Earlier this week, Green Resilience Project Manager Janet Patterfung and steering committee members Mitchell Beer and Jim Mulvale joined basic income activist Scott Santens, moderator Natasha Pei and the Tamarack Institute for a Vibrant Communities webinar on the links between climate change and basic income.
Their discussion focused on the need for strong policy solutions that give people the financial security to navigate the challenges of the climate crisis and allocate the time, energy and resources needed to take action on climate in their communities.
Jim Mulvale, a professor in the faculty of social work at the University of Manitoba, talked about the need for a radical economic shift to a system in which social priorities direct markets instead of vice versa.
He said that basic income is a necessary but not sufficient component of this restructuring—one that would ensure everyone has what they need to navigate a changing economy while also creating a foundation for exploring additional social policies like improved healthcare, affordable green housing, ecologically focused education and more.
“People are at a point where they’re willing to rethink some of [their] fundamental political and economic assumptions,” he said.
Scott Santens emphasized the importance of basic income’s ability to let people choose how to allocate their resources in the face of an escalating climate crisis.
He spoke about his own experience being evacuated from New Orleans during Hurricane Ida earlier this year, when he had to spend ten days in a hotel in Houston. It’s much harder to evacuate from disaster, he pointed out, if you don’t have ready access to money for gas or hotels.
He recalled having to replace the food in his fridge and freezer after losing electricity for an extended period of time. Since grocery stores had also lost power they couldn’t accept debit cards or food vouchers, and so having cash also made a big difference in allowing evacuees to begin rebuilding what they had lost.
“The ability that basic income has to be anything is really important for resilience as far as being able to adapt to the realities of climate change,” he said.
Janet Patterfung spoke about the need for tools and solutions that allow people who are dealing most directly with the impacts of climate change to take on leadership positions in movement spaces. One lesson we’ve learned during the COVID pandemic, she said, is that we can’t deal with the effects of a crisis without dealing with its root causes.
She highlighted that in her conversations with Green Resilience Project community partners, one of the frequently identified barriers to taking action on climate is time. People need time, resources and energy to have capacity for climate solutions, and social policies that create that type of resilience can be an important tool for building that foundation.
Mitchell Beer, who is Publisher of the Energy Mix, echoed this sentiment. He pointed out that it’s difficult to prioritize reducing individual emissions when people are already struggling just to get by. The shift to a low-carbon economy can be scary and destabilizing for those reliant on a fossil fuel income, and if we want to make sure no one is left behind in that transition we need robust social policies that address existing financial barriers.
He also emphasized the need for a paradigm shift to thinking about climate solutions as a fundamental component of building economic resilience, rather than a sacrifice.
All panelists talked about the need for innovative thinking and frontline leadership on all aspects of responding to the climate crisis, and the potential for a basic income to facilitate this work.
You can learn more about the Vibrant Communities series and access additional webinars about the links between climate and poverty here.
The City of Miami will soon give out a “bitcoin yield” from the staking of its cryptocurrency to its citizens, Miami Mayor Francis Suarez announced on CoinDesk TV Thursday morning.
“We’re going to be the first city in America to give a bitcoin yield as a dividend directly to its residents,” Suarez said.
The yield comes from the staking of the city’s own cryptocurrency, MiamiCoin, which was introduced early this year and has already earned over $21 million in the past three months for Miami. Suarez noted that if you were to annualize that revenue, it would equal roughly one-fifth of Miami’s total annual tax revenue of $400 million.
The city will make the payments through a digital wallet and will work with a variety of cryptocurrency exchanges to allow its residents to acquire a wallet, register and get verified, the mayor said.
“[Mayor Suarez] just turned his city into an oil-producing country that gives bitcoin yield to its citizens. That’s incredible,” Community Lead for CityCoins Patrick Stanley told CoinDesk TV. CityCoins is the organization that set up and runs MiamiCoin.
In the long run, Suarez said the approach could potentially eliminate the need for Miami residents to pay taxes, which would be “revolutionary.”
“I do see very quickly a world where the satoshi system is what is used to make payments,” Mayor Suarez said. “We need for people to understand that … yes, we want you to hold bitcoin but we also want to increase the utility of bitcoin.”
South African Federation of Trade Unions (Saftu) general secretary Zwelinzima Vavi has called for the introduction of a R1,500 monthly grant aimed at South Africans over the age of 18 without work.
Vavi was speaking at an eventahead of the Medium Term Budget Policy Statement (MTBPS) on Thursday (11 November). Saftu is the second largest trade federation in South Africa, representing more than 21 affiliated unions and over 800,000 workers across the country.
“People are starving and without food. To end this, the state should look to progressively introduce an unconditional universal basic income grant. We need a basic income grant now for those between the age of 18-59 for those who are without a stable income.”
“A basic income grant will boost the economy, creating demand for products and services, and thus creating many jobs. Government must focus on attracting the people back into the economy instead of just foreign investors,” he said. “We demand a basic income grant of R1,500 and further reject the privatisation and commoditization that is creeping into every aspect of our lives.”
Finance minister Enoch Godongwana is expected to provide clarityaround the R350 social relief of distress (SRD) grant and the introduction of a basic income grant in his maiden budget speech on Thursday.
The SRD grant was initially introduced to assist South Africans impacted by the Covid-19 lockdown, but the government has faced increased calls to make the grant a permanent fixture.
An estimated nine million South Africans currently collect the grant, which the president recently extended until March 2022.
Data published by the World Bank in September shows that a third of South Africans are beneficiaries of a social grant directly, which rises to close to two-thirds when those who benefit indirectly are included.
The World Bank recommends the basic income grant take the form of a “jobseekers’ grant, targeted at the unemployed. It said that a job-seekers grant, set at R350 a month, could cost R16.2 billion a year.
“The dilemma of the future of South Africa’s social assistance system rests in the opposing pull of these two forces: The limited political appetite for cost-saving reforms and the need to consolidate expenditures,” the World Bank said. “Feasible options for broader reform hence need to balance political will and the need to contain costs.”
We don’t want a BIG out of laziness, we need it because, without it, our poverty will kill us. If I ask any woman or man in my community if they want to work, they will say ‘I am ready to work — just tell me where and when’. The BIG and decent-paying jobs must happen together.
My name is Israel Nkuna, a community activist from a small village called Mahlathi near Giyani in Limpopo, who receives the R350 Social Relief of Distress (SRD) grant. Every month, I assist around 500 people in all nine provinces with their SRD grant applications.
I have serious questions about the ‘household grant’ that we hear the National Treasury is considering.
Who is the head of a household — is it a man who has a wife and children in Mahlathi but spends months living and working in North West, where he has another family? Which household will receive the household grant? What will happen if the man receives the household grant and withholds it from the family? Or if the mother receives the grant, but she’s not able to spend it on herself and her children because of an abusive husband?
What about a family with no parents, just young brothers and sisters, some with drinking and drug problems? Who receives the household grant, and how will you make sure everyone in that family can buy food and put money aside?
How will the government register all these families and heads of families, and make sure this grant gets to the people who need it?
These questions trouble me, especially when I think about all the problems we’ve had with the SRD grant. The Treasury says they have consulted with people. But they haven’t consulted with people like me and those in my village — if they had, they would know the problems we face.
The majority of people I help with SRD applications don’t know technology and don’t have smartphones to apply for the grant. Even if I can assist them, the Sassa system often declines them. How will a family grant application work any better?
We need a Basic Income Grant/guarantee (BIG) without a complicated, faulty application process. We need a BIG at a decent level that’s given to individuals so they can access their own funds.
And we need it now.
There are many things we have to pay for to survive in my community. A simple thing like getting water is a problem — I have to spend R5 for 20 litres of water and I don’t have a choice. We have a gravel road that is in a bad state — if we need to buy something in town, if we have to go to a government office, if we want to get our sick relatives to a clinic, we have to pay to get there. We don’t have a choice.
If we want to look for work, we have to pay, too. But there is no work to be found for many of us in our community. For someone over 40, if they don’t have work now, they are not going to find it for the rest of their life.
We don’t want a BIG out of laziness, we need it because without it, our poverty will kill us. If I ask any woman or man in my community if they want to work, they will say ‘I am ready to work — just tell me where and when’. The BIG and decent-paying jobs must happen together.
My community believes in education. But our daughters and sons cannot learn if they cannot eat. They cannot learn if they can’t afford the bus or the taxi fare to get to school. They cannot learn if they see their family around them starving.
A BIG would support families so it’s easier to send our daughters and sons back to class.
For those people like me, who do receive the SRD, we are able to buy maize meal, cooking oil, potatoes, soap, and washing powder. But R350 is equal to R11 a day — that’s not enough to live on. I’m unable to buy clothes and healthy foods. I’m unable to save money to go to the clinic when I feel sick. I’m unable to save to pay a funeral parlour for a deceased relative, or to buy the many things that are needed in a household.
The BIG would be a guarantee — not a handout — that everyone in this country can have their basic needs met. What else should our government be working towards?
Let’s make the BIG something South Africans can be proud of, not something to be ashamed of. Let it save lives, save our daughters and sons from starvation, let our women live safely, let all people live with dignity, give them a chance to build something and contribute to their communities and our economy. Let us resist a household grant and insist on a BIG for individuals.
On a hot summer evening, a distraught mother of color brings her young daughter into the ER audibly struggling to breathe. The young child’s eyes are fearful behind the mask of her inhaler while her chest heaves to force air through constricted airways. Her usual asthma medications are no longer effective as air quality worsens in the extreme heat.
The solution lies in a suite of policies that will stimulate the transition to a clean energy future while protecting those who have historically suffered the brunt of fossil fuel pollution. Experts concur that a steadily increasing fee imposed on fossil fuel companies at the source (when it comes out of the ground or into the country) would serve as a catalyst to this transition.
Like our patient, people of color are three times more likely than white people to breathe polluted air in our country. Those who practice in Houston know first hand that air pollution contributes to myriad health problems from asthma to heart disease, lung cancer, developmental delays in children, and dementia in older adults.
Globally, nearly 500,000 infants die annually because of their mother’s exposure to air pollutants during pregnancy. Further highlighting disparities, studies have demonstrated an increased likelihood of dying from COVID-19 where air quality is poor. As temperatures increase, the quality of the air further degrades, especially for disadvantaged populations on the frontlines of fossil fuel pollution.
Fortunately, a price on carbon would not only reduce greenhouse gas emissions, but it would also improve air quality rapidly. One analysis projects a 75–90% reduction in air pollutants in just ten years. Those populations who have been disproportionately burdened by fossil fuel pollution would realize the greatest benefits. This is good news to the 4 out of 10 people who, like our patient, live in communities in which air pollutants are unsafe.
Dr. Carden Johnston has served the Children’s Hospital of Alabama since 1975, and currently serves the UAB School of Medicine as Emeritus Professor of Pediatrics.
Many environmental justice advocates have appropriately raised concerns about utilizing cap and trade policies like those in California which did not definitely improve air quality for many frontline communities. It is important, however, to distinguish cap and trade policies from carbon fee policies. Although both are types of carbon pricing, most carbon fee policies do not allow for secondary carbon markets, ensuring that frontline communities realize the health benefits provided by improved air quality.
At least one carbon fee bill goes a step further. It not only places a fee on greenhouse gas emissions, but also puts a price on the most dangerous forms of air pollution responsible for the health problems described above. By placing a fee directly on these toxins, we can ensure that all communities, like the one in which our patient resides, realize the health benefits of improved air quality.
How would a carbon fee affect those who struggle to put gas in their cars or pay their energy bills? Returning revenues generated by the carbon fee directly back to US citizens protects most low and middle income families from rising energy costs.
Dr. Natasha DeJarnett is an Assistant Professor of Medicine at the University of Louisville School of Public Health and Information Sciences
One option would be to rebate the majority (approximately 70%) of revenues generated from fossil fuel pollution-fees directly to lower income families to offset possible cost of living increases, and then invest the remaining 30% of funds (hundreds of billions of dollars over the next decade) into frontline, Indigenous, and coal mining communities who have suffered disproportionately.
If we want to ensure a healthier future for all people, including this young ER patient gasping for air, we must advocate for a wide array of climate policies that will enable the world to thrive. While only one piece of the puzzle, federal carbon fee and dividend legislation will catalyze the transition to clean air and a healthy climate for all, especially those who have historically suffered the brunt of fossil fuel pollution.
The expanded child tax credit, established in March by the American Rescue Plan, will be continued for just one more year, according to the latest spending proposal by Democrats.
But a key part of the credit – full refundability – will be made permanent, per the Democrat’s plan.
“The key to the child tax credit is making it fully refundable,” said Stephen Nuñez, the lead researcher on guaranteed income at Jain and co-author of the paper. “So that money isn’t gated behind what happens in the labor force in any given year for parents.”
The details
The existing child tax credit was expanded in March by the American Rescue Plan as one of many responses to the coronavirus pandemic and ensuing recession.
The enhanced credit included advance monthly payments from July to December of 2021, increased the benefit to $3,000 from $2,000 with a $600 bonus for kids under age 6, and made 17-year-olds eligible for the benefit for the 2021 tax year.
It was also made fully refundable, meaning that families have not had to show any earned income to receive the money. Previously, the credit was partially refundable up to $1,400, which meant that people who made less than $2,500 annually didn’t get the benefit even if they had children who would’ve been otherwise eligible.
If the Democrat’s budget resolution passes as is, the credit will be extended in this form through the 2022 tax year.
In 2023, the credit would revert to its previous age requirements and amounts – $2,000 for those under the age of 17 – but would be available to families with the lowest incomes.
Who full refundability helps
Keeping full refundability will mean that some 27 million children will continue to get some money through the credit.
It will have a greater impact on children of color: full refundability would reduce African American child poverty by 30%, according to the research paper.
“Full refundability is especially important for those that are the most vulnerable children in the lowest-income families,” said Jack Landry, a fellow in guaranteed income at the Jain Family Institute and co-author of the paper.
To be sure, if the Democrats’ original plan that included a longer expansion of the full enhanced credit had been implemented, it would’ve cut child poverty by about 40%, according to the report.
Still, continuing full refundability would reduce child poverty significantly more than reverting to the credit as it was in the Tax Cut and Jobs Act, which still left 13.4% of children in poverty. It’s also much cheaper than keeping the larger $3,000 credit: the additional cost per year of full refundability is $17 billion, as opposed to the $45 billion it would cost to continue the larger benefit, according to the paper.
