading the research for the Bridge Project.
“Families are constantly forced to choose between paying rent, paying for child care, paying for basics.” With a more stable income, those trade-offs can get less extreme.
Mothers in the program were also able to prioritize time off to care for and bond with their new babies, said Baker, without feeling “forced to engage in the labor market right after giving birth,” she said.
For Hernandez, not working didn’t feel like an option after having her first child. She needed the money. But employers saw her as a liability. They often assumed a new mother wasn’t going to be able to work reliable hours, she said.
“If I had that extra income that probably would have saved me from bothering to go to interviews,” and instead look for part-time or weekend work, she said. “Just so I could be able to be there for my son, to be able to buy whatever I need to buy.”
Another question the Bridge Project’s experiment is hoping to answer is how much monthly money is enough to make a dent. In a high-cost city like New York, at a time when inflation is ratcheting up the cost of everything from diapers to gas, the difference between an extra $500 a month and an extra $1,000 has already proven significant, Baker said.
“We need to think about unconditional cash differently based on cost of living, geographic context.”
These findings could prove instructive for a national basic income program, she said, which is the ultimate goal of basic income advocates, including those behind the Bridge Project.
The closest thing the U.S. has gotten to a fully federal monthly cash payment was the Child Tax Credit, which gave families up to $300 per month per child during six months of the pandemic.
Just during the first month, it kept an estimated 3 million children out of poverty, according to the Columbia University Center on Poverty and Social Policy; when the credit expired in January, child poverty shot up again to 17%.
“You don’t have to look any further than the impact of the child tax credit to understand what unconditional cash can do for families with kids,” said Baker. The Bridge Project is “really picking up where the child tax credit fell off, and is patching some of those holes for families,” she said.
The assistance is also helping participants plan for the future.
“The goal was like, by the time this program ends, I hope to have a job that pays me more than where I’m at now,” said Hernandez. “I don’t want to just be able to take my kids out on adventures right now. And then when the program ends, like, ‘Okay, I’m sorry, guys, like, now we have to stop it.’”
How Cash Payments Changed Low-Income Americans’ Lives
Cash was key to tackling US inequality during Covid-19. But for women who received monthly guaranteed income, it was far more than a pandemic stopgap.
When 100 women in Jackson, Mississippi, were told in March 2020 that they had been chosen to be part of a year-long guaranteed income program, they couldn’t have known that the year would be harder than most.
The pandemic was only just beginning, but all of them were already dealing with everyday crises — navigating car trouble, job loss and debt on low wages, with families to feed and bills to pay.
When those challenges were compounded by the pandemic, they had something to fall back on: $1,000 a month, for 12 months.
They made up the second cohort of a program called The Magnolia Mother’s Trust, which has been giving Black mothers who live in subsidized housing in Jackson $12,000 a year to spend how they wish — no strings attached — since 2018.
The Magnolia Mother’s Trust initiative builds off a simple idea: that cash is the most efficient and most effective way to help people in need. It’s an old concept, but one that got legs during the pandemic, partly because of how effective cash payments were at buoying low-income Americans over the last two years.
This week’s episode of The Pay Check podcast dives into how national programs like stimulus checks, the child tax credit and bigger unemployment benefits helped some Americans weather the early pandemic months, and fended off the worst of the economic crisis that lockdowns, infection and uncertainty threatened to create.
They’re also credited with bolstering wealth for some of the least advantaged Americans during a time when many expected inequality to get worse.
Those government programs have lapsed, and political momentum for renewing them has stalled. But across the US, dozens of local guaranteed income pilot programs like the Magnolia Mother’s Trust continue. Here’s what the cash meant to three mothers in Jackson.
In March 2020, Djunaita Johnson had two kids, one job, and a “household full of bills.” Those bills — rent, renters’ insurance, car insurance, and groceries, “oh my goodness, groceries, so high” — had started to outweigh her $65-a-day income as a substitute teacher for a local middle school.
Then, while she, her students, and her kids were home for spring break, she heard on the news that school would be out for a little longer than expected. She wondered how long it would be. “I didn’t wanna exhaust all my funds that I just got,” she said.
