Free money for all? Mayors hope local tests bring big change

Jul 23, 2021, 5:31 AM | Updated: Jul 25, 2021, 3:02 am
FILE -In this June 16 2021 file photo, people walk on one of the main streets in Ellenville, N.Y. i...

FILE -In this June 16 2021 file photo, people walk on one of the main streets in Ellenville, N.Y. in Ulster County. Though pretty, there are pockets of poverty. The county is working with the Center for Guaranteed Income Research at the University of Pennsylvania on a pilot program funded by private donations. One hundred households making less than $46,900 a year in May began receiving a $500 payment each month for a year. Recipients of the money can spend it as they wish, but will be asked to participate in periodic surveys about their physical health, mental health and employment status. (AP Photo/Seth Wenig File)

(AP Photo/Seth Wenig File)

By triggering $1,400 stimulus checks for millions of people and expanding the child tax credit for many families, the pandemic offered a clear takeaway for some officials: That putting tax dollars in people’s pockets is achievable and can be a lifeline to those struggling to get by.

Now a growing number of mayors and other leaders say they want to determine for sure whether programs like these are the best way to reduce poverty, lessen inequality and get people working.

In experiments across the country, dozens of cities and counties — some using money from the $1.9 trillion COVID relief package approved in March — and the state of California are giving some low-income residents a guaranteed income of $500 to $1,000 each month to do with as they please, and tracking what happens. A coalition known as Mayors for a Guaranteed Income plans to use the data — collected alongside a University of Pennsylvania-based research center — to lobby the White House and Congress for a federal guaranteed income or, for starters, to make the new $300 per month child tax credit that’s set to expire after this year permanent.

The surge in interest in these so-called free money pilot programs shows how quickly the concept of just handing out cash, no strings attached, has shifted from far-fetched idea to serious policy proposal, even as critics blast the programs as unaffordable or discouraging people from going to work. Supporters say it’s all due to COVID-19, which cost millions of people their jobs and prompted the federal government under both Presidents Donald Trump and Joe Biden to cut checks to rescue the economy — relief that was hugely popular politically.

“The pandemic showed us what is possible,” said Los Angeles Mayor Eric Garcetti, whose latest budget included a $24 million guaranteed income program to give 2,000 poor families $1,000 per month. “We’re now going to be a pretty potent lobby to get the child tax credit permanent.”

The American Rescue Plan, which Biden signed in March, increased the child tax credit for one year to $3,600 annually for children under 6 and $3,000 for ages 6 to 17, with the first six months of the credit advanced via monthly payments that started this month. Last year the credit was $2,000 per child, and only families that owed income taxes to the government could receive it. That excluded low-income families and those who generally have no income to report.

Biden is pushing to extend the credit through 2025, and ultimately make it permanent. Republicans argue doing so would create a disincentive for people to work, and lead to more poverty — an argument similar to what critics say about the guaranteed income programs. No Republicans voted in favor of the American Rescue Plan, which they said was too expensive and not focused specifically enough on COVID-19´s health and economic crises.

Former Stockton Mayor Michael Tubbs, who started Mayors for a Guaranteed Income in June 2020, launched a guaranteed income program using private funds in his Northern California city in 2019. An independent study found full-time employment for participants grew in the first year of the program more quickly than it did for those not receiving cash, a finding Tubbs argues contradicts conservative arguments against them. Some recipients were able to complete classes or training and get full-time jobs that provided more economic stability than cobbling together gig employment.

Mayors for a Guaranteed Income started with 11 founding mayors and now has more than 50. Two dozen pilot programs have been approved, from Los Angeles County — the most populous county in the U.S. — to a county in upstate New York and the cities of Wausau, Wisconsin, and Gainesville, Florida.

Last week, California lawmakers approved a state-funded guaranteed income plan with a unanimous vote that showed bipartisan support. It will provide monthly payments to qualifying pregnant people and young adults who recently left foster care.

Some pilot programs have been funded privately — Twitter founder Jack Dorsey has donated over $15 million to MGI. Other places, like Minneapolis, are using federal dollars from the American Rescue Plan.

Matt Zwolinski, director of the Center for Ethics, Economics and Public Policy at the University of San Diego, has studied guaranteed income policy for over a decade and says the increased interest is remarkable.

But he says there’s a flaw in using the pilot projects as a “proof of concept.” Most are for one to two years and give money to a narrow slice of the population that knows the cash will eventually stop, so participants may be more likely to seek fulltime employment during that period than if they knew the cash was permanent.

Zwolinski also questions whether people in the U.S. are willing to support a national program that gives money to people who could work but aren’t doing so.

“That really rubs a lot of people the wrong way,” he said.

Even in the smaller pilots there have been hiccups. In many cases, waivers are needed to ensure the new income doesn’t make recipients ineligible for other benefits they receive.

Wausau, Wisconsin, Mayor Katie Rosenberg said that snag has delayed the city’s program from getting up and running.

“I don’t want to hurt people,” Rosenberg said.

Gary, Indiana, started its pilot program in April, providing $500 per month to 125 households for one year. Burgess Peoples, the pilot’s executive director, said recipients receive “wraparound services,” including help with finding jobs. Already it’s making a difference, she said.

Two women used their first checks to pay what they owed for college tuition, allowing them to keep working toward their degrees. One man got his car repaired so he could get to work without paying for a Lyft ride.

Peoples hopes more local experiments will pressure the federal government to change the way it assists poor people.

“That way they can get help the way they need it,” she said, “not just the way the government thinks it should be.”

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Free money for all? Mayors hope local tests bring big change