Going forward
While the enhanced child tax credit seems to be safe in the Democrats budget resolution framework thus far, it’s possible that things could still change.
Because Democrats are looking to pass the legislation through a sped-up process called reconciliation, all 50 Democrats in the Senate must agree.
Still, advocates will continue to push for full refundability of the credit to be made permanent.
“If the expanded credit has to be modified to reduce costs, the place to cut is among the wealthiest families,” said Natalie Foster, co-founder and co-chair of the Economic Security Project. “Not by leaving low-income families, especially families of color, to the mercy of future Congresses.”
The voters of Maine passed the “right to food” state constitutional amendment on Tuesday, the first amendment of its kind in the U.S.
The Associated Press reported that the amendment to Maine’s constitution would “declare that all individuals have a natural, inherent and unalienable right to grow, raise, harvest, produce and consume the food of their own choosing for their own nourishment, sustenance, bodily health, and well-being.”
The vote on the “right to food” amendment was passed with large support in Maine’s state legislature, but needed to be placed on the ballot following approval from lawmakers.
The referendum on the amendment came amid growing sentiment among small farmers, liberals, libertarians and other anti-corporation factions that local communities should have more of a stake in their food supply, according to the wire service.
Supporters of the amendment argued that the bill would allow residents the right to grow produce and maintain livestock when big business threatens ownership of local food supply.
State Sen. Craig Hickman (D) told the newswire that the amendment resonated with Mainers.
“It’s always a good idea to secure and protect an individual right in the world we live in. Food is life,” Hickman said, according to AP. “I don’t understand why anyone would be afraid of saying so out loud in the constitution.”
However, opponents of the measure argue the new amendment is vague, and poses a threat to food safety and animal welfare. They fear that people will try to raise domesticated livestock such as cows in their backyards in Maine’s cities like Portland.
“Maine Farm Bureau is prepared to support Maine farmers as this amendment is enacted and, as always, stands clear in its resolve to protect and embrace food safety and animal welfare as a standard for all Mainers,” Maine Farm Bureau executive director Julie Ann Smith said in a statement, according to AP.
Maine passed the nation’s first food sovereignty law in 2017, which allows food producers to sell their yields on site.
The Freiburg Institute for Basic Income Studies (FRIBIS), a network of several faculties at the University of Freiburg, has expanded with a new international team which focuses on basic income and gender issues, pulled together by Enno Schmidt. It uses as a starting point, the study by Prof. Toru Yamamori on the British women’s liberation movement in 1970’s, which was already calling for a UBI. According to Yamamori, grassroots feminist economic and political thought forms a basis of the demand for basic income, and the beginning of this can be seen during the women’s liberation movement in 1970’s Britain. For this reason, the relationship between grassroots feminist economic and political thought and basic income deserves to be re-examined, as this area has often been overlooked.
As a comprehensive research and design goal, the initiative seeks to examine grassroots feminist economic understanding and behavior and its potential in forming a new social contract with a particular focus on basic income. Based on this main principle, to amplify the voice of women in basic income research and design, the initiative seeks three objectives.. First, the further elaboration of Toru Yamamori’s study with final book publication, supported in particular by the collaboration of Barb Jacobson and Dr. Liz Fouksman in the UK. Secondly, a study and documentation on the question of women’s understanding of and behaviour in the economy and cooperation with members of the Self-Employed Women’s Association (SEWA) in India under guidance of Renana Jhabvala. This will be supplemented by similar empirical research by Liz Fouksman in South Africa and Prof. Dr. Kaori Katada in Japan and by the experiences, data and results of basic income projects in Canada by Chloe Halpenny. As a third goal, enriched by the outputs of the other 2 goals, the initiative aims to embed their relevance in a potential new social contract for real gender equality. This is planned to be introduced as a pilot project, in a yet to be determined region in the USA under the guidance of Prof. Dr. Almaz Zelleke and others to come. However, the team is also open to new influences and directions that arise during the collaboration, for example an additional focus on China.
For these purposes, the research programme will take place in 4 stages. The first phase will include a manifesto and presentations based on research which is already ongoing and which will start shortly. At this stage, the data, interviews and questionnaires of the participating researchers will be used. In the second phase, the focus will be on the collective reconstruction and articulation of “grassroots feminist economic and political thought”. At this stage, the experiences of relevant people in the research team will be used. In the third stage, the aim is to determine the positions of the above research in academic disciplines. In this sense, theoretical and anthropological studies will be carried out at this stage and the theoretical infrastructure of the outputs of the first two stages will be established. Based on the presentation and evaluation of the nature of women’s cooperation and work, and women’s perspectives on work and economy, this will significantly benefit from the experience of SEWA, and the Basic Income Pilot Projects for women in New Delhi and the 2009-10 pilot project in Madhya Pradesh. The fourth and final stage as envisaged so far, will include the implementation of UBI and new laws in a community in the USA.
In summary, the project aims to combine the introduction of a basic income and the creation of a new social contract from the point of view of women.
The output that is intended to be reached at the end of the project is the draft of a new social contract. In other words, the main goal here is to present in a holistic way a draft programme for a society based on unconditional basic income, which is necessary to bring women to equal status with men.
The research team consists of Dr. Liz Fouksman, Chloe Halpenny, Prof. Dr. Kaori Katada, Prof. Dr. Toru Yamamori, Prof. Dr. Almaz Zelleke and as actors from social society Barb Jacobson and Renana Jhabvala. PhD student Jessika Schulz is organisational coordinator of the team on the part of FRIBIS.
Further information about the initiative and the project can be found at the following links:
Companies need to offer higher pay, a shorter working week or enhanced benefits to prevent an exodus of unhappy staff over the next 12 months, research has found.
A survey by Autonomy, a thinktank specialising in the future of work, concluded that improving working conditions was vital for sectors suffering from acute labour shortages.
In the wake of a report suggesting almost one in four workers were considering quitting their jobs in the next few months, the Autonomy poll of more than 1,000 workers in the care, transport and logistics, and hospitality industries showed:
41% were considering leaving their job in the next 12 months.
Low pay, long working hours and poor mental health were often cited as reasons for dissatisfaction.
The majority of those considering quitting had been offered no incentives to stay by their employers.
Workers in these sectors reported that a pay rise, shorter working hours for the same pay and better in-work benefits such as holiday pay and pensions would stop them from resigning.
UK job vacancies are at a record high, reaching 1.1m in the latest data reported by the Office for National Statistics, and Autonomy said shortages of labour had had a severe impact on business, leading to a loss of clients and income through an inability to deliver services and products.
Will Stronge, the thinktank’s director of research, said: “The good news is that the labour market crisis can be solved fairly easily by offering better working conditions.
“However, the response by companies is falling far short of what is needed and unless they quickly come up with a better offer, our research suggests the crisis is going to get a lot worse in the next 12 months.
“The Covid pandemic has shone a spotlight on unfair and precarious working practices in Britain and it seems that workers have simply had enough.”
The Autonomy survey also contained new analysis from the shareholder advisory firm PIRC that showed three-quarters of the largest companies listed on the London Stock Exchange – with a collective global workforce of 4.5 million – cited labour shortages or staff retention as principal risks to their business.
Tom Powdrill, the head of stewardship at PIRC, said: “The labour market is at a crucial juncture that requires urgent action.
“Private sector companies have a duty to themselves, their investors and their workforces to take steps in order to avoid further problems and costs down the line. Listening to workers is a good start.”
PULLMAN, Wash. – When given cash with no strings attached, low- and middle-income parents increased their spending on their children, according to Washington State University research. The study, published in the journal Social Forces, also found that the additional funding had little impact on child-related expenditures of high-income parents.
For the study, WSU sociologist Mariana Amorim analyzed spending by recipients of the Alaska Permanent Fund payments. Funded by state oil revenues, the fund is the closest program in the United States to a universal basic income. Every resident in Alaska receives a payment called a dividend; the total amount varies each year, but during the time span of this study, 1996-2015, payments averaged around $1,812 a person, or $7,248 for a four-person family, when adjusted for inflation to 2014 dollars.
Amorim found that after the lump sum payments, low- and middle-income parents made more education, clothing, recreation and electronic purchases for their children.
The findings contradict a common argument in the U.S. that poor parents cannot be trusted to receive cash to use however they want, said Amorim.
“The data suggests that lower-income parents are responsible using cash payments, so we don’t need to be so afraid to give poor people money that can help their families,” Amorim said. “Low-income parents do need to spend a greater part of the money they received on basic necessities—for instance to catch up on bills or to fix a broken car—but they still managed with the leftover amount to invest in their children.”
Amorim used 20 years of data from the Consumer Expenditure Surveys to analyze spending by Alaskan parents around the time they received annual payouts from the fund. She compared those spending patterns to those of parents in the continental U.S. who did not get the payouts.
Although all parents seemed to increase their child-related spending some after payouts, low- and middle-income parents increased spending in categories that may matter most to their children’s future, such as education.
In contrast, high-income Alaskan parents showed no big jumps in child-related expenditures after the payouts, other than a modest increase in clothing purchases.
While the data could not reveal the exact reason, Amorim said the lack of significant change in child-related spending may indicate that high-income parents had already maxed out their spending in that area or that they were saving the money for future investments.
“We know that with their normal income, high-income parents do spend a lot on their children,” said Amorim. “High-income Alaskan parents may be saving a lot of the money from payouts, and that’s why we don’t see spikes in current spending. That is something I can’t investigate with this data, but if they are saving for college or a house down payment, we may see bigger inequalities in the future.”
While the study does have policy implications, Amorim cautioned that the Alaska program is not a perfect model for universal basic income policies. The Alaskan dividend is a one-time payment which affects the way people spend their money. For instance, research suggests that spending on electronics increases when people receive a lot of money at one time because they can afford those big-ticket items. If they were receiving a smaller amount of money every month, parents may choose to spend on items with smaller or more spread out costs, such as books or monthly lessons.
The universal nature of the one-time payments in Alaska, however, does provide key information on how lower-income parents spend their money compared to high-income parents, and how socioeconomic differences in spending decisions might affect future inequalities.
“The spending behaviors of lower-income parents suggests that they are trying to catch up, even if they can’t keep up with higher-income parents in the long term,” Amorim said.
Since July of this year, over 30 million families have received monthly cash payments from the Federal government under the Child Tax Credit (CTC).
Now, Congress is debating whether to extend or expand that policy. The CTC is a centerpiece of President Biden’s social policy package, and Democrats mostly support it. But the CTC is not a narrow, partisan policy, and there are good reasons for those with conservative and libertarian values to support it too.
Some may be surprised to learn that the CTC was originally a Republican innovation, championed by former Speaker Newt Gingrich and President Ronald Reagan as a way to give money directly to parents instead of bureaucrats. As Sen. Marco Rubio recently wrote in a letter to the Wall Street Journal, the CTC, in principle, is a “conservative, pro-work, pro-family policy.”
It is also pro-freedom. Unlike a lot of other government programs, the CTC provides financial support directly to families and trusts them with the freedom and the responsibility to use that money as they see fit. They can spend it on rent, on tuition for private school or on groceries. They can even save it away for a rainy day. The point is that with the CTC, it’s parents — the people who know their childrens’ needs best — who get to make the choice.
New research by a team of researchers from Washington University in St. Louis, Appalachian State University, University of North Carolina-Greensboro and the Urban Institute, in partnership with Humanity Forward, demonstrates that when you give parents this freedom, they use it responsibly.
According to the survey, parents reported using the CTC on essential expenditures and savings.
The five top uses of the credit were to save for emergencies, pay for home necessities, pay for necessities for their children, pay for food and contribute to a college fund. Low-income families in particular, who are often the recipients of wasteful welfare programs (if they can navigate them), were actually most likely to report using the credit on essentials for their children.
Conservatives sometimes worry that government handouts create dependency and discourage work. But there is little evidence to support this concern. According to the Humanity Forward research, nearly 94% of parents said that they planned to continue working or work more while receiving the credit. Only 6.4% of parents said they would use the credit to either work less or change jobs, and the vast majority of these respondents were parents of infants or toddlers.
In other words, almost nobody is going to drop out of the labor market just because they’re getting an extra few thousand dollars per child, per year from the CTC. And the relatively small number of people who do are almost always going to be married parents who are using the CTC to spend more time at home with young children while their partner works. It’s hard to see how somebody could object to that outcome, from a conservative perspective.
Some conservatives also worry about the cost of the CTC. But the CTC is actually a rock-solid investment that, over time, more than pays for itself.
America currently has one of the highest child poverty rates in the developed world — with 1 in 7 children living under the official poverty line. Providing financial assistance to families with young children has been shown to yield long-term financial benefits. Children who receive assistance get more education, commit fewer crimes, are less likely to use drugs, and have better health. Even if you forget about the fact that these are human beings we’re helping and simply focus on the dollars and cents, the CTC is a fiscally sound policy.
Conservatives and libertarians should not let partisan divides stop them from supporting good public policy, whatever its source. The CTC is pro-work, pro-family, and pro-freedom. If Congress decides to extend it, all of us have reason to celebrate, whatever our political ideology.
WASHINGTON ― When a small group of Democrats held up a procedural vote on President Joe Biden’s policy agenda in August, news stories described it as a rebellion by the moderates.
Their plan was to force a House vote on a bipartisan infrastructure bill before the House considered more ambitious legislation addressing climate change and the nation’s substandard treatment of families.
The gambit failed badly, and the moderates got nothing.
But they weren’t the moderates. They were an ad hoc gang of fewer than a dozen relatively conservative Democrats with no plan for success.
Meanwhile, there is an actual, organized group of 95 moderate House lawmakers known as the New Democrat Coalition. As their website says, they’re “pro-economic growth, pro-innovation, and fiscally responsible,” with an aversion to partisanship. And they have quietly backed the president’s plans while offering only mild strategy disagreements with progressives.
Their chairwoman, Rep. Suzan DelBene (Wash.), is a former Microsoft executive first elected to Congress in 2012. She exudes professionalism and eschews the kind of ultimatums that have plagued the legislative process lately.
“New Dems have always been a group that’s been forward-looking and focused on getting things done. We know that we don’t help anybody if we don’t get policy passed,” DelBene said in an interview at the Capitol. “We feel very responsible that we need to show governance can work and be part of that process.”