By April, Johnson had learned that her district didn’t plan to resume in-person classes until the next school year. But at that point, she had already gotten the first of a dozen $1,000 payments, and had qualified for enhanced unemployment insurance. She was in a “calm state” for the first time in years.
“What’s so amazing is that with that income and the unemployment income, I made almost $30,000 at the end of last year,” she said. “I know 30 might not seem like it’s a lot for some families, but I’m a manager. I know how to manage money.”
So manage she did, putting much of the extra money she was making towards her various bills, and squirreling away the rest. “I always was prepared and was always saving,” she said. “Because I knew that it wasn’t a program that was gonna last always, even though we might have wanted it to.”
Another curveball came in January 2021, when her school asked her to come back to the classroom. She was terrified. So she made a decision that in another year might have been impossible: she stayed home rather than risk her health.
“I had a nice little amount of money saved up where I didn’t have to – I had everything figured out,” she said. “I was like, okay, I can stay here for this amount of time.”
The $1,000 payments stopped in February. By August, she returned to school, and stayed even as mask requirements dropped. But remnants of her time as a Magnolia Mother remain: There’s the $13,000 she saved, and the motivation it gave her to make that same income on her own.
She switched school districts, and now makes $10 an hour. Johnson loves the students, but she’s looking for a new job where she can make even more.
“I at least need to make no lower than $15 an hour,” she said. “I’m definitely gonna find another job cause I just can’t live no more like this. This is hard.”
The day Tamika Calhoun told her five kids that she would soon be getting $1,000 a month from the Magnolia Mother’s Trust, “it kind of blew their minds.”
She had been rejected the year before, and had a rough 2019 of job loss and car trouble, so they were all ecstatic when the call came in March 2020. Calhoun had also just gotten a new job she could do from home, answering calls for Apple for about $14 an hour.
First on her mind were the big expenses the funds could cover, like getting a new car for more reliable transportation.
Dreams also swirled through her mind of savings, new clothes and an allowance for the kids — and maybe even a small vacation. But the pandemic, which had only just begun, reordered priorities. The kids needed computers to sign into remote school, and desks to make their days more structured.
“I was just trying to prepare for: What if this is gonna be permanent?” she said. But she knew that even if the pandemic turned out to be long-lasting, the payments wouldn’t be. So after covering the basics — paying off her new truck, and getting monthly groceries for her full house — she focused on saving half.
When Calhoun thinks about how the program changed her life, it’s the way that $6,000 in extra savings allowed her to let go of a list of worries. When her car needed to be fixed, she wasn’t stressed about affording everything else that month.
When she moved out of subsidized housing, she didn’t have to panic about using a whole paycheck for the first month’s rent and a deposit on a new house. When she and her family finally did go on that vacation, they could actually have fun.
This year, intent on sustaining the quality of life she had with a guaranteed income, Calhoun started a new career as a financial counselor for aspiring homeowners. It’s a job she loves, but without the extra cash from Magnolia Mother’s, saving has been harder, adding to her conviction that something national and lasting is necessary.
“I don’t think anyone wants it just to be their only income, but to supplement,” she said. “Especially with inflation, it would be just what a lot of families need.”
When a letter advertising the Magnolia Mother’s Trust showed up at her apartment in early 2021, Sherika Washington had been in and out of the hospital for months. Since finding out she was pregnant with her third child, the nausea and vomiting had been relentless.
Her weight had dropped to 81 pounds, and her doctor told her she was at risk of having a stroke. “My face had started to sink in,” she said. “When I went to the hospital, they told me it was by the grace of God that my sister had got me there in time.”
After she gave birth to her daughter, the complications continued, meaning she couldn’t go back to work as a nurse’s assistant, or stand up long enough to style hair like she used to do on the side. Even as the baby grew, daycare didn’t feel like an option, with Covid cases still circulating in Jackson.
Income was close to non-existent and bills were mounting. Then she found out she had been chosen for the Magnolia Mother’s program, and suddenly she had a safety net: In April 2021, she started getting $1,000 a month. She bought herself a car for $1,700, and had enough to keep the tank full; her son got a scooter.
Other portions went to paying off rent multiple months at a time, and to stocking up on household supplies. “I would buy big boxes of diapers,” she said. “It had got to the point where my apartment looked like a hoarder house.”
