When governments give away cash
Happy finance Friday! Chicago has become the latest big city to roll out a guaranteed basic income pilot program, which is giving monthly payments of $500 to 5,000 of the city’s low-income households over the next 12 months. The $31.5 million Chicago Resilient Communities Pilot is now one of the largest such programs in the nation. This week’s LSS looks at the research and results so far of giving cash to families, and what the future holds.
But first, I’ll be moderating this year’s “State of the States” online event hosted by the Urban Institute on July 25 @Noon EDT. Learn more and register here!
Using federal funding for cash transfers
Last year, California became the first in the country to approve a state-funded guaranteed income program. Since then, Maryland has also set aside $72 million from American Rescue Plan Act funds for a similar program and more than a dozen cities—including Minneapolis, Seattle and St. Louis—are doing the same.
Guaranteed, or universal basic income initiatives (UBI) have gained in popularity across the country since 2019 when Stockton, California, launched a closely watched program. Some of the biggest initial benefits are:
Removing red tape: It’s really hard to apply for government assistance and get through all the bureaucracy correctly on the first try. This gets money to where it’s needed and, ideally, in time to be useful for monthly bill payments.
Trust and ownership: The process of applying for government assistance can be a humiliating experience where applicants are repeatedly asked to prove their dire straits. A no-strings-attached assistance program instead tells the recipient that they are trusted to use the money where it’s needed most.
“People know what they need to move forward in their lives,” Chicago’s Department of Family and Support Services Commissioner Brandie Knazze said in a statement on Monday. “Whether that is paying for childcare, groceries, baby formula or utility bills — we want participants to have the choice and flexibility necessary to thrive on their terms.”
What this means: States and localities are running pilot programs to see how a UBI would work and /or improve outcomes, but in a sense we have already conducted that experiment as a nation. For six months in 2021, the child care tax credit program sent a monthly cash payment to help households cover the costs of raising children. The payments, which reached 61.2 million children, were largely spent on necessities like food, clothes and school supplies, and cut monthly child poverty by roughly 30%. That’s a slam dunk of a result if there ever was one.
Problem is, that program ended and for all the good the tax credits did, the child poverty rate jumped right back up in 2022. So what will happen when these state and local UBI pilot programs funded with federal aid end? Six or even 12 months of extra income isn’t long enough to permanently lift most people out of poverty. Unless governments are planning now for a way to keep these programs going with their own revenue, they’ll end up as another blip on the radar.
What happens when you give new mothers cash
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