New Democrats have been at the center of Democratic politics since the 1990s. Bill Clinton called himself a New Democrat, and so did Barack Obama. But in terms of what policies they support, the New Dems of today, with DelBene helming their House coalition, are different. You could say there’s actually something “new” about them.
It’s all about giving people money. DelBene is one of the most prominent House supporters of the child allowance Democrats created this year by taking the child tax credit and turning it into a monthly advance refund. Payments of as much as $300 per child started in July for all households earning less than $150,000, which is the vast majority. The policy represents a radical break from the past, and has already slashed child poverty.
“If [the child allowance] can be made permanent, it is a watershed moment in the long history of the welfare state.”- Molly Michelmore, professor of history at Washington and Lee University
Some Democrats started to call themselves “New Democrats” in the 1990s because they were trying to shed their popular image as the party of welfare. Clinton won the presidency in part with his pledge to “end welfare as we know it.” And with the help of a Republican Congress, he really did end welfare, a “win” for Democrats that helped ensure children would suffer the highest poverty rate of any age group for years to come.
In other words, the New Democrats once stood for taking money from parents, and now they stand for giving money to parents.
“This is a big deal: self-identified centrists embracing a landmark expansion of the state’s responsibility for the well-being of its citizens,” said Molly Michelmore, a professor of history at Washington and Lee University.
In her 2012 book “Tax and Spend,” Michelmore chronicled the race-based welfare backlash that scared Democrats out of trying to reduce material hardship in the latter decades of the 20th century. Instead, they often sought to help people indirectly, such as by promoting economic growth through tax incentives. Meanwhile, every other advanced country in the world started giving parents monthly cash benefits, in recognition of the free market’s total indifference to children and families.
To be sure, Democrats today love describing the new child tax credit as a tax cut, which is technically correct. But it’s unlike any tax cut that’s come before, in that people who make no money, and therefore aren’t required to file federal tax returns, can qualify for the full benefit.
“If it can be made permanent, it is a watershed moment in the long history of the welfare state,” Michelmore said.
Though DelBene says her dad’s job loss and determination to provide for his family motivated her political career, she is no bleeding-heart liberal. She describes her support of the tax credit with coldblooded corporate logic.
“We are very much focused on the data,” she said. “The data is very clear in terms of the impact we can have on the lives of children if we make an investment. For every dollar we spend on the child tax credit, there’s been estimates from $5 to $8 on return that we get.”
Child poverty winds up wasting as much as $1 trillion annually in lost adult wages, increased crime costs and higher health expenditures, according to a comprehensive 2019 study by the National Academies of Sciences, Engineering, and Medicine. Spending $100 billion annually on cash benefits for parents ― roughly the cost of Democrats’ child tax credit ― could drastically reduce the costs to society when today’s children grow up.
The old thinking was that the right way to help children was to make their moms and dads get jobs, and so welfare benefits were predicated on “work requirements” that denied benefits to unemployed parents. Sen. Joe Manchin (D-W.Va.) tried to revive the concept in recent weeks, saying he wanted “work requirements” for the child tax credit. DelBene did not hesitate to put out statements saying new stipulations would hurt middle-class families; nobody but Manchin voiced support for the idea, and he seems to have backed off.
Democrats built the consensus within their party on turning the credit into a monthly benefit over a period of years. DelBene was a top co-sponsor of a 2019 bill that served as the framework for what ultimately became law as part of the American Rescue Plan this year.
But it didn’t happen just because Democrats had some good arguments in favor of reducing child poverty. The policy also resulted from the coronavirus pandemic. Republicans and President Donald Trump excitedly sent out pandemic relief checks to everyone they could, even people with no incomes. Having already agreed among themselves, Democrats seized the excitement over checks to create a child allowance as soon as they controlled Congress and the White House this year.
The monthly payments will stop after December unless Democrats continue them as part of the Build Back Better legislation they’re racing to complete in the coming weeks. Here’s where the New Democrats and the Congressional Progressive Caucus disagree ― the progressives want the bill to include as many new programs as possible, even if the bill’s limited budget headroom forces them to make the policies temporary.
DelBene has pushed for making the credit permanent, or at least to extend it through 2025 so that it expires at the same time as a host of Republican tax cuts, which would create an obvious opportunity to cut a deal regardless of which party controls Congress then. It’s one of four New Dem priorities for building back better, along with expanding federal health insurance coverage and reducing carbon emissions. Progressives want those things and more, including universal prekindergarten and child care subsidies.
“We’ve made it harder and harder for kids growing up today, so we need to fix that.”- Rep. Suzan DelBene (D-Wash.)
It’s not clear if the New Dems are as cohesive a group as the progressives, a caucus that also boasts 95 members. (Some lawmakers are in both groups.) Led by Rep. Pramila Jayapal, another Democrat from Washington state, the progressives held together this fall in threatening to vote against the infrastructure bill if House Speaker Nancy Pelosi (D-Calif.) brought it up for a vote before the Build Back Better bill. New Dems haven’t been tested in the same way.
Progressive caucus member Rep. Earl Blumenauer (D-Ore.) said there’s been a “remarkable degree of cooperation” lately among Democrats of different ideologies. It has a lot to do with the fact that Biden adopted such a progressive policy agenda after beating Sen. Bernie Sanders (I-Vt.) for the Democratic presidential nomination.
“We’ve got a president who’s really tackled stuff that people were surprised how aggressive and visionary he was,” Blumenauer said. “And I think people are reacting in a very positive way.”
In a meeting with Biden this week, DelBene urged the longest possible continuation of the child tax credit, though she declined to dish on the conversation.
“I continue to believe the right thing to do is to have the child tax credit through 2025 because that provides that certainty,” she said.
As of right now, Democrats are leaning toward extending the credit for only a year or two, but DelBene has not threatened to withhold support from the broader bill if she doesn’t get her way. That would be unprofessional.
I asked DelBene how her life would have been different if her parents had received monthly cash payments when she was a kid. The question provoked no sentimentality on her part.
“It might have helped my family a lot,” she said, before quickly adding that education gave her a chance to succeed.
“That fundamentally was what led me to run for Congress,” she said. “I felt like I had a chance. And we’ve made it harder and harder for kids growing up today, so we need to fix that.”
WASHINGTON — It looks like Sen. Joe Manchin (D-W.Va.) won’t prevail in his quest to deny child benefits to unemployed parents.
Democrats told HuffPost this week that they don’t expect a “work requirement” to be added to the child tax credit as part of the Build Back Better bill they’re hoping to pass in the next few weeks.
“We wanted to make sure there were no restrictions on low-income people,” Sen. Sherrod Brown (D-Ohio) told HuffPost. “No work requirement.”
“Work requirement” is a Washington term for excluding people who don’t have jobs from a given benefit. Manchin said he wanted work requirements for everything in Build Back Better, which Democrats envision as a legacy-defining bill to establish universal kindergarten and child care subsidies, promote green energy and broaden government health care coverage.
Too many new benefits, Manchin has argued, would foment an “entitlement society” of people who can’t help themselves.
“I believe government should be your best partner, but it shouldn’t be your provider,” Manchin said this week. “We have a moral obligation to provide for those who have incapacities, such as physical or mental. But everyone else should be able to help and chip in, so that’s my mindset.”
Democrats used to be much more averse to providing direct cash benefits to poor people. But this year, as part of the American Rescue Plan, Democrats broke with their past by approving monthly payments of as much as $300 per child for practically every parent in America.
The payments have already cut child poverty, but are set to expire in December unless they’re extended. Manchin has said the program should include a work requirement and exclude more families with higher incomes.
But in recent days, Manchin has declined to say whether he is still insisting on a work requirement specifically for the child tax credit.
“We’re all still talking,” he told HuffPost on Tuesday. “We’re working hard.”
Before Congress expanded the child tax credit as part of the American Rescue Plan earlier this year, the credit had a work requirement ― people who had earned less than $2,500 in the previous tax year were ineligible for even a partial credit.
Bringing back that earnings requirement, and reducing payments for lower earners, would cut benefits for the families of some 27 million children, according to the Center on Budget and Policy Priorities. The work requirement would also put a huge dent in the antipoverty impact of the monthly payments.
“Taking away the full credit from children based on their parents’ earnings would needlessly leave in poverty — or push deeper into poverty — the children who need help the most, injuring their long-term health and educational outcomes and reducing their earnings as adults, while doing virtually nothing to boost parental employment,” the Center on Budget’s Arloc Sherman, Chuck Marr and Stephanie Hingtgen wrote in a September policy brief.
Even without a work requirement, Democratic leaders aren’t entirely getting their way. They previously wanted to make the tax credit permanent or at least to extend it through 2025; their current plan is to do it for only one year, and it’s likely they’ll agree to Manchin’s demands that the policy exclude more households with six-figure annual incomes.
Sen. Michael Bennet (D-Colo.) said his understanding of the deal is that the monthly payments would continue through 2022 with “full refundability.” The payments are technically advance tax refunds, and full refundability means there is no earnings threshold and parents can receive the full amount as cash.
“That resolves the question about whether the poorest people in the country are eligible for it,” Bennet said.
Rep. Richard Neal (D-Mass.), chair of the House Ways and Means Committee and the lead author of a House version of the Build Back Better Act, also said he thought the work requirement idea was off the table.
“It certainly hasn’t permeated the conversation in the last couple of days,” Neal said.
President Joe Biden has been meeting with lawmakers in an effort to strike a deal that will satisfy progressives, as well as Manchin and Sen. Kyrsten Sinema (D-Ariz.), who has also withheld support for Build Back Better.
Neal said he could “envision a series of trade-offs” to get the senators on board. It’s possible Manchin dropped his work requirement demand in exchange for the shorter continuation of the credit, plus stricter eligibility rules for high earners.
“One of the big challenges is trying to walk back your words,” Neal said. “So I think if you had something to show for walking back your words, that’s an accomplishment.”
As the U.S. public debt approaches $30 trillion, the same misguided alarms have been sounding that I’ve been hearing continuously for all of my 50 years in finance.
First, the public debt per se is a residual calculation. It’s the dollars spent by order of Congress that haven’t yet been used to pay taxes. It’s not wrong to call it the net money supply. And, of course, an economy needs a money supply to function, and a growing economy needs a growing money supply.
Second, until Modern Monetary Theory (MMT), everyone thought the government needed to collect taxes or borrow in order to spend. Unfortunately, they’ve had the sequence backwards for a very long time.
MMT recognizes that the dollars needed to pay taxes and buy treasury securities come only from Congress’ designated agent, the Federal Reserve Bank, and its fully regulated member banks. Therefore, as a point of logic, agents of Congress spend first to provide the economy with the dollars that are then used to pay taxes or purchase government securities.
When Congress spends, the Fed is instructed to credit the appropriate member bank account at the Fed, which is called a reserve account (as in the Federal Reserve Bank).
As former Fed Chairman Bernanke testified, “…we use the computer to mark up the number in their account…” It’s simply a matter of scorekeeping.
Likewise, when taxes are paid and the check clears, the Fed debits (lowers the number) a member bank’s reserve account, and that member bank just lowers the number in the tax payer’s bank account. The dollars don’t “come from” anywhere or “go to” anywhere. The Fed doesn’t have or not have any dollars. It just changes numbers up and down, and accounts for what it has done.
Deficit spending is when the Treasury spends more than is paid in taxes. So if total government spending is $10 trillion, that much is added to our bank accounts. And if we pay $5 trillion in taxes, that much is subtracted from our bank accounts, leaving a $5 trillion in our bank accounts which equals the $5 trillion of deficit spending.
And it’s after we receive the $5 trillion that we buy $5 trillion of Treasury securities, which are nothing more than dollar deposits in what are called securities accounts at the Fed. They are functionally identical to savings accounts at commercial banks.
This means the purchase of Treasury securities merely shifts dollars from reserve accounts at the Fed to securities accounts at the Fed.
And when they come due, the Fed shifts the dollars back to the reserve accounts. There are no taxpayers or grandchildren in sight when that happens every month.
With a monetary system where the dollars to pay taxes and buy bonds come only from the government, the notion of the government running out of dollars, becoming insolvent, crowding out borrowers or driving up interest rates is entirely inapplicable. Mainstream economists have been rapidly catching on and modifying their models and their narratives accordingly. And as it is realized that the public debt is just the net money supply for the economy, that it already is “the money” and not something that gets “paid back” in the normal sense of that expression, analysis shifts from solvency fears to the effects of the actual government spending and taxing, which is what matters.
President Joe Biden and leading Democratic lawmakers, including Colorado Sen. Michael Bennet and Connecticut Rep. Rosa DeLauro, have been fighting to make permanent a child tax credit that would give families at least $300 a month per child
WASHINGTON — To supporters of the child tax credit, there has always been an “aha moment” — the recognition that as little as a few hundred dollars a month could be life-changing.
For Colorado Sen. Michael Bennet, it was several years ago when he was working as Denver’s school superintendent. One high schooler kept falling asleep in morning classes. When Bennet asked why he was so exhausted, the student said he worked the midnight shift at McDonald’s so that his family had enough money.
For Connecticut Rep. Rosa DeLauro, it was the childhood memory of her parents being evicted and finding their furniture on the street.
Bennet and DeLauro are among the Democratic lawmakers who have pushed to make permanent an expanded child tax credit, which President Joe Biden’s coronavirus relief package transformed into a monthly payment that would be available to almost any child. But Biden could not convince even enough of his fellow Democrats that they should extend these payments through 2025, and in negotiations for his broader package of economic and social programs he appears to have settled for a one-year extension that runs through next year.
Despite the concession, the president is still fighting for a legacy-making policy that could become the equivalent of Social Security for children. Biden dubbed the start of payments in July as “historic,” saying that the reduction to child poverty would be transformative and that he intended to make the credit permanent.
The steady evolution of the child tax credit reflects a fundamental split on how lawmakers think about human nature. Do payments from the government make people lazier or give them the resources to become more responsible? Established with bipartisan support in 1997, the credit has changed in ways that challenge many of the assumptions of political identities, as Democrats would be the ones calling on Republicans to cut taxes.
Republican critics and West Virginia Sen. Joe Manchin — the decisive Democratic vote — worry that the payments could discourage parents from working, while supporters say the money would make it easier to afford the child care and transportation needed to find jobs.
“It’s a flat-out tax cut for ordinary people,” Biden said in a Wednesday speech in Scranton. “That’s what it does. I make no apologies for it.”
The continuation of the payments of at least $300 a month per child is as much about a political transformation as an economic one.