The cash took stress off of Washington when times were toughest, she says. And now, even after the last of the payments stopped coming this March, things are starting to look up. Washington started applying for jobs, and got one, as a patient care assistant.
“Can you believe it? Oh my goodness, I went to two interviews with my daughter on my hip!” she said. She still can’t lift anything too heavy because of an umbilical hernia during birth, so will be doing housekeeping instead of the nursing work she’s used to. But it’s “better than nothing,” she said.
“I love elderly people. I love working in nursing homes. I love working in hospitals. I love working with children,” she said. “It’s my passion, you know, so long as I’m still able to do that and I can walk up and down the hall and say ‘Hey Miss Joelle,’ or whoever, I’m okay with that.”
Chicago Taps Direct Cash Charity To Give Residents $500 A Month
GiveDirectly will run the city’s guaranteed basic income pilot, amid a surge in cash assistance programs.
A nonprofit that originally focused on giving cash to impoverished people in Africa will soon be delivering money to poor residents of Chicago, in one of the largest tests of a guaranteed basic income program in the US.
GiveDirectly is administering a program that will give $500 a month to each of 5,000 households in Chicago as soon as the end of June.
The city is using $31.5 million from the federal government’s American Rescue Plan Act for the year-long pilot, and hoping the payments will help it recover faster from the pandemic.
A growing number of communities across the U.S., from St. Paul, Minnesota, to Alachua County in Florida to San Francisco, have launched similar programs in the wake of the pandemic. GiveDirectly is also administering a program in Georgia now.
The idea of handing money to the poor isn’t new: Martin Luther King Jr. advocated for it during the Civil Rights movement. But since Andrew Yang proposed a related idea during his presidential campaign, it has gained mainstream momentum from an unlikely combination of libertarians, tech executives and liberals seeking to alleviate poverty and foster an equitable recovery.
The pitch for basic income often comes down to giving individuals the freedom to choose how to spend monetary assistance, whereas current federal aid programs tend to offer funds that can only be used to, for example, buy food. Handing over money directly can also be cheaper for the state to manage by reducing the number of workers needed to administer services.
Studies of of local pilot programs have found that beneficiaries spend the funds on essential items like child care, paying off debt and transportation; some have also found that the programs helped recipients get jobs, and boosted their well-being. And during the pandemic, Congress engaged in its own temporary mass cash distribution experiments.
Many advocates now point to the Child Tax Credit, which lifted millions of children out of poverty and pushed 3 million kids back below the poverty line when it ended, as a model for successfully scaling the idea. But Givewell, which recommends GiveDirectly as a top-rated charity, notes that evidence about the long-term impact of direct cash transfers is limited.
GiveDirectly, founded in 2009 by Harvard University and Massachusetts Institute of Technology alumni trained in economics, is backed by Google.org, Google’s philanthropic arm, among others.
It has distributed more than $550 million to more than 1.25 million poor families in African countries, Yemen, and more recently the US through programs for a set amount of time and one-time donations. It has grown fast during the pandemic, with distributions in 2020 making up more than a third of the total amount since its founding.
“A sea change was sparked in some ways by the Covid-19 crisis,” Sarah Moran, GiveDirectly’s country director for the US, said in an interview. “We saw there is clearly untapped potential.”
That shift happened because more people needed assistance amid the pandemic, particularly among women and minority communities. Plus, federal resources began flowing to fund the programs, including the American Rescue Plan Act, said Brandie Knazze, Chicago’s commissioner for the department of family and support services.
“The need is great,” Knazze said in an interview. “The chance and opportunity is right now.”
In the suburbs surrounding Chicago, Cook County has initiated a separate $42 million two-year basic income pilot funded with federal aid. The county expects to select partners in early July, and applications for participants are expected to open in the fall.
“One of the things the pandemic did was expose the tremendous inequities in this country,” Cook County Board President Toni Preckwinkle said in an interview. Her goals for the pilot include increasing financial stability for those with the lowest incomes, reducing the need for payday loans and spurring entrepreneurship with the payments. “It’s a direct investment in our residents.”
GiveDirectly has been advocating for such payments for more than a decade. Private donations it distributed in Kenya were spent by recipients on medicine, livestock, school fees, water, tin roofs, solar lights and motorcycles to start taxi services, according to the group.
