When President Biden prepared to distribute the American Rescue Plan Act in March 2021, a substantial part of the amount of $1.9 trillion was directed toward individuals. The economic impact payment, or the third stimulus check, was huge, comprising 54% of the total funds.
The previous packages under the Trump administration placed a larger emphasis on business-directed assistance. The economic impact of the pandemic has been vast, even unmeasurable, and weighed most heavily on vulnerable populations, especially folks experiencing homelessness and poverty.
The American Rescue Plan was hailed as a significant win for the Democrats by the media, especially for Americans living in poverty. Not only does the bill include direct stimulus payments to individuals making less than $75,000 and married couples filing jointly and making less than $150,000 a year.
The Rescue Plan even provided a stimulus check to dependents and the amount was also $1,400, the same that was given to each filer. Other provisions that were included in the Rescue Plan included expanded benefits for the unemployed, an expanded version of the Child Tax Credit, and state investments aimed to help with the distribution of vaccines and the reopening of schools.
A Columbia University report states that the package comprising both the additional investments in programs and the direct stimulus checks brought down poverty rates by 30% and reduced the number of children living in poverty by half.
Universal Basic Income Preempts Economic Woes Unlike The Stimulus Checks
Nobody doubted that the stimulus check was a step in the right direction. But there was also the question of the need to address economic woes through preemption rather than through mitigation. An alternative method to bring down individual financial instability and also reduce poverty is the concept of a universal basic income.
The very word, universal, indicates that the UBI is for everyone, regardless of socioeconomic, employment, and housing status. And the crucial difference between the concept of universal basic income and stimulus checks is that the UBI concept provided direct stimulus checks to individuals for an extended period of time, if not for an unlimited period of time, unlike the one-off stimulus checks.
The stimulus check has always been a sporadic effort and has been dependent upon legislation each time the payments were necessary. This sporadic nature of stimulus checks has led to a more extended system to support the American poor through the universal basic income model.
Cities and local bodies have started the concept of universal basic through pilot projects, and they are steadily gaining success. Cities and states are now adopting the model while those who have passed through the pilot project routine are now expanding the concept.
A basic income case project from Stockton in California was recently in the news. Two years ago a monthly stimulus check of $500 was given to 125 individuals who were selected randomly. The main criteria for selection were that these individuals were below the median income of the city of Stockton, which was $45,000 in a year.
The recipients of the stimulus checks were able to spend the money as they wished. They were not obligated to complete any drug test, aset or means test, interviews, or even any work requirements. The beneficiaries just got the stimulus checks, no questions asked, no strings attached.
The regular stimulus checks had a huge impact on those who received them. A comparison of those who received this monthly payment with those who did not show the glaring difference. The study showed that there was a marked decrease in income volatility and the figure was as significant as 22% for those who received the payments.
It has been seen that the overwhelming number of beneficiaries were using the $500 to purchase only essentials such as food, utilities, and clothing. A second crucial discovery was that the stimulus checks did not dissuade people from looking for work or joining the workforce.
Rather as households were now in a more stable position, they were free to now access resources that helped them progress further in their field of work. With a more stable financial position, they could not spend time looking for more permanent and sustainable work.
But the concept of a universal basic income is only opposed by the Republicans. Their major critiques are that it will dissuade people from joining the workforce, a line that is similar to what the Republicans used when they opposed the pandemic stimulus checks.
The Stockton Stimulus Checks Challenged The Opposition By The Republicans
The Stockton pilot project proved an eye-opener. For one, as has been mentioned before, the monthly stimulus checks did not dissuade people from going to work. Rather, it provided them the time to find suitable jobs and engage with their communities. There was even a rise in the percentage of jobs with full-time participants’ share growing by 12 percentage points as against only 5 percentage points in the control group.
Secondly, the cost of moving out people of poverty also alleviated the economy in various areas. For instance, healthcare was a beneficiary. Toxic stress that has always been linked to finances is normally pervasive and also expensive for both the system and the individual. But the freeing up of resources will definitely serve the community in the long run.
The former mayor of Stockton, Michael Tubbs stressed the point when he revealed that much of the societal illness is due to toxic stress and the high levels of cortisol and anxiety. These are directly linked to the volatility that low and moderate-income families usually face.
Most families are just a payment away from being either thrown out on the streets or starvation and in most cases, both. The pain of not having enough to cover the necessities of your family is one of the most stressful situations that a parent can face. And that has become even more true post the pandemic. Financially stable households have the ability to come together to become vibrant, healthy communities. Most cities are planning to go the Stockton way with Chicago and Los Angeles already off the mark.