For the purposes of the federal budget, it is a tax cut aimed squarely at the middle class as median family incomes are at $86,372. The credit’s evolution since being created in 1997 speaks to the power of using the tax code for social policy.
It allows Democrats to claim the mantle of middle-class tax cutters, while Republicans who oppose the idea could be criticized for favoring tax hikes on this key group of voters ahead of the 2022 elections. That is a sharp reversal from the Ronald Reagan-era identity of Republicans as committed to tax cuts for aiding growth.
“A lot of its initial success was that it did fit into the frame of tax relief,” said Gene Sperling, a Biden aide who worked on economic policy in both the Clinton and Obama White Houses. “This is one place where progressives have over a period of 30 years kind of won the conceptual war.”
The child tax credit was initially bipartisan, a unique policy overlap between former President Bill Clinton and former House Speaker Newt Gingrich.
Republicans made it part of their 1994 “Contract with America,” a list of polices that former Georgia Rep. Gingrich rode to the House speakership. Gingrich said in an interview that former Illinois Rep. Henry Hyde, a staunch abortion opponent, emphasized that the GOP needed to show that it cared about children after they were born, not just when they were in the womb. The tax credit was the chosen vehicle.
Clinton separately proposed it in December 1994 in his “middle class bill of rights” speech. The convergence ultimately led to the 1997 overhaul of welfare that established a $500 tax credit for children. Future administrations expanded the credit. But until this year the credit was not “fully refundable” — which meant that parents with low incomes might not earn enough to receive the full payment.
What Biden and Democratic lawmakers did with their coronavirus relief package was remove that limit, effectively turning the tax credit into a monthly child allowance. Their planned extension would make this change permanent.
Gingrich and Republicans say people would quit their jobs because they would be able to receive payments without working, depriving children of working parents who can serve as role models.
He calls that “an enormously dangerous thing for our culture.”
Backing that argument is a paper by University of Chicago economists that assumes the expanded tax credits would cause 1.5 million parents to ditch their jobs because the credits would no longer be tied to working.
“It’s a policy that’s been transformed from one that encourages self reliance and work to one that doesn’t,” said Bruce Meyer, the University of Chicago professor who co-wrote the analysis.
However, real world economic data shows no correlation between the payments and people leaving work so far. Researchers at Columbia University have found that the expanded child tax credit payments that began in July had no impact on labor and that models claiming otherwise are overly simplified. Workers often need to spend money in order to get a job, they reason.
“You have to make an investment in order to be able to work,” said Elizabeth Ananat, an economist at Barnard College who co-wrote the Columbia paper. “You do have to get your car fixed. You have to get your phone turned back on. You have to buy a month supply of diapers in order to secure your spot in the preschool.”
Democratic lawmakers believe the payments reduce poverty and improve educational outcomes, making it more likely that the children will hold steady jobs as adults.
Colorado Sen. Bennet backed the idea of a child tax credit after he found as a school administrator that more resources were needed to ensure kids had the stability to succeed.
“Most of the parents are working incredibly hard, some of them working two and three jobs. And no matter what they do, they couldn’t keep the kids out of poverty,” Bennet said.
DeLauro says the breakthrough on expanding the credit came as a result of the coronavirus showing how economically fragile many families are and Biden’s own choice as a presidential candidate to support the policy. She believes that beneficiaries will keep their jobs because work is part of who they are.
“People identify themselves by their work,” she said.
A key piece of President Joe Biden’s plan to address climate change in his Build Back Better plan appears to be dead. The Senate should replace it with the bipartisan-supported, industry-supported, market-based carbon fee and dividend program.
The Biden proposal, known as the Clean Electricity Performance Program, would have rewarded energy suppliers who switch from fossil fuels like coal to clean power sources like solar, wind and nuclear power. West Virginia Senator Joe Manchin doesn’t support using taxpayer dollars to pay private companies to do things they’re already doing. Manchin is half right.
The carbon fee and dividend, which we have endorsed several times in the past, is a scalpel to Biden’s blunt instrument. The program imposes fees on everything used or produced in the United States based on the greenhouse gas emissions associated with their creation.
One hundred percent of the fees collected would be disbursed in the form of a dividend to consumers affected by higher costs in the marketplace — mostly lower-income consumers.
This would correct imperfect market forces to incentivize production of cleaner products: Produce a cleaner product, pay a lower fee. Zero net impact on consumers.
Right now greenhouse gas emitters are getting a free ride, a subsidy on their pollution that will be paid by our children and grandchildren to mitigate the effects of climate change. Charging emitters a fee (small at the outset, becoming increasingly painful over years) corrects this market failure.
This fee would drive up prices, but the dividend back to all Americans with the revenue generated by the fee would make it budget-neutral. Consumers could use the money as they saw fit, with some choosing products that require less fossil fuels to produce that would also be less expensive.
The beauty of this policy is it isn’t mandating adoption of specific renewable energy technologies. These mandates, like the 20% renewable mandate enacted by voters in Colorado and increased by the legislature, can have negative impacts that drive up energy costs.
This policy introduces a market mechanism that would allow the vast multitude of existing and new technologies and policies to compete in the marketplace. Better technologies would win out based on the free market and solutions like coal to gas switching would also be incentivized.
This idea isn’t a new one, the Citizens’ Climate Lobby and its local chapter have been advocating for it for years, but it feels like now would be the perfect time to implement it. It would play a major part in reaching Biden’s goal to reduce carbon emissions by 50% by 2030.
It also has been getting support from Republicans who see it as a more market-based solution than “command and control” methods. While the chances of a Republican backing the Build Back Better bill are basically zero, Manchin may appreciate the history of bipartisanship around this policy proposal.
We’re already seeing the negative effects of climate change right here in Western Colorado. The fires and mudslides that have caused long closures of I-70 in Glenwood Canyon the past few years are costly for our local businesses. The drought drying up or reservoirs is a problem that is only going to get bigger and more costly over time.
A carbon fee and dividend program has not been added into the Senate’s Build Back Better bill, but we believe it should be. We’re calling on our Senators Michael Bennet and John Hickenlooper to back this proposal and get it in the bill.
INDIANAPOLIS (AP) — Earlier this year, an insistent cry arose from business leaders and Republican governors: Cut off a $300-a-week federal supplement for unemployed Americans. Many people, they argued, would then come off the sidelines and take the millions of jobs that employers were desperate to fill.
Yet three months after half the states began ending that federal payment, there’s been no significant influx of job seekers.
In states that cut off the $300 check, the workforce — the number of people who either have a job or are looking for one — has risen no more than it has in the states that maintained the payment. That federal aid, along with two jobless aid programs that served gig workers and the long-term unemployed, ended nationally Sept. 6. Yet America’s overall workforce actually shrank that month.
“Policymakers were pinning too many hopes on ending unemployment insurance as a labor market boost,” said Fiona Greig, managing director of the JPMorgan Chase Institute, which used JPMorgan bank account data to study the issue. “The work disincentive effects were clearly small.”
Labor shortages have persisted longer than many economists expected, deepening a mystery at the heart of the job market. Companies are eager to add workers and have posted a near-record number of available jobs. Unemployment remains elevated. The economy still has 5 million fewer jobs than it did before the pandemic. Yet job growth slowed in August and September.
Adam Todd, director of the Governor’s Job Fair Network, speaks about the state’s efforts to attract applicants to attend the Lee County Area Job Fair in Tupelo, Miss., Tuesday, Oct. 12, 2021. Employers representing a variety of manufacturing, production, service industry, medical and clerical companies attended the day long affair with an eye towards recruitment, hiring, training and retention.
An analysis of state-by-state data by The Associated Press found that workforces in the 25 states that maintained the $300 payment actually grew slightly more from May through September, according to data released Friday, than they did in the 25 states that cut off the payment early, most of them in June. The $300-a-week federal check, on top of regular state jobless aid, meant that many of the unemployed received more in benefits than they earned at their old jobs.
An earlier study by Arindrajit Dube, an economist at University of Massachusetts, Amherst and several colleagues found that the states that cut off the $300 federal payment saw a small increase in the number of unemployed taking jobs. But it also found that it didn’t draw more people off the sidelines to look for work.
A workforce placement company outlines the pay and benefits that could be obtained should the applicant be placed at the Toyota Auto Manufacturing plant in Blue Springs, Miss., during the Lee County Area Job Fair in Tupelo, Miss., Tuesday, Oct. 12, 2021. Employers representing a variety of manufacturing, production, service industry, medical and clerical companies attended the day long affair with an eye towards recruitment, hiring, training and retention.
Economists point to a range of factors that are likely keeping millions of former recipients of federal jobless aid from returning to the workforce. Many Americans in public-facing jobs still fear contracting COVID-19, for example. Some families lack child care.
With a growing Latino population in the northeastern counties of Mississippi, Direct Auto Insurance sought out bilingual job applicants during the Lee County Area Job Fair in Tupelo, Miss., Tuesday, Oct. 12, 2021. Employers representing a variety of manufacturing, production, service industry, medical and clerical companies attended the day long affair with an eye towards recruitment, hiring, training and retention.
Other people, like Rachel Montgomery of Anderson, Indiana, have grown to cherish the opportunity to spend more time with their families and feel they can get by financially, at least for now. Montgomery, a 37-year-old mother, said she has become much “pickier” about where she’s willing to work after having lost a catering job last year. Losing the $300-a-week federal payment hasn’t changed her mind. She’ll receive her regular state jobless aid for a few more weeks.
Ariel Jones, a United Parcel Service human resources intern, hands an applicant an information sheet, while the human resources specialist for the company, Mareno Moore, right, monitors the interaction during the Lee County Area Job Fair in Tupelo, Miss., Tuesday, Oct. 12, 2021. Employers representing a variety of manufacturing, production, service industry, medical and clerical companies attended the day long affair with an eye towards recruitment, hiring, training and retention.
“Once you’ve stayed home with your kids and family like this, who wants to physically have to go back to work?” she said. “As I’m looking and looking, I’ve told myself that I’m not going to sacrifice pay or flexibility working remotely when I know I’m qualified to do certain things. But what that also means is that it’s taking longer to find those kinds of jobs.”
Jamie Snyder, right, of H&R Block, explains the training process to applicant Diane Moore, during the Lee County Area Job Fair in Tupelo, Miss., Tuesday, Oct. 12, 2021. Employers representing a variety of manufacturing, production, service industry, medical and clerical companies attended the day long affair with an eye towards recruitment, hiring, training and retention.
Some former recipients, especially older, more affluent ones, have decided to retire earlier than they had planned. With Americans’ overall home values and stock portfolios having surged since the pandemic struck, Fed officials estimate that up to 2 million more people have retired since then than otherwise would have.
And after having received three stimulus checks in 18 months, plus federal jobless aid in some cases, most households have larger cash cushions than they did before the pandemic. Greig and her colleagues at JPMorgan found in a study that the median bank balance for the poorest one-quarter of households has jumped 70% since COVID hit. A result is that some people are taking time to consider their options before rushing back into the job market.
An applicant fills out a job employment form during the Lee County Area Job Fair in Tupelo, Miss., Tuesday, Oct. 12, 2021. Employers representing a variety of manufacturing, production, service industry, medical and clerical companies attended the day long affair with an eye towards recruitment, hiring, training and retention.
Graham Berryman, a 44-year-old resident of Springfield, Missouri, has been living off savings since Missouri cut off the $300-a-week federal jobless payment in June. He has had temporary work reviewing documents for law firms in the past. But he hasn’t found anything permanent since August 2020.
“I’m not lazy,” Berryman said. “I am unemployed. That does not mean I’m lazy. Just because someone cannot find suitable work in their profession doesn’t mean they’re trash to be thrown away.”
Likewise, some couples have decided that they can get by with only one income, rather than two, at least temporarily.
Graham Berryman looks at his laptop at his apartment in Springfield, Mo., on Thursday, Oct. 21, 2021. Berryman is a lawyer that his struggled to find work during the pandemic after he was let go by his previous firm in August 2020. He has lived off savings since losing his job, but the money may not last much longer.
Sarah Hamby of Kokomo, Indiana, lost her $300-a-week federal payment this summer after Gov. Eric Holcomb, a Republican, ended that benefit early. Hamby’s husband, who is 65, has kept his job working an overnight shift at a printing press throughout the pandemic. But he may decide to join the ranks of people retiring earlier than they’d planned.
And Hamby, 51, may do so herself if she doesn’t find work soon. The jobs she had for decades at auto factories have largely disappeared. The positions that she sees available now require skills she doesn’t have. Yet she isn’t desperate for just any job.
“I’m at a point where I feel too old to go off and get educated or trained to do other type of work,” she said. “And to be honest, I don’t want to go work at a computer, in an office, like what a lot of us are being pushed to do. So now I’m stuck between doing some line of work that pays too little for what it’s worth — or is too physically demanding — or I just don’t work.”
Nationally, the proportion of women who were either working or looking for work in September fell for a second straight month, evidence that many parents — mostly mothers — are still unable to manage their childcare duties to return to work. Staffing at childcare centers has fallen, reducing the care that is available. And while schools have reopened for in-person learning, frequent closings because of COVID outbreaks have been disruptive for some working parents.
Exacerbating the labor shortfall, a record number of people quit their jobs in August, in some cases spurred by the prospect of higher pay elsewhere.
In Missouri, a group of businesses, still frustrated by labor shortages more than three months after the state cut off the $300-a-week federal jobless checks, paid for billboards in Springfield that said: “Get Off Your Butt!” and “Get. To. Work.”
The state has seen no growth in its workforce since ending emergency benefits.
“We don’t know where people are,” said Brad Parke, general manager of Greek Corner Screen Printing and Embroidery, who helped pay for the billboards. “Obviously, they’re not at work. Apparently, they’re at home.”
Richard von Glahn, policy director for Missouri Jobs With Justice, an advocacy group, suggested that many people on the sidelines of the job market want more benefits or the flexibility to care for children.
“People don’t want to go back” to the pre-pandemic job market, von Glahn said. “Employers have a role in creating a work environment and offering a package that provides workers the security they need.”
In Wyoming, fewer people are in the workforce now than when the state cut off all emergency jobless aid. Fear of contracting COVID-19 likely discouraged some people from seeking jobs, Wenlin Liu, chief economist at the state Economic Analysis Division, said last week.