GiveWell, which analyzes the effectiveness of charities, ranks GiveDirectly among its top rated, citing evidence that direct cash transfers provide immediate help to low-income households as well as the nonprofit’s transparency and record of effectively giving money to people.
Google.org has been involved with direct cash assistance for roughly a decade and was a contributor to GiveDirectly’s pandemic response program.
“While all generosity is needed and there are few wrong moves, there is one tool with a proven track record of success that I think should be given more consideration: giving people cash,” Jacquelline Fuller, a GiveDirectly board member and president of Google.org, wrote in a January 2021 opinion piece in Fortune.
Guaranteed basic income as a policy does have critics. Some fear that recipients will spend the money on items such as alcohol or that widespread programs would be too expensive. When Chicago’s pilot was debated by the city council, some Black aldermen questioned why the money shouldn’t instead be used to pay reparations, an idea that is still being debated.
The city found no shortage of demand from potential recipients. Chicago received more than 176,000 applications for its 5,000 slots, with the first 90,000 coming in the first day. The assistance is available to residents 18 years or older who have experienced economic hardship related to Covid-19 and with a household income at or below 250% of the federal poverty level.
The $500 a month may help struggling recipients stabilize their lives by determining how to spend the money based on their changing needs, whether housing or food or children, the city’s Knazze said.
“Families know best what they need,” she said. “To have $500 a month to buy formula matters.”
Illinois Guaranteed Income Pilot Program Gives Residents $500 A Month
Cook County’s ‘Promise’ will grant 3,250 qualifying households monthly payments for two years.
Illinois’s largest county is offering some of its residents a guaranteed income in pilot program as the state seeks to even out the economic recovery for those who suffered a disproportionate hit from the pandemic.
Applications for Cook County’s “Promise” pilot program opened Thursday and will grant 3,250 households monthly payments of $500 each for two years, according to a statement by the county, which includes Chicago.
The $42 million program was funded by the more than $1 billion the county received from the American Rescue Plan Act signed by President Joe Biden.
Over 91,000 people applied within the first 24 hours of the launch, a spokesperson for the county said. Almost 8 in 10 applicants were women, and three in four were Black. Over 129,404 applications have been started, the spokesperson said.
The pilot program is the latest in a growing trend of basic-income programs that provide participants with monthly payments for a set amount of time. Data has shown that the majority of those who enroll in guaranteed-income programs are people of color and low-income single parents, according to Stanford University’s Basic Income Lab.
Other programs include the Stockton Economic Empowerment Demonstration, in which 125 families in the California city received $500 a month for 24 months. The program was introduced by then-mayor Michael Tubbs in 2019, and early data show the program helped recipients weather month-to-month income changes and secure full-time employment.
Since then, other programs have launched in cities like Los Angeles, New York and Atlanta. At least 20 programs launched last year alone, with budgets collectively totaling at least $35 million
Cook County is home to over 5 million people, and includes Chicago, the third-largest city in the US. The city never fully recovered from a legacy of segregation that hollowed out parts of the south and west sides, which include the city’s most economically challenged neighborhoods. And the pandemic only exacerbated these inequities.
To qualify for the program, a one-member household would need to make less than $33,975, and a family of four, $69,375. About 36% of households qualify for such a ceiling, Cook County President Toni Preckwinkle said.
The payments won’t be taxed, and people can apply regardless of citizenship status. People who are involved in any other basic-income pilot program, such as the one currently underway by the city of Chicago, aren’t able to apply.
The county plans to further outreach through the Oct. 21 deadline by providing residents with information in a variety of languages. Joseph Lopez, the executive director of Spanish Coalition for Housing, said it’s critical to reach underserved groups so they have a chance to apply for the program.
The county expects to make its first payments in December. Recipients will have the choice between receiving a pre-paid debit card or bank account direct deposits, and can use the funds how they see fit. The separate program launched by Chicago started payments for its program in August. In it, 5,000 households will receive monthly payments of $500 for one year.
Massachusetts Should Launch Baby Bonds Program, Task Force Says
Massachusetts should invest in baby bonds to help narrow the racial wealth gap, according to a task force convened by the state treasurer to consider such a program.