Wyoming has one of the lowest vaccination rates in the country, he noted, and has been a COVID-19 hotspot since late summer. The surge in infections, Liu said, may be causing some parents to keep their children home.
State Rep. Landon Brown, a Republican, defended the cutoff of federal unemployment aid.
“Wyoming,” Brown said, “is not interested in continuing to allow the federal government to keep people away from jobs, paying them as much to stay home in some cases as to go and get a job.”
Mississippi ended all emergency jobless aid on June 12. Yet it had fewer people working in August than in May. In Tupelo last week, a job fair attracted 60 companies, including a recruiter from VT Halter Marine, a shipbuilder located 300 miles south. About 150 to 200 job seekers also attended, fewer than some businesses had hoped.
Adam Todd had organized the job fair for the Mississippi Department of Employment Security, which helps people find jobs and distributes unemployment benefits. The agency has received “calls of desperation,” Todd said, “from businesses needing to recruit workers during the pandemic.
“We’re in a different point in time than we have been in a very long time,” Todd said. “The job seeker is truly in the driver’s seat right now.”
After a disappointing jobs report in April, Montana Gov. Greg Gianforte announced, “Montana is open for business again, but I hear from too many employers throughout our state who can’t find workers.” He subsequently withdrew Montana from the enhanced unemployment insurance program, which had previously added $300 a week to unemployed workers’ paychecks. This was replaced with a new ‘Return To Work” bonus, in which people who started new jobs could receive a $1,200 payment.
Ten other states followed with similar programs. Ultimately, however, most states failed to produce a “Return to Work” program that delivered the promised money. Four months later, only 1,061 Montanans have received a return to work bonus. Over the same period, the number of people who stopped receiving unemployment bonuses decreased by 6,000. While most states have not made the information about the take up of their programs public, those that have reported similarly dismal results.
There are several ways in which the ineffectiveness of these policies was baked into their design. First, most states made people apply for this program through a new web portal constructed for the bonuses. These portals were generally built months after the program was announced. What’s more, they were rife with glitches and user interface problems common to the rollout of other new programs, including the Affordable Care Act and recent Child Tax Credit.
Second, states require that workers validate their new employment for a prolonged period (usually from four to ten weeks) after being hired. This transformed the bonus from “returning to work” to “persisting in the job for several months.” It also meant that workers had to document that they had stayed in the job by submitting pay stubs or letters from their employer to receive the bonus. In turn, those documents had to be checked and verified.
The one exception to this was Colorado, which managed to get the “Colorado Jumpstart” bonus to over 11,000 people.
Instead of building a new web portal and verification process, Colorado used its existing unemployment insurance website. As people left unemployment, they were notified that they were eligible for “Colorado Jumpstart” and given the option to sign up. They would be issued their first check four weeks later, with no additional paperwork required.
Key to Colorado’s success was the lack of additional hurdles for receiving the bonus. Colorado easily integrated the bonus into existing systems and databases rather than creating a new system requiring people to submit paperwork to verify a new job. Why, then, did other states create customized systems? Sam Bell of “Employ America,” a think tank dedicated to pursuing full employment, speculated that governors who “ didn’t choose [Colorado’s] path wanted the headlines about bonuses without actually having folks receive them.“
Most “Return To Work” programs failed in their stated goals. But even though the money did not make it to many people, “Return to Work” bonuses succeeded in one unsavory way: they gave governors political cover while they ended their state’s participation in the Federal Pandemic Unemployment Compensation program. By announcing the programs simultaneously, it seemed as though governors were replacing one program to provide aid to people who were currently unemployed with another.
In truth, they were replacing a program that had been effective at supporting people with an empty promise.
Ultimately, neither the “Return to Work” bonuses or withdrawing from unemployment insurance seem to have substantially helped get people back into the workforce. Neither tactic addressed the primary barriers to employment: the increased risk of coronavirus transmission at crowded workplaces, parents’ need to be available at home if schools are closed, and the process of connecting workers and firms. If they shift their focus on these very real problems, governors can finally demonstrate that they genuinely want to help their constituents.
Businesses across the US say they are struggling to find employees, especially for hourly work.
Joey Holz decided to test their claims, submitting two applications a day in September.
Holz got one interview, and his summary of the experiment went viral on multiple platforms.
Joey Holz recalled first hearing complaints about a labor shortage last year when he called to donate convalescent plasma at a clinic near Fort Myers, Florida.
“The guy went on this rant about how he can’t find help and he can’t keep anybody in his medical facility because they all quit over the stimulus checks,” Holz told Insider. “And I’m like, ‘Your medical professionals quit over $1,200 checks? That’s weird.’”
Over the next several months, the 37-year-old watched as a growing chorus of businesses said they couldn’t find anyone to hire because of government stimulus money. It was so ubiquitous that he joined a “No one wants to work” Facebook group, where users made memes deriding frustrated employers.
Yours Truly puts out a sign for hiring on June 3 in Chagrin Falls, Ohio.
He said he found it hard to believe that government money was keeping people out of the labor force, especially when the end of expanded federal unemployment benefits did not seem to trigger a surge in employment. All expanded benefits ended in September, but 26 states – including Florida – ended them early in June and July.
“If this extra money that everyone’s supposedly living off of stopped in June and it’s now September, obviously, that’s not what’s stopping them,” he said.
So Holz, a former food-service worker and charter-boat crewman, decided to run an experiment.
On September 1, he sent job applications to a pair of restaurants that had been particularly public about their staffing challenges.
Then, he widened the test and spent the remainder of the month applying to jobs — mostly at employers vocal about a lack of workers — and tracking his journey in a spreadsheet.
Two weeks and 28 applications later, he had just nine email responses, one follow-up phone call, and one interview with a construction company that advertised a full-time job focused on site cleanup paying $10 an hour.
But Holz said the construction company instead tried to offer Florida’s minimum wage of $8.65 to start, even though the wage was scheduled to increase to $10 an hour on September 30. He added that it wanted full-time availability, while scheduling only part time until Holz gained seniority.
Holz said he wasn’t applying for any roles he didn’t qualify for.
Some jobs “wanted a high-school diploma,” he said. “Some wanted retail experience,” he added. “Most of them either said ‘willing to train’ or ‘minimum experience,’ and none of them were over $12 an hour.”
He said: “I didn’t apply for anything that required a degree. I didn’t apply for anything that said ‘must have six months experience in this thing.’”
Holz isn’t alone. Others have also spoken out about their troubles finding work, despite the seemingly tight labor market.
In a Facebook post on September 29, which went viral on Twitter and Reddit as well, Holz said, “58 applications says y’all aren’t desperate for workers, you just miss your slaves.”
“My opinion is that this is a familiar story to many,” he added.
By the end of September, Holz had sent out 60 applications, received 16 email responses, four follow-up phone calls, and the solitary interview. He shared a pie chart showing his results.
Joey Holz
Holz acknowledged that his results may not be representative of the larger labor challenges in the country, since his search was local and targeted the most vocal critics of stimulus spending.
He added that despite the claims of some businesses struggling to hire, his boss had no staffing issues during the pandemic.
“Nobody leaves those positions because he takes care of his people,” Holz said, referring to his boss.
Manchin is reportedly pitching a $60,000 income cap for families to get the Biden child tax credit.
A new analysis indicates 37.4 million kids could get less federal aid if Democrats adopt it to win his vote.
That amounts to 60% of eligible kids nationwide facing a sharp cut to government assistance, including many in West Virginia.
Sen. Joe Manchin of West Virginia is reportedly seeking a $60,000 income cap for families to get the expanded child tax credit, a key element of President Joe Biden’s domestic agenda up on the chopping block as negotiations over the scope of the spending bill drag on.
For over a month, the West Virginia Democrat has pressed for a work requirement and ensure only the lowest-income households can receive fresh government assistance. He’s been the sole lawmaker in either chamber promoting the limits on benefits over the objection of most Democrats, who instead favor locking in the ability of nearly all families to tap up to $300 in monthly child tax credit payments even if they don’t pay taxes.
But Manchin holds outsized sway in the 50-50 Senate, given Democrats can’t spare any votes in their endeavor to turn Biden’s economic plans into law in the face of united Republican opposition. Details are still sparse on Manchin’s proposal, but experts are beginning to model how it could pan out.
A new analysis conducted by the Niskanen Center’s Robert Orr and Samuel Hammond indicated 37.4 million children could lose out on federal aid if Democrats adopted Manchin’s $60,000 income cap with sizable losses falling on non-working parents who are disabled, students, or grandparents. The estimate includes 189,000 kids in West Virginia, a 58% cut in Manchin’s home state.
Manchin's approach would amount to a sharp cut in government assistance for 60% of kids now benefiting from the revamped child tax credit. Biden and others are touting it as a federal measure helping stabilize people's day-to-day finances, allowing them to pay the bills, put food on the table, and weather income shocks.
That estimated reduction in coverage under the income cap assumes a sharp cutoff where families making over $60,000 wouldn't receive the bulked-up CTC, which is $3,000 or $3,600 for only a year depending on the child's age. Niskanen's estimates don't include any potential effects from a work requirement as well, meaning the number of children losing out on benefits could be even higher.
Hammond, the Niskanen Center's welfare policy director, called it "a huge step backwards" for efforts to slash child poverty in the US within social benefit legislation Democrats are still piecing together.
"What Manchin is proposing will deal a blow to rural economies like that of West Virginia," he said in an interview, adding that it "cuts the value of the credit by at least half and probably cuts the number of children receiving the credit by well over half."
Many of the children affected would likely get at least part of an underlying $2,000 tax credit boosted under President Donald Trump. But Hammond argued the Manchin proposal would open the child tax credit to political attacks if it is perceived as a social program for only the poorest Americans, stigmatizing its beneficiaries and undercutting its odds of success.
The West Virginia Democrat has clamored for a $1.5 trillion social spending bill, a sum far lower than the $3.5 trillion that progressives like Sen. Bernie Sanders of Vermont want. Manchin has focused on the child tax credit among other proposed measures, arguing it could discourage low-income Americans from working.
There's little research so far to back that up. A study released last week from the Center on Poverty and Social Policy at Columbia University indicated the measure had "insignificant" impacts on employment after evaluating the first two rounds of payments.
Democrats are balking at Manchin's income cap. "I know Joe Manchin cares about the parents and kids in his state," Sen. Sherrod Brown of Ohio said in a statement to Insider. "He doesn't want to see working families struggling to stay in the middle class, or children living in poverty any more than the rest of us."
Brown noted Manchin had co-sponsored a bill in 2019 that would widen the credit's reach to families with little or no income taxes. "I know we'll get something across the finish line that allows parents to keep up with the cost of living and lifts kids in West Virginia and Ohio and the rest of the country out of poverty," he said.
Brown and Sen. Michael Bennet of Colorado are both spearheading efforts to keep the revamped child tax credit. Bennet said he didn't think Manchin's pitch for work requirements was catching on among Democrats.
"I think the caucus understands how important the child tax credit is to the American people and we're gonna fight to make sure that it remains the way it is," Bennet told Insider.
Many House Democrats are also unsettled, particularly the centrist-leaning New Democrat coalition chaired by Rep. Suzan DelBene of Washington.
"To continue advancing the President's agenda, New Dems are focused on doing a few things better for longer in order to deliver tangible, immediate results for Americans," she said in a statement on Monday. "New Dems would have serious concerns with any changes that undermine the success of this historic opportunity for families.
Manchin, along with Sen. Kyrsten Sinema of Arizona, haven't budged from their demands for a skinnier bill. Whether their frugal attitudes extend to the child allowance may spell the difference between millions of children continuing to count on a steady flow of aid or being left in the lurch.
It’s a question that everyone already seems to have an answer for.
“The poor are lazy.”
“The poor can’t manage money.”
“The poor don’t have the right mindset.”
These theories are anecdotal at best and downright insulting at worst. The problem with these arguments is that they are based on small sample sizesrather than empirical data. While I agree that some people are poor because of these things, there has been little experimental research done on this topic…until now.
Earlier this year researchers at the London School of Economics released a paper titled, “Why Do People Stay Poor?” that illustrated how thelack of initial wealth (and not motivation or talent) is what keeps people in poverty. The researchers tested this by randomly allocating wealth (i.e. livestock) to female villagers in Bangladesh and then waited to see how that wealth transfer would affect their future finances. As their paper states:
[We] find that, if the program pushes individuals above a threshold level of initial assets, then they escape poverty, but, if it does not, they slide back into poverty…Our findings imply that large one-off transfers that enable people to take on more productive occupations can help alleviate persistent poverty.
Their paper clearly illustrates that many poor people stay poor not because of their talent/motivation, but because they are in low-paying jobs that they must work to survive.
They are, in essence, in a poverty trap. This is a poverty trap where their lack of money prevents them from ever getting training/capital to work in higher paying jobs. You might be skeptical of these findings, but similar things have been found by experimental researchers doing random cash transfers in Kenya as well.
The fact is that money begets money. In investing we all know this to be true, but these empirical studies suggest that this is also true in the labor market. Without financial resources people find it incredibly difficult to get the skills and training to get ahead. I know this all too well as a first-generation college student who was fortunate enough to have their tuition paid for by a need-based scholarship.
And I can tell you that without that financial support there is almost no way I am here today. I know this because in the spring quarter of my junior year I didn’t have an internship lined up for that summer. I had been rejected from every one I had applied to. Luckily, my aunt was nice enough to offer me a job working in the warehouse she ran back home. If I had taken it I would’ve been paid minimum wage to move boxes while many of my peers were working at various Fortune 500 companies across the country.
However, late in the spring quarter one of my professors asked me what I was doing for the summer. I told him the unfortunate truth about the warehouse job and he immediately replied, “You are not doing that.” He then basically forced me to send my resume to a healthcare consulting firm that was run by another professor at our university. I did as he said, got the job, and spent my summer learning computer programming. It was amazing.
When I think back on it now, it was probably the most pivotal moment in my career. Without that initial nudge into a corporate role, a role that taught me my first technical skills, nothing in my career exists. I likely would have interned at my aunt’s warehouse and probably worked there full-time at a fraction of what I got paid in my first actual job out of college. But, even that result would have been incredibly fortunate because I would have had a guaranteed job coming out of college no matter what.
I only tell this story because it illustrates the immense amount of wealth/resources that were needed to change my career trajectory from one of low income to one of high income. The financial capital provided by my university, the social capital provided by my professor, and the career capital provided by my aunt were all things that most other first-generation college students wouldn’t have had access to. I am lucky to know the transformative power of wealth and how it can affect someone’s life.
I was reminded of this truth after hearing about the recent passing of famed actor Chadwick Boseman, most well known for his role in Black Panther. Boseman, who didn’t come from money, had his time at Oxford’s Drama Academy paid for by a secret benefactor who later turned out to be Denzel Washington.
Rather than summarize the power of Washington’s gift on Boseman, I’ll let Boseman’s words to Washington speak for themselves:
An offering from a sage and a king is more than silver and gold. It is a seed of hope. A bud of faith. There is no Black Panther without Denzel Washington. And not just because of me, but my cast, that whole generation, stands on your shoulders. The daily battles won. The thousand territories gained. The many sacrifices you made for the culture on film sets through your career. The things you refused to compromise along the way, laid the blueprint for us to follow.
That is the power of wealth. Not the fancy cars. Not the private planes. Not the mansions. But the ability to change someone’s life. Think about the compounded effects of Washington’s gift on Boseman’s career and, eventually, on the world. Think about the number of young black children that will forever be inspired by Black Panther because of that gift long ago.
This is why wealth can be so powerful. Because it gives people the ability to change their world in meaningful ways. Whether that means getting a cow in Bangladesh or getting funds to pursue an acting scholarship in a foreign country, wealth is the change agent.
[Author’s note: If you are interested in learning more about cash giving and its effectiveness, check out the research from GiveDirectly here.]
We’ve hit the point in the legislative process where, even though the energy and the numbers are on the side of going big, centrist members of the Democratic caucus are starting to hedge. As a result, there’s been an uptick in Congress of two of the worst words in American politics: “means testing.”
Centrist Democrats are trying to shave the total cost of President Joe Biden’s proposed $3.5 trillion investment in key domestic priorities over the next decade, even though it’s less than half of what will be invested in the Pentagon in the same time frame. One of the most touted proposals in the Build Back Better Act has been two years of free community college for every American paid by the U.S. government — the very definition of a universal benefit.
But now Sen. Tim Kaine, D-Va., tells Business Insider reporter Joseph Zeballos-Roig that he could see the program’s being reduced to being accessible only to lower-income Americans.
On the surface, that sounds great. You save taxpayer dollars and make sure that only poor Americans can use the programs. Win-win, right? Well, no.
For those unfamiliar with the phrase, “means testing” is the art of limiting the possible.
For those unfamiliar with the phrase, “means testing” is the art of limiting the possible. Say you want to establish a government program to provide free lunches for students, which is proven to be especially beneficial for kids from low-income families. The easiest way to make it happen is to do just that: provide free lunches for all students at public schools through federal funding. Or you could provide lunches only to some students who are most in need. And to determine which students requires adding steps to the process.
That could look like requiring parents to fill out paperwork documenting their annual incomes and the numbers of children they have in school. It could involve having school districts apply a formula for the number of kids per household for every tax bracket to decide whether each student qualifies. Then you have to keep track of every kid in the system and account for every reduced-price or free lunch that is given out. Most likely, you’ll need all of those steps and more — just to make sure some kid whose parents make a bit too much money or who qualifies but never filled out the form doesn’t get access to the school-provided lunch.
The justification for means testing is that it helps keep costs down for programs that are, in theory, paid for with higher taxes. This is done by ensuring that only the “right” people have access to federal aid, the argument goes. “Means testing,” then, is a nicer way of saying, “We want to add more hoops for people to jump through so fewer people can get help.”
When we look at the participation rates of means-tested programs in the U.S., we typically find that around one in five eligible people are not receiving the benefits they are owed.
The overall participation rate of the food stamp program is 85 percent and is only 75 percent for the working poor who likely have a harder time proving their eligibility to the welfare office. The participation rate of Medicaid is 94 percent for children, 80 percent for parents, and around 75 percent for childless adults. The participation rate of the Earned Income Tax Credit (and also presumably the Child Tax Credit) is 78 percent. The low participation in the EITC cuts the poverty-reducing effect of the program by around 33 percent, according to the Census Bureau, meaning that mainstream estimates of the EITC’s impact (e.g. those produced by CBPP) overstate the effectiveness of the program by at least 50 percent.
To repeat, a major factor in this disparity is the administrative hurdles Americans are forced to overcome just to prove that they qualify for assistance. The Atlantic’s Annie Lowry spelled out this year just how burdensome these bureaucratic requirements can befor people who are already struggling to make ends meet:
Government programs exist. People have to navigate those programs. That is how it goes. But at some point, I started thinking about these kinds of administrative burdens as the “time tax” — a levy of paperwork, aggravation and mental effort imposed on people in exchange for benefits that putatively exist to help them. This time tax is a public policy cancer, mediating every American’s relationship with the government and wasting countless precious hours of people’s time.
The issue isn’t that modern life comes with paperwork hassles. The issue is that American benefit programs are, as a whole, difficult and sometimes impossible for everyday people to use. Our public policy is crafted from red tape, entangling millions of people who are struggling to find jobs, failing to feed their kids, sliding into poverty or managing disabling health conditions.
On and on down the list of Democratic initiatives you can see what Lowry describes as a “love of too-complicated-by-half, means-tested policy solutions” creeping into place as the Build Back Better Act takes shape. New Medicare benefits that would, for the first time ever, cover vision, dental and hearing costs? “We have to have means-testing to bring it in,” Rep. Henry Cuellar, D-Texas, told Bloomberg News.
What Democrats need to understand is that they’re dealing with a binary situation: There’s universal and there’s not.
Who would benefit from this? Well, the lobbying groups pushing centrist members of Congress to reduce the tax hikes on corporations and wealthy individuals that Democrats want to include in the package. If you cut those revenue increases, then suddenly the bill is no longer “fully paid for,” which means cutting down on the spending side to balance it back out.
These centrists also think they’re set to reap political benefits for backing these changes. I’m highly skeptical. First, there’s less cachet in seeming to be fiscally conservative than they’re assuming, especially when everyone benefits from the federal spending in question. Second, the parts of the bill that they’re most against are the ones that are the most popular with Americans, as The New York Times’ David Leonhardt and Ian Prasad Philbrick noted Wednesday.
What Democrats need to understand is that they’re dealing with a binary situation: There’s universal and there’s not. It’s easier and cheaper and better politics to say “this is for all Americans” than to try to explain that you’re now helping only some people. Otherwise, you’re not only paying more for the privilege of failing to meet your goals, but also giving the GOP fodder for criticisms of your ineffective programs.
The benefits were handed out. But they don’t seem to be translating politically. In some cases, voters don’t even credit Biden for them.
By Sam Stein
When they took power this past winter, Democrats made a commitment to not repeat what many viewed as a critical misstep of the Obama years. The legislation they passed would do two things well: make sure that the benefits were frontloaded and that the impact was tangible.
The result was a Covid relief package that included direct payments of up to $1,400 to most Americans, $300 per week in unemployment insurance supplements, and an expansion of the child tax credit for a year.
Nine months later, whatever political benefits were supposed to accrue from that package have seemingly faded. The public’s support for the direct payments has been overtaken by its concerns about the lingering pandemic. The federal unemployment insurance benefits ended in September with no apparent appetite by the feds or state governments to extend them. And while Democrats are seeking to extend the expanded child tax credit past its expiration date this December, recent polling data suggests that they are getting little credit for it.
A POLITICO/Morning Consult poll released last week showed that 61 percent of respondents said they’d received the credit — a $300 payment per month for every child under the age of 7 and a $250-per-month payment for every child under the age of 17. But only 39 percent of respondents said that the payment had a major impact on their lives. And while 47 percent of respondents credited Democrats for passing the expanded child tax credit, just 38 percent credited President Joe Biden.
Those numbers are causing agita on Capitol Hill, where there is growing concern that in a rush to continue legislative momentum around infrastructure and Biden’s Build Back Better social spending plan, the party has failed to hammer home the benefits of their first big bill: the American Rescue Plan.
“It’s great to deliver and do things, but you have to actually go out and tell the f—ing world about it,” conceded one top Senate Democratic aide who worked on getting the child tax credit passed. “That’s not a two-month project. It has to keep going.”
It’s also compelling officials in the party to revisit the calculation they made in January. Giving people money may not be the dispositive political winner that they imagined.
“I believe we should do popular things and use our power while we have it,” said Adam Jentleson, a party operative who now finds himself among the more vocal progressive activists in D.C. “But you should do them because they’re the right thing to do but not with the expectation that there would be a big political payoff.”
As Jentleson and others noted, the moral case for passing the child tax credit remains quite profound. Researchers at Columbia University found that 59.3 million children nationwide received payments in July 2021. That month alone, they wrote, the program “kept 3 million children from poverty.” Extended through its duration, the program could “reduce monthly child poverty by up to 40 percent.” Combined with all Covid-related relief, “it could contribute to a 52 percent reduction in monthly child poverty.”
Democrats negotiating the Build Back Better legislative package have pushed to extend the program expansion until 2025. And Biden himself has leaned into that policy specifically as a way to sell the larger reconciliation package.
“The jobs numbers also remind us that we have important work ahead of us, and important investments we need to make,” Biden said on Friday, after the release of an underwhelming jobs report. “We’re going to help build families, and we’re going to help them afford to care for their new baby, a child, an elderly relative. [We’re] going to extend the tax credit for families with children.”
The question confronting the campaign apparatuses within the party, however, is how can they turn any such extension into actual electoral positives. For some, it’s simple: You keep building a record that you can take to the voters as a case for remaining in power.
“All of this is part of the stew you need to put together to create a post-pandemic, economic boom in 2022,” said one top party operative, in reference to both the child tax credit, the infrastructure bill and the Build Back Better initiative. “And if you succeed, there is a clear argument to make that Joe Biden and a Democratic Congress came in, got to work, rescued the economy and put money in your pocket. You can see the ads. But it’s an ugly path to get there.”
But others say that Democrats’ ambitions need to be recalibrated a bit; that there are no panaceas for electoral success and that the real benefits won’t be realized in 2022 or maybe even 2024, but in the reshaping of the electorate down the road.
Ethan Winter, a senior analyst at Data for Progress, does polling for Fighting Chance for Families, a group that is working to extend the child tax credit. The data he has shows wide support for the expanded tax credit among Democrats and independents. But the more interesting number, he argued, was found in the crosstabs.
Republican parents who have gotten the benefits, he said, support Biden at a higher rate than their non-parent Republican peers. And that, Winter added, is a decent thread of optimism for Democrats who thought the policy would serve them well both morally and politically.
“I think there was a triumphalist narrative that if we provide this benefit, we will remake American politics,” Winter said. “But I think this misreads the literature on policy feedback slightly. The place where this works is at the margins. That’s where the struggle is waged.”
He went on from there.
“It’s really hard to remake the electorate, but if you can provide clear benefits to Republican parents, then you can pick off maybe not the module Republican parent, but the marginal one. And if you can pick up the marginal ones, then you can maybe win the next election and that solidifies it even further.”
Demands for workers to return to the office have reached fever pitch. “Home working left Britons at the Taliban’s mercy,” boomed the front page of the Mail on Sunday last weekend (10 October). Either you are at the office or you are with the terrorists, apparently.
Iain Duncan Smith, the former Conservative Party leader, was similarly hysterical. In an article for the Mail, IDS compared civil servants working from home unfavourably with the Blitz generation who, he argued, kept coming to the office “even when Hitler’s bombs were raining down”.
Leaving aside the fact there was no technology enabling people to work from home in the 1940s, Duncan Smith’s comments are historically inaccurate even on their own terms. In advance of the Blitz, thousands of civil servants were relocated to areas far outside of London, to places such as Colwyn Bay and Llandudno in Wales.
More recently, millions of employees across Britain were urged by the government to work from home to “stop the spread” of Covid-19. It was our patriotic duty to stay indoors and “save the NHS”. Eighteen months later, as the pandemic slowly recedes, the government and its cheerleaders are urging workers to get back to the office again, this time to save Pret a Manger.
And yet, it seems that much of the public quite like aspects of the “new normal”. According to a recent YouGov poll, a majority of workers said they would prefer to work from home either full time or at least some of the time. Another study found that 61 per cent of people would be willing to take a pay cut to maintain remote working status.
As Covid took hold, things that were previously out of the question – greater levels of public spending, flexible working arrangements, an end to homelessness – suddenly became part of the fabric of reality. Those with a vested interest in the old way of doing things are today faced with a dilemma. Either they accept the “new normal” or they try to frighten people back to the office with dire warnings about everything from terrorism to “lazy” office workers who “just want to watch Loose Women”.
It isn’t just working from home that the public seems to like. New polling for Survation has found that nearly 50 per cent of the public would be in favour of altering the 9am to 5pm five-day work week altogether.
It’s easy to assume that the way things are today is fixed, that the nine to five is “just how it is”. Yet you don’t have to go far into the past to see just how recent an innovation the five-day working week actually is. Until the 20th century, most workers clocked in around 60-70 hours per week. In the US, the Ford Motor Company only adopted the five-day week in 1926. The gradual reduction in working hours in the ensuing years was made possible by improved productivity and the emergence of trade unions.
61 per cent of people would be willing to take a pay cut to maintain remote working status. Nearly 50 per cent of the public would be in favour of altering the 9am to 5pm five-day work week altogether.
Today, our rigid adherence to office nine-to-five culture is arguably a fetter on productivity (it’s certainly a bigger barrier to productivity than workers watching daytime TV). Indeed, recent surveys have found that productivity is often higher when employees are allowed to work from home.
Much as the 70-hour working week began to look old fashioned during the 20th century, so the idea that more hours equals greater productivity looks increasingly old fashioned in the 21st. The difference today is that we have the data on what peak performance looks like; and it doesn’t offer much support to those who believe we should spend 40 hours a week working slavishly in an office. We know for example that over the course of a week, 25 hours is the optimum amount for cognitive functioning. We also know that Germans work 400 fewer hours per year than Americans and have a better quality of life.
Several recent studies have looked at the impact a shorter working week would have on productivity and employee wellbeing. A New Zealand-based company, Perpetual Guardian, recently trialled a four-day working week and found that employees showed improvements in job satisfaction, teamwork and company loyalty, as well as a reduction in stress. Productivity was unaffected.
Bigger trials in Iceland, which included 1 per cent of the country’s workforce, were so successful that 86 per cent of workers have subsequently shortened their hours or gained the right to do so. During the trials, which took place between 2015 and 2019, productivity stayed the same or increased according to researchers.