Baby bonds are government-issued trust accounts given to newborn children to generate wealth over the course of their childhood.
On Monday, the task force, which includes state lawmakers and bankers, released a report advising Treasurer Deb Goldberg to move forward with such a program and modeled seed funding of $6,500 per child. The report clears a path for state legislators to begin drafting legislation.
“Solving a problem like inequality when it comes to economics is not a simple solution,” said Julie Beckham, assistant vice president at Massachusetts-based Rockland Trust Bank, who helped prepare the report. “The work we did solidified the need for a bold program that would help diminish the racial wealth gap.”
Massachusetts would be among the first states in the country to initiate such a program. Connecticut and the District of Columbia have established them, and a handful of other states, including New Jersey and Washington state, have considered related proposals.
The program’s cost hinges on enrollment, which would fluctuate with the number of children eligible for certain state economic assistance programs.
The task force recommended that Massachusetts pay for the program with American Rescue Plan funds, and allow the trust to accept private donations, Beckham said. The state could also issue bonds to fund the trust, or tap general appropriations, which would be subject to annual approvals.
The task force’s report will serve as a blueprint for the program. It recommends that children under age 1 who are enrolled in the state’s Transitional Aid to Families with Dependent Children program, an income-based economic assistance program, should be eligible for the baby bonds program, as well as children under 1-year-old in foster care.
Funds would be disbursed beginning at age 18 and terminate at age 35. They could be spent on wealth building activities like buying a home or pursuing post-secondary education.
EBT Skimmers Are Draining Millions of Dollars From the Neediest Americans
The technology that secures EBT cards is woefully outdated, allowing criminals to drain millions of dollars from accounts before the neediest people see a dime.
On a warm September night in Green Bay, Wisconsin, Crystal Cork started her Mercury Mountaineer and made her way to a nearby US Bank ATM. Back in Sacramento, California, where Cork and her five children live, the clock had just struck 12 a.m.
Around midnight at the beginning of every month, millions of dollars in welfare payments traditionally flow into the bank accounts of low-income families across the US. Cork was driving through Green Bay in the middle of the night in a race to withdraw her money before anyone else got to it.
Recently, Cork had encountered a peculiar and stressful problem: Other people had apparently gained access to her monthly benefits.
In three separate instances, she’d arrived at an ATM to withdraw these benefits in cash only to discover the bulk of her balance had already been siphoned away. According to bank records, the mystery withdrawals had taken place at ATMs she’d never visited.
That September night, Cork couldn’t afford for things to go wrong again. She and her kids had to get back from Green Bay, where they were seeing family, to Sacramento for school. Flying had been too expensive, so Cork had piled everyone into the Mountaineer. But it was 16 years old. “My car is not something that should be driven across the country,” she says.
The plan was to hit the road with some money in her wallet and pray she wouldn’t need it for repairs along the 30-hour-plus drive home.
At the ATM, Cork tried to withdraw her monthly stipend, about $1,300, but the transaction was declined. She checked her balance, and the number on-screen confirmed what she suspected: The bulk of her money was gone. “There’s no way this is happening,” she remembers thinking.
Cork had fallen victim yet again to thieves who intercept money from massive public assistance programs intended to help poor Americans pay for rent, gas and food. Her stolen benefits came from CalWorks, a $7.2 billion annual program that provides cash to low-income families.
Scammers also target the Supplemental Nutrition Assistance Program (SNAP), which is projected to distribute $127 billion in grocery allowances for residents in or near poverty this year.
This fraud, known as “skimming,” is becoming a big problem for people on public assistance. It’s hard to put a dollar figure on how much is being skimmed nationwide; in many states, welfare administrators don’t collect individual reports of missing money, let alone track the scam more broadly.
In addition, a lot of victims don’t know their benefits have been stolen until weeks or months after it happens. And even when they find out, they may not report the theft. In most states, once benefits are gone, they’re virtually impossible to get back.
Hints are emerging about the scale and persistence of the issue in California, one of the states hardest hit by skimming because of its large population and relatively robust welfare programs.
The problem there has been growing at an alarming rate: In summer 2021, the California Department of Social Services was spending about $100,000 a month restoring benefits that residents had reported stolen through skimming (or text and email phishing scams). Through March of this year, the figure had grown to an average of $10 million.
The EBT card is equipped with the same level of technology as a “glorified hotel room key”
These programs are all vulnerable for the same reason: They rely on desperately obsolete payment technology. For decades the US has depended on a humble piece of plastic known as the Electronic Benefits Transfer card to move billions of dollars to welfare recipients. Like most bank cards of the late 20th century, the EBT card uses a simple magnetic stripe to encode confidential payment information.
All thieves have to do to lift this information is install skimmers in places where bank cards are frequently swiped, such as cash registers or ATMs. The devices mimic the appearance of genuine payment terminals, while surreptitiously recording and storing card numbers and personal identification numbers (PINs) for later misuse.
In recent years, financial-services companies have bolstered card protections to stay a step ahead of fraudsters, heralding security features such as chips and tap-to-pay. But federal and state governments have made little effort to equip EBT cards with these now-standard measures.
The EBT card is equipped with the same level of technology as a “glorified hotel room key,” says Haywood Talcove, chief executive officer of LexisNexis Risk Solutions, which collects law enforcement data from about 2,000 US police departments. In January 2022 participating agencies received 300 reports of skimming incidents. By this January, the number had risen to almost 18,000.
Law enforcement agencies are struggling to get a handle on the problem, in large part because of the decentralized nature of skimming rings.
The few criminals who’ve been caught so far insist they’re merely carrying out orders from anonymous higher-ups, many of whom investigators have traced abroad. Vacancies in these rings are filled by new recruits eager to make some quick cash.
“We have transnational organized crime groups that are specifically targeting EBT programs,” says Michael Peck, assistant special agent in charge with the US Secret Service, which is investigating EBT fraud. “They’ve identified weaknesses, vulnerabilities and normal protocols that they can get around in order to take advantage of this system. It’s everywhere.”
Scammers targeting food benefits stroll into grocery stores, typically in pairs, appearing to shop like normal customers. Then, at checkout, one person distracts the cashier while the other quickly lays a new unit over the retailer’s point-of-sale terminal. The ersatz device snaps on quickly and cleanly.
Criminals can easily purchase basic hardware online, then hollow it out so it has just enough capability to collect magnetic stripe data. The skimming device doesn’t interfere with the normal checkout process; it simply records crucial payment information—the account number encoded in a card’s magnetic stripe and the secret PIN that authorizes a purchase—while letting the data flow unimpeded into the genuine terminal underneath.
The equipment used to pull off a similar maneuver at ATMs is even harder to detect. To get EBT card data, thieves slip razor-thin “deep-insert” devices inside card readers, pairing that hardware with pinhole cameras, which they tape near keypads to capture PINs.
After the traps are laid, the criminals wait for people to step into them, then return later to either physically retrieve the devices and the data they contain or, increasingly, to collect it surreptitiously via Bluetooth.
The databases they compile can include hundreds or even thousands of EBT account numbers and their corresponding PINs.
Then they encode the stolen account numbers onto the magnetic stripes of blank cards, typically old gift cards that have been wiped clean.
They put a sticker with the associated PIN on each. The final product is a cloned EBT card equipped with virtually the same level of access to the food or cash benefits intended for its legitimate twin—and it’s reusable until a victim changes their PIN.
Withdrawing cash benefits simply requires swiping a cloned card at an ATM. The process is so straightforward that people have been recorded on surveillance footage zeroing out dozens of accounts linked to EBT cards in minutes, then leaving with thousands of dollars in cash.
To convert food benefits into cash, scammers mainly use their cloned cards to purchase bulk quantities of high-value items and then flip those purchases online for as close to retail price as possible.
In the past year the go-to item for EBT skimming rings has been infant formula, a product that’s seen severe shortages and, as a result, price gouging online. (Red Bull energy drink is popular, too, because it’s easy to flip and has a high resale value.)
In a recent bust, investigators throughout Arizona seized more than 3,200 cans of formula, alongside skimming devices, card-making equipment and 1,200 cloned EBT cards.
David Babcock, a senior investigator with the Los Angeles County district attorney’s office, is a member of state and federal teams trying to rein in the skimming problem.