Of course, productivity shouldn’t be the only relevant metric. An increase in leisure time would probably do most of us good. Indeed, progress was considered synonymous with expanded leisure time for the reformers of the 20th century, something worth remembering today as we are marinated in an exploitative hustle culture that teaches us to “rise and grind” and do little else.
The perception and scope of what the government can do tends to widen during times of national crisis. It happened in the aftermath of the Second World War, which is why those today using the “Blitz spirit” as a rhetorical device to castigate office workers would do well to remember what happened once the war was over. In the years after 1945, the so-called Blitz spirit demanded an end to squalor and indignity. People didn’t want to go back to the old way of doing things; and so, despite harrumphing from the Tory benches, the welfare state was created.
Today, the ground is shifting once more. The enemies of progress are harrumphing again. But owing to the changes wrought by a deadly virus, people are realising that there is more to life than lining somebody else’s pocket.
A new study challenges Manchin’s assertion that the revamped child tax credit keeps people from working.
The analysis found “statistically insignificant impacts” of the credit on job seeking and workforce participation.
Manchin has pushed to attach a work requirement to the revamped child tax credit, frustrating many Democrats.
A new study released Tuesday indicated that the revamped child tax credit hasn’t kept people from working, blowing a hole in an argument championed by Sen. Joe Manchin of West Virginia as Democrats grapple with extending the credit as a key part of President Joe Biden’s domestic agenda.
The analysis from researchers at the Center on Poverty and Social Policy at Columbia University, Barnard College and Bocconi University found “very small, inconsistently signed, and statistically insignificant impacts of the CTC” on employment and participation and the workforce.
It relied on data from the monthly Current Population Survey from earlier this year as well as the Census Household Pulse surveys that were collected from April 2021 through August 2021, the second month that the child tax credit checks were sent.
Analysis of CTC’s impact on employment. Via Center on Poverty and Social Policy at Columbia University
The child tax credit was overhauled in Biden’s stimulus law earlier this year. From July to December, families will get a $300 monthly benefit per child age 5 and under, amounting to $3,600 this year. The one-year measure provides $250 each month per kid age 6 and 17, totaling $3,000. Half of the benefit will come as a tax refund next year.
Families with little or no tax burden can also receive the federal cash now, a sharp change from how the credit was originally structured. The latest research challenges Manchin’s assertion that federal aid will keep people from seeking work as he argues against the US economy slipping into an “entitlement mentality.”
Some experts cautioned against drawing definitive conclusions early in the credit’s rollout. Scott Winship, a poverty expert at the right-leaning American Enterprise Institute, wrote in a tweet that “research finds that the labor supply response takes years to fully manifest, not days or months.”
A strong majority of Congressional Democrats support making the changes permanent in their safety net package, citing research that it could cut child poverty by up to half and particularly among Black and Latino kids. Early research has indicated that it helped feed 2 million kids in its first month and kept 3 million out of poverty.
But Democrats are running into resistance from Manchin who wants people to work as a condition to receive the credit.
The West Virginia Democrat has been the chief advocate for imposing a work requirement on the expanded child tax credit. He argues the generous federal assistance would keep people from working.
“There’s no work requirements whatsoever,” he told CNN on September 12. “There’s no education requirements whatsoever for better skill sets. Don’t you think, if we’re going to help the children, that the people should make some effort?”
He doubled down a few days later, telling Insider that “tax credits are based around people that have tax liabilities.”
Some Senate Democrats shot back, including Sen. Sherrod Brown of Ohio, one of the architects of the expansion. “I think raising children is work,” he told HuffPost.
SEOUL, South Korea (AP) — South Korea’s ruling liberal party on Sunday nominated its candidate for next year’s presidential elections, selecting a maverick politician known for his outspoken views who is currently the race’s front-runner.
Lee Jae-myung’s nomination as the Democratic Party presidential candidate comes despite his rivals’ efforts to depict him as a dangerous populist and link him to a snowballing real estate scandal.
Lee has vowed to fight economic inequality, introduce a universal basic income and resume reconciliation projects with North Korea.
Gyeonggi Gov. Lee Jae-myung, left, elected as the ruling Democratic Party’s candidate for next year’s presidential election, bows after winning the party’s final race in Seoul, South Korea, Sunday, Oct. 10, 2021.
In his acceptance speech, Lee bowed deeply several times and said he’d want to carry out what he called a public call to “root out unfairness, inequality and corruption” and carry out other sweeping reform steps.
“I’d restrain the excessive desires by the strong and protect the lives of the weak. I’d protect the people’s jobs, income and welfare,” Lee said.
Party officials announced Lee had collected about 50.3% of all votes cast during the race, defeating three challengers in a party primary that ended Sunday.
Gyeonggi Gov. Lee Jae-myung, left, elected as the ruling Democratic Party’s candidate for next year’s presidential election, shakes hands with former Prime Minister Lee Nak-yon after winning the party’s final race to decide on the presidential candidate in Seoul, South Korea, Sunday, Oct. 10, 2021.
Lee, 56, is the governor of South Korea’s most populous Gyeonggi province that surrounds the capital of Seoul. He is known as a tough-speaking liberal who has built up an image as an anti-establishment figure. He’s also famous for his self-made success story as he worked as a boy as a factory worker, a time that left him an arm disability, before later making his own way through school and passing the country’s notoriously difficult bar exam to work as a human rights lawyer.
Before becoming governor in 2018, Lee worked as mayor of Seongnam, a city inside Geyonggi, for eight years. Previously a political outsider, he rose sharply amid public anger over an explosive 2016-17 corruption scandal that eventually led to the ouster of the conservative President Park Geun-hye.
Gyeonggi Gov. Lee Jae-myung, left, one of the ruling Democratic Party’s contenders for next year’s presidential election, shakes hands with another candidate Park Yong-jin after winning the final race to run for the president in Seoul, South Korea, Sunday, Oct. 10, 2021.
Lee has said that if elected, he would focus on easing South Korea’s deep-rooted economic polarization and inequality that he says causes other social problems, as well as hurting South Korea’s economic growth.
Some of his actions and campaign pledges have drawn accusations from critics that they are populism-driven ideas. Among them are his provision of COVID-19 relief fund to all Gyeonggi residents, contrary to the central government’s decision to give such money to only 88% of the country’s population; a promise to adopt a universal basic income to give all citizens at least 1 million won ($840) every year; and a push to not levying toll fees from cars using a bridge in Gyeonggi.
Lee has also faced an escalating political offensive by his opponents over a dubious property development project in Seongnam that was launched when he served as mayor there. One former senior city official has been arrested over the scandal. A small asset management firm and its affiliates made massive profits from the project and there are suspicions about possible corruptive links among them, city authorities and other high-profile figures.
The ruling Democratic Party’s contenders for the next year’s presidential election candidate, Gyeonggi Gov. Lee Jae-myung, from left, former Prime Minister Lee Nak-yon, lawmaker Park Yong-jin and former Justice Minister Choo Mi-ae arrive for the final campaign to choose the presidential election candidate in Seoul, South Korea, Sunday, Oct. 10, 2021.
Next year’s March 9 election will likely be a two-way race between Lee and whoever wins the main conservative opposition People Power Party’s nomination in November. Most recent surveys put Lee ahead of either of the two main conservative presidential hopefuls, though some indicated they were in a neck-and-neck competition.
The election is meant to find a successor of current President Moon Jae-in, a Democratic Party member whose single five-year term has been marked by dramatic ups and downs in relations with North Korea, a worsened conservative-liberal divide at home and varied economic woes.
On North Korea, Lee said he would take a similar appeasement policy as Moon’s. He said he would seek a relief of international sanctions on the North to resume stalled inter-Korean cooperation projects. To resolve the North Korean nuclear crisis, Lee said he would propose that each of North Korea’s denuclearization steps be matched with the easing of sanctions that can be restored if the North fails to implement its disarmament pledges.
Those proposals weren’t something new and it’s unclear if they could be realized. The U.S. has said the sanctions will stay in place unless North Korea takes concrete steps toward denuclearization.
A recently released research paper from the Becker-Friedman institute has challenged the consensus view that the new Child Tax Credit (CTC) program would have limited effects on employment. The authors — Kevin Corinth, Bruce D. Meyer, Matthew Stadnicki, and Derek Wu — use data from the Comprehensive Income Dataset. They find that the CTC expansion proposed by the Biden administration (and currently being debated for permanent renewal by Congress) would reduce total employment by 1.5 million and reduce poverty rates by 22 percent. This differs substantially from previous estimates, which have generally found limited effects on employment as well as larger effects on poverty reduction (usually around 40 percent).
This is a new working paper that has not been peer-reviewed. We expect other economists to question the validity of some of the papers’ assumptions (some have already begun to do so). The paper is complex and necessarily makes certain assumptions about how to model different decisions and which parameter estimates to use. While we expect that most of these decisions are reasonable, similarly reasonable modeling choices would likely yield very different estimates.
This is especially important because the significant effects the paper suggests are hard to reconcile with the observations of other countries that have created similar programs. In our previous white paper, we noted that there was no such decline in labor force participation after a similar program was introduced in Canada.
Nevertheless, it is worth taking the paper’s findings seriously as given.
A Refundable CTC Does Not Lead To An Entitlement Society
It’s first worth noting that this paper agrees with the previous literature in one crucial capacity. The paper estimates that relatively few parents (0.14 million) will leave the labor force because of the additional cash provided to parents by the expanded CTC (what economists call “the income effect”). Parents will not decide to stop working because the money provided by the CTC makes it possible for one or more parents to get by without a job. This should not be surprising: $300 a month per child is not nearly high enough to replace labor income.
If you, like Senator Manchin, are concerned that the CTC expansion will create an “entitlement society,” this paper should alleviate those concerns.
A Refundable CTC Takes the Government’s Thumb Off The Scale
Instead, the findings are driven by the “substitution effect.” The previous version of the Child Tax Credit “phased in” (such that only parents who were earning at least $24,000 a year would receive the full credit). This meant that the CTC previously operated as a subsidy for employment, effectively increasing the wages of someone who earned $24,000 to $26,000. Effectively, the government is choosing to supplement parents’ wages who decide to work rather than remain at home.
It’s worth asking whether this is the proper role for the government. While the government (or society more broadly) arguably does have an interest in helping people find work (and may choose to limit assistance for people who can work and choose not to), to claim that the government should specifically push parents into the workforce goes against many conservative principles. Some social conservatives, including Reihan Salam, Senate candidate Blake Masters, and Lyman Stone, have gone so far as to suggest that lower workforce participation by parents should be a policy objective. The Niskanen Center has previously argued that the government should largely be neutral in this decision, neither pushing parents into or away from the workforce. A fully refundable CTC achieves this goal, whereas the previous phase-in did not.
A Refundable CTC Lets Employers Phase-In
Finally, it’s worth noting that, if ending the phase-in of the CTC decreases the incentive to work provided by the federal government, there is a group that may be better suited to increasing that incentive: employers themselves.
The Becker-Friedman paper assumes that offered wages will not change in the presence of the fully refundable CTC. But if 1.5 million people are considering leaving the workforce, as the paper suggests, firms will, of course, consider how they can attract more job candidates. This may take the form of increased wages–effectively replacing the funding previously provided by the government. A result of these increased wages would be that many parents decide to keep working.
And certainly, employers may be able to come up with better solutions for attracting parents than money alone. If parents are considering leaving the workforce, businesses will look for new ways to attract them. Most obviously, this could include options such as more regular hours or limited hours that make it easier for parents to be home before and after school. That’s a pro-family policy we should all get behind.
Experts in philanthropy are gradually coming around to the idea that simply giving poor people cash — rather than services or in-kind benefits — is the most efficient way to make progress on severe poverty.
The big picture: The divergent economic experiences between rich and poor countries during the pandemic has shown the value of directly giving money to those in need.
With extreme poverty in developing countries spiking during the pandemic, direct cash giving is more important than ever.
What’s happening: GiveDirectly — a charity that pioneered the practice of sending money to people in poverty, no strings attached — recently announced it sent $1,000 each to more than 178,000 U.S. households in need during the pandemic, with plans to reach another 20,000 over the next few months.
GiveDirectly works with Propel — a company that provides software that helps Americans digitally manage food stamps and other benefits — to identify households in need and quickly send out money.
The direct cash giving model’s greatest advantage is its “exceptional efficiency,” says Alex Nawar, GiveDirectly’s U.S. director, who estimates that 98–99 cents of every dollar donated to the charity’s U.S. pandemic program goes directly to giving, with little required for overhead.
Between the lines: GiveDirectly’s program, as successful as it was, is a drop in the bucket compared to the billions in direct stimulus checks and expanded jobless benefits from the federal government that have flowed to Americans during the pandemic.
That aid — much of it cash — not only prevented much of the massive economic pain Americans could have suffered during the pandemic, but it actually helped reduce the U.S. poverty rate in 2020.
But what both private philanthropy and government aid demonstrate is the power of rapidly distributed cash to shield the needy from catastrophe and actually lift people out of poverty.
What they’re saying: “It was really exciting to see the U.S. embrace cash as a first solution for the financial security problems people are facing through the pandemic,” Nawar says.
Globally, there has been a 148% increase in cash social programs during COVID-19, with a total of 782 cash transfer programs being implemented or planned across 186 countries.
“I think there’s a lot of room for both governments and NGOs and other kind of disaster responders to increase how often we use cash, because we know it’s more efficient than delivering in-kind aid,” says Nawar.
By the numbers: Poverty declined in the U.S. during the pandemic but not in the poorest countries in the world.
Extreme poverty levels were projected to fall to 537 million people by 2030, but the pandemic interrupted this trend, with the number increasing for the first time since 1997 to an estimated 588 million people.
“There are people who might have exited poverty in the last few years or the last decade through growth and all of the progress that has been made, and unfortunately, have fallen straight back in,” Vishal Gujadhur, deputy director of development policy and finance at the Gates Foundation, told Fast Company recently.
How it works: During the pandemic, GiveDirectly worked with the government of Togo — where half the citizens live below the poverty line — to identify and distribute millions of dollars in cash aid to those in need.
To speed the process up, GiveDirectly used satellite images to identify tell-tale images of poverty, like houses with thatched roofs rather than metal ones, as well as mobile phone data, employing an algorithm to find people who more often made short, cheap calls — another sign of poverty.