When Babcock and his colleagues at the Southern California High Tech Task Force, a regional network of investigators focused on white-collar crimes, began working to address the explosion in theft complaints it saw beginning in summer 2022, the problem at first seemed random.
Reports were coming in from across Southern California, but they often had little in common. Each case involved a different ATM or bank, and the stolen amounts fluctuated. But one detail stood out: the timing of the withdrawals at midnight on the first day benefits are available.
In mid-August, Babcock’s team moved to make use of its findings, setting in motion a bust to unfold at midnight on Sept. 1, the next time the state would dole out EBT benefits. They focused on six ATMs that had come up frequently in past complaints.
At about 12:05 a.m., Babcock and a fellow officer approached a man as he stepped out of a low-slung branch of Bank of America in LA’s Larchmont Village neighborhood.
They asked him if he had anything illegal on him. “Cards,” he responded. In his black Nautica wallet, the officers discovered 15 gift cards bearing neon stickers with PINs scrawled on them, according to the arrest report. The man, Andreas Graagand, had $9,200 on him.
Inside the ATM vestibule, the officers discovered a man and a woman crouched on the ground. Bank of America surveillance footage showed that they’d been cashing out a stack of more than 30 cards before tucking them above a ledge and hiding when police approached. The two had more than $13,000 on them.
By the end of the night the task force had nabbed 16 suspects in LA County, seizing $130,000 in cash and more than 300 cloned cards. At the time, it was the country’s single biggest benefits skimming bust. All the suspects were released on bail.
Seven were later found guilty of fraudulent credit or debit card use, and the others never showed up for court and are now at large. According to court records, Graagand pleaded no contest and was sentenced to 11 days in jail and two years of probation.
Following suspects up the chain of command is challenging. Investigators say they don’t believe Graagand, for example, was the leader of a cell. Rather, they think he and the others apprehended on Sept. 1 were “runners” for someone bigger and unknown. Skimmers are often members of diffuse and opaque networks in which participants may act independently and without knowing who their collaborators are.
There are people who put the skimming tech in place. There are people who collect the data and clone the cards. There are people who cash out the accounts and funnel the money. “In a sense, they fall under one group, but it’s more splintered than you might think,” Babcock says.
In January municipal police in the small city of Anderson, in Northern California, arrested two men outside a Bank of America branch in a strip mall. (A Bank of America Corp. spokesperson declined to comment on incidents at its branches.) They suspected one man of installing skimming devices and the other of being an accomplice.
According to an incident report, the accused installer said he got $300 to $500 per transaction. He said he wasn’t “the big one” within the organization but declined to elaborate out of fear for his family.
He also told police that he didn’t know the accomplice, who was handling the driving—that they’d met for the first time when he’d been picked up in the morning.
Babcock says he didn’t expect the task force’s bust to stamp out EBT skimming in Southern California, but he wanted it to have a chilling effect. “When you start to punish people and hold them accountable, you’re starting to hope that, OK, maybe that’ll be a deterrent, right?” he says.
In the half-year after the bust, though, the cost of skimming and other types of EBT card fraud more than doubled for California. In March, the most recent month for which data are available, the state spent an unprecedented $13 million restoring stolen benefits.
Investigators note that the uptick in EBT skimming appears to have coincided with the end of pandemic unemployment insurance programs, which were a frequent target of fraud.
The pool of food and cash benefits to steal from also grew after Congress significantly bumped up the value of monthly nutrition assistance payments. (That was phased out in March.)
The scope of the problem has drawn in the US Department of Homeland Security, which formed a group of Secret Service agents focused on benefits skimming. Investigators suspect that people are traveling from Europe with specific intent to defraud food and cash benefit programs.
“You see a large number of Romanians that have entered the country illegally, and they’re largely going to California” to skim, says Jarred Medenwald, a Secret Service special agent who’s been looking into Romanian organized crime for five years.
The task force includes members of the Romanian National Police, though it hasn’t pointed the finger at a specific crime ring from the country. Investigators say the fraud is being carried out by small, loosely coordinated teams, and that they’re investigating the problem broadly.
“There’s not a clearly defined hierarchy of one organized crime group doing all of this skimming in the United States,” Medenwald says.
Aid groups representing the poor say they’ve been warning about vulnerabilities in public assistance programs for more than a decade.
In 2011 a California resident who’d been victimized by skimming sued the Department of Social Services, arguing that recipients whose benefits are stolen electronically deserve full reimbursement.
(Prior to the lawsuit, victims in California who reported lost or stolen cards were entitled to reimbursement, but those whose accounts were drained by cloned cards were unprotected.)
The suit prompted lawmakers to pass legislation mandating the restoration of skimmed cash benefits using the state’s general fund. They later expanded this protection to food benefits.
This legal remedy is a relative anomaly; only the District of Columbia, Rhode Island and Wisconsin dip into their own funds to replace skimmed food benefits. Even then, reimbursement can often require dealing with bureaucracy, including filing reports with social services agencies and the police. Each time Cork was scammed, it took about three weeks before she was made whole.
The gap in coverage in most states is at odds with basic protections to which other consumers have grown accustomed. A banking customer whose debit card is skimmed can safely assume they’ll be reimbursed for unauthorized withdrawals.
But EBT cards are excluded from standard financial safeguards. In 1978, Congress passed the Electronic Fund Transfer Act, which protects consumers against unauthorized electronic transactions.
In 1994, the Federal Reserve Board, which implemented EFTA at the time, moved to explicitly include EBT recipients under the law.
But as part of a controversial package of welfare reforms signed by President Bill Clinton in 1996, EBT cards were carved out of EFTA’s scope, creating a two-tier system for banking protections.
“There was never a parallel set of protections set up,” says Victoria Negus, benefits policy advocate at the Massachusetts Law Reform Institute, which fights for economic justice.
Late last year, Congress passed an appropriations bill that set aside some money to replace skimmed food benefits up to twice per year per recipient.
The value of each restoration would be capped at two months’ worth of benefits, however, which falls short of what observers say EBT recipients deserve.
“It’s an equity issue,” says Andrew Kazakes, an attorney at the Legal Aid Foundation of Los Angeles. “Why do the people who need benefits have the least secure means of receiving those benefits?”
In recent months, state and federal officials have announced efforts to bring EBT card technology up to industry standards. In March the US Department of Agriculture, which oversees food benefits, announced it would work with five states—Illinois, Louisiana, Massachusetts, Missouri and Oklahoma—to test contactless mobile payments.
According to the press release, the rollout will take place over “the next few years,” a timeline Negus argues is unacceptably long. “If a whole bunch of rich people had their dollars stolen from them because the solutions that the government and banks and credit card companies had put in place to protect them failed, we would have had systemic solutions in place months ago,” she says.
“There’s no solution in sight. There’s no timeline. There’s no sense of when things will happen. There’s nothing.” (A USDA spokesperson says the pilot initiatives “are complex projects involving a wide range of stakeholders carefully coordinating efforts.”)
Cards with chips are much more secure than those that have only magnetic stripes, says Alain Martin, head of consulting at the banking and payment services arm of the Thales Group, a multinational tech company.
That’s because the chip is a tiny computer that exchanges encrypted information with a point-of-sale device to prove the card isn’t a clone. The account info and PIN stored in a chip-based card might be the same as a magnetic stripe card, but the unique key the chip uses to encrypt the data is inaccessible and unreadable.
California is working to put chip technology on EBT cards, says Jason Montiel, a spokesperson for the Department of Social Services. He didn’t specify a rollout date, noting there are technological and statutory issues to be worked out.
In the meantime, the state has started releasing benefits to recipients later in the morning, to prevent ATM skimmers from working under cover of night and to give recipients a better chance of receiving their benefits before they can be stolen.
The agency also says it has blocked suspicious transactions and identified potential perpetrators, but it declined to comment further on its mitigation efforts.
For Crystal Cork, the mother who was skimmed four times between October 2021 and September 2022, the time change simply adjusted when she got to an ATM each month to 6:30 a.m. She hasn’t had her benefits stolen since September of last year, but she hasn’t let her guard down, either.
Cork says she’d find a way to get by if she were skimmed again: “I always let my kids know that Mom will find a way.” That might mean borrowing money from family, or not buying birthday gifts, or making dinner for the family with just a chicken breast, a can of vegetables and rice. “It’s just very sad,” she says, “that there’s people out there that really do this type of stuff.”