Details: A 2018 review of 165 studies of cash-giving programs found it tends to increase spending on food and other goods — dispelling the idea that much of the aid would be wasted by recipients — while not reducing recipients’ willingness to work.
A 2019 study by GiveDirectly of its cash-transfer program in Kenya found positive spillovers even to those who didn’t receive money, with little effect on price inflation.
The other side: “Cash can’t buy everything,” as Drake University economist Heath Henderson wrote this year.
Cash assistance can’t always help with the structural issues that keep people in poverty, including the lack of access to COVID-19 vaccines in very poor countries.
The bottom line: Even if money isn’t a cure-all, when it comes to tackling poverty as quickly as possible, “it can be as simple as expanding cash,” says Nawar.
The end of the £20 uplift to Universal Credit this week represents the biggest overnight cut to the basic rate of social security since the Second World War – at a time when the effects of the pandemic are still being felt.
This, combined with the end of the furlough scheme, will plunge millions of families into poverty over the next few months. Politicians, activists and civil society leaders agree there is still an urgent need to provide economic support that protects everybody.
Welcome as the furlough scheme and the uplift to Universal Credit were, their targeted design meant that many fell through the cracks, and the government spent much of last summer rushing through loans, grants and add-on schemes to catch those who didn’t qualify for one reason or another.
A crisis that affects everyone needs a response that protects everyone.
That’s why, at the UBI Lab Network, we’re proposing that the government put in place what we call a Resilience Universal Basic Income (UBI). This is a new and fully costed proposal that we’re proud to launch today in openDemocracy.
We want to give every working-age adult (16-64) resident in the UK £400 a month for a year – no strings attached.
We also want to give all children and pensioners £200 a month. This would be without any changes to existing benefits or the State Pension.
Unlike the small mountain of paperwork generated by the furlough scheme and Universal Credit, receiving the payments (which we’re calling a COVID Dividend) would be straightforward. All you would have to do is show that you’re a permanent resident of the UK to claim your money. Everyone would receive the COVID Dividend, regardless of income, wealth or work.
The Resilience UBI would initially last for a year, but it could be extended depending on the circumstances of the pandemic. In our full proposal paper, we’ve also outlined how it could be transitioned into a permanent Universal Basic Income for everyone.
Our Resilience UBI would guarantee economic security for every household in the UK, and would give citizens the crucial spending power needed to revive our struggling communities and high streets. It would build up resilience, both in individual households and the economy as a whole, to protect against future shocks like COVID.
The Resilience UBI is affordable. We estimate the overall cost would be £261bn over 12 months. This is around half what the UK spent onbailing out the banks after the 2008 financial crash, and a fraction of what the US government has put into their own temporary UBI – theStimulus Checks.
Instead of tax rises, we would fund the Resilience UBI through People’s Quantitative Easing – government money creation, in other words – which would reinject some of the money that working families have lost during lockdown back into the economy.
Quantitative Easing is how the government funded the bank bailout as well as most of the COVID support schemes, including furlough. The difference is that the money from those two interventions went to banks and big business – our Resilience UBI would give money directly to citizens and to communities.
We’ve teamed up with PolicyEngine UK, which models the effect of proposed policy changes on the economy, to crunch the numbers. Its modelling of our Resilience UBI shows that overall poverty would fall by 80%, and child poverty by 85%. It also found that the lowest earners would be the biggest winners. It’s even created a tool so that you can see the effect the Resilience UBI would have on your own household.
We’ve also considered the inflationary risk of our proposals. We argue that the one-year Resilience UBI would only have a transitory effect on inflation, whereas any full UBI in the future would have a minimal effect as it would significantly offset inflationary risk through additional taxation on the wealthiest.
Politicians from Labour, the Liberal Democrats, the Alliance Party and the Green Party have welcomed our Resilience UBI proposal as an important contribution to the debate around ongoing economic support after the end of the furlough scheme.
Scotland’s first minister Nicola Sturgeon said in May last year that Universal Basic Income was an idea “that’s time has come”, while Greater Manchester mayor Andy Burnham recently called for the introduction of the policy at the Labour Party conference. Most significantly, in Wales, first minister Mark Drakeford recently announced his government’s intention to launch a major pilot of UBI after a successful election campaign by the UBI Lab Network.
Our fully costed Resilience UBI is an innovative response to an unprecedented crisis. The economic interventions the Conservative government has made in the past 12 months – unthinkable before 2008 – have shown that the government can act big to protect households and the economy. It’s just a matter of political will.
A Resilience UBI would protect everybody, and would be the first step towards a society free of poverty and insecurity, and protected against future shocks like COVID. We can turn our patchy safety net into a safety floor that no one can fall below. If not now, then when?
Budget reconciliation negotiations among Democrats have hit an impasse over Senator Joe Manchin’s worries about extending the Child Tax Credit (CTC) without a work requirement. As he put it in his agreement with Majority Leader Chuck Schumer, Manchin believes any new family spending must have “needs based means testing.”
At the outset, it is worth emphasizing that Manchin’s position is not entirely unreasonable. While America is one of the few developed nations without a child allowance — a 2020 survey found 108 countries have some form of periodic child benefit anchored in national legislation — the concept is nonetheless somewhat novel in the U.S. context. It is therefore worth reviewing the top five reasons why adding a work requirement to the CTC is not only unnecessary, but may even risk undermining Manchin’s own stated goals.
1) The work disincentives from child benefits are negligible
Unconditional child benefits have historically faced an uphill battle in the U.S. given concerns over the potential that they discourage work. As recently as the 2016 election, then-candidate Hillary Clinton proposed a significant CTC expansion that still phased in with earnings. This was simply following the conventional wisdom that her husband established 20 years earlier with welfare reform: namely, that transfer programs should always be tied to work, implicitly or explicitly, in order to promote self-sufficiency and thus genuine poverty alleviation.
In the decades since, anti-poverty experts have realized that we in many ways over-learned the 1996 welfare reform’s success at promoting work among single mothers. After all, the Clinton-era welfare reform was aimed at Aid to Families with Dependent Children (AFDC), a program that not only provided cash assistance to needy families, but one which also rapidly withdrew assistance if a struggling parent sought employment. As a textbook example of a poverty trap, AFDC’s steep benefit cliffs promoted dependency by design. This was technically the byproduct of too much means-testing, not too little, made all the worse by Kafkaesque social services that sacrificed the poor on the altar of bureaucracy.
Flat child benefits don’t suffer from AFDC’s benefit-cliff problem, as a dollar earned is a dollar kept. Meanwhile, the disincentive from the pure “income effect” of a child allowance ranges from small to negligible, and in a way that is differential with respect to married and single mothers (no study has ever found a significant effect on the labor supply of fathers). Canada’s child benefit is nearly twice as large as the CTC expansion being considered by Congress, and yet a 2021 study found no effect of its expansion on overall parental labor supply. To the extent employment rates were affected at all, earlier research found the Canada child benefit only decreased work among a small subset of married mothers who became stay-at-home parents. Never-married parents, meanwhile, increased their employment rate by nearly 2 percentage points.
The Canadian results are consistent with the broader research literature on income effects. While one must always be cautious with international comparisons, the labor market institutions of countries like Canada, Australia, and the U.K. are far more similar to the U.S. than their counterparts in Northern Europe. In fact, a 2020 study of the CTC found that a $1,000 increase in the credit was associated with a 1.1 percentage point increase in the labor force participation of single mothers — exactly in line with the Canadian results. In both studies, the effect was driven by single parents who used the child benefit to afford home- and family-based child care.
2) The “zero-income” demographic is not a bunch of slackers
Most rich countries have a child allowance in recognition that child dependents add expenses for households without generating any corresponding income. While promoting work is important to reducing poverty, the market does not automatically pay workers more simply because they have kids at home. That basic arithmetic is why child benefits are essential to reducing overall rates of family poverty, as illustrated by the United States’ outlier status among the OECD in terms of both child poverty and social spending on family.
Nevertheless, some remain squeamish about providing a cash benefit to households with low or zero income. The image in many of these critics’ minds is a member of the non-working poor — what scholars in the 1990s called the “underclass.” Yet this portrait of households with zero reported income is as outdated as it is misleading. Income distributions are not static; people move in and out of “poverty” as measured by income every year. Nor does reporting zero personal income in a given year imply that one is necessarily poor. It’s not uncommon for a small business owner with some savings to forgo taking a salary until their company gets off the ground, for instance.
The 2020 Census found that 5.8 million children in the U.S. live in households headed by their grandparents, or 7.9 percent of all children under the age of 18. In addition, over 4 million U.S. households with children are headed by parents with a disability. Parents and legal guardians living on a fixed income typically don’t need to file a tax return, and when they do, Social Security benefits are not considered part of their gross income. Nonetheless, these households face all the same child-related expenses as households with working-age parents. And while Social Security offers “auxiliary benefits” to beneficiaries with child dependents, restrictive rules mean that more than half of all families with two or more beneficiaries are affected by the statute’s per-family maximums. The “dependent allowances” in state Unemployment Insurance programs are even more paltry, averaging on the order of $5 extra dollars a week per child.
The age gap between when a family has their first child and when they reach their peak earning potential makes tying the CTC to tax liability particularly problematic. That’s all the more true for parents young enough to still be in school. According to 2015-2016 data from the National Postsecondary Student Aid Study, 22 percent of all undergraduates in the U.S. are parents. This represents 3.8 million students raising a child while in college, typically with minimal market incomes and large additional expenses like tuition. Not surprisingly, with the share of colleges that provide on-site child care services in steady decline, the dropout rate among student-parents is the highest of any demographic. If the goal is long-term self-sufficiency, using the CTC to incentivize cash-strapped parents to quit school in favor of an entry level job is misguided to say the least.
3) More rules mean more bureaucracy
Even a modest earnings requirement would severely compromise the administrative simplicity of the Child Tax Credit. As it stands, the IRS has made strides toward easing the application process since the CTC was temporarily extended in 2019, including through a simplified online portal. The lack of a phase-in under the extended CTC has been critical to this effort. With benefit calculations now a matter of simply counting the number of eligible children in a household, the administrative burdens involved with income verification have been lifted.
Contrast this with the Earned Income Tax Credit (EITC), which has a complex phase-in structure and 41 pages of tax preparation rules. It is no wonder that the EITC suffers from such a high error rate, accounting for 44 percent of all IRS audits in 2019. These mispayments are a pittance compared to the estimated revenue the IRS fails to collect from wealthy individuals every year, and place significant stresses on both the recipients and the IRS itself.
Wherever possible, we need to maintain a dogged preference for simple, clear rules and standards over multifactor balancing tests; for big, blunt interventions over subtle nudges; for on-budget direct payments to beneficiaries over tax preferences and empowering bureaucratic intermediaries; and for decision-making venues that force rent-seeking insiders to face effective representation of the broader public. Small government is not the answer; what is needed is simpler, more legible government.
A child allowance fits that bill. By not phasing out until relatively high incomes, the CTC now reaches 96 percent of all families, with benefit levels that only need to be adjusted for households that file income taxes anyway. The simplicity of a flat benefit reduces the need for bureaucracy, leaving paternalism to parents. It has also made it infinitely easier to enact important policy innovations, from making the credit a monthly payment, to allowing the credit to follow a child who lives part of the year in a different household. This would all be jeopardized by even a modest work requirement.
4) Earning phase-ins amplify income shocks
Even if a flat child benefit doesn’t discourage parents from working, some still support phasing the Child Tax Credit in with earnings as a proactive work incentive. For non-working, able-bodied parents, the credit’s historical 15 percent phase-in rate may function as a kind of wage subsidy: with every dollar earned along the phase-in range, the CTC kicks in an extra 15 cents.
This argument suffers from several problems. First, most labor market entry decisions are relatively binary — do you take the entry-level job or not — and therefore unlikely to be influenced by marginal incentives at very low levels of earnings. Indeed, even the EITC’s effectiveness as a work incentive is now under dispute despite its far more aggressive phase-in rate of 34 to 45 percent.
Less appreciated is how an earnings phase-in can wind up amplifying income shocks if and when they occur. Consider a single parent who takes a year off work to care for a sick family member. While this parent may normally earn a reasonable wage, they will report low or zero income within the period of their leave. If the CTC is phased in with annual earnings, any loss of market income that results will come with an additional reduction in tax benefits, turning the social insurance function of the CTC on its head.
The perverse flipside of a CTC earnings test should be particularly troublesome to pro-family conservatives. The certainty and predictability of an unconditional child benefit is key to promoting household stability, as measured by rates of divorce, reductions in child abuse and neglect, and lower consumption of stress-relievers like alcohol and tobacco.
5) Child allowances reduce dependency and social inequality
Pregnancy and childbirth can itself represent a significant income shock. The nation’s traditional welfare system, Temporary Assistance for Needy Families (TANF), is thus widely acknowledged to function as a kind of maternity-leave-of-last-resort for new moms near the poverty line. In lieu of a child allowance, cash-strapped new parents are instead forced to turn to means-tested public assistance.
The unconditionality of a child allowance can help divert these parents from sticky, bureaucratic forms of aid in a way analogous to how Unemployment Insurance diverts dislocated workers from turning to disability insurance. Child allowances can thus promote improved social mobility in the long run, all while reinforcing a deeper commitment to social equality. As I put it in a piece for the Institute for Family Studies earlier this year,
At 22.9% of all “poverty spells,” the introduction of a new child to the family is the third leading reason women report turning to traditional welfare programs. Divorced and never-married mothers are particularly vulnerable in this respect, including those who may have otherwise considered terminating their pregnancy, giving rise to the so-called “feminization of poverty.” In lieu of a simple child allowance, many cash-strapped moms are thus forced to turn to more bureaucratic alternatives. Navigating the morass of Great Society-era anti-poverty programs can itself become a full-time job. As a result, a family that starts off as merely income poor risks becoming socialized into “poverty” in the richer sense of the term, putting children at a much higher risk of becoming dependent as adults.
Senator Manchin’s concerns about the potential for family welfare policies to backfire and create dependency are thus not without merit. Well-intentioned policymakers in the U.S. have a long track record of doing just that. Nevertheless, if the senator paused to take a closer look at the evidence around child allowances, he might well be surprised. Far from repeating previous policy mistakes, the CTC expansion in the reconciliation package would actually right those past wrongs, creating a more equitable and family-friendly tax code in the process.
