The Pandemic Proved That Cash Payments Work

Moreover, the $600 bonus payments are acting as a lifeline for the whole economy, not just individual jobless workers. Without the additional UI payments, millions of Americans would have neither jobs nor cash to spend on groceries, rent, and so on. The economic contraction would become more severe, not less. Indeed, a large body of research shows that expanded UI payments are one of the most effective recession-fighting expenditures available to the government, with every $1 in UI supporting approximately $2 in economic activity.

When the pandemic is brought under control and the economy enters a sustained recovery, lawmakers could consider shaving the payments down bit by bit, rather than having them suddenly disappear. A bipartisan group of policy experts, including Obama-era Treasury Secretary Timothy Geithner and George W. Bush economic adviser Glenn Hubbard, have put forward a proposal that would tie UI payments to the unemployment rate. Many Democrats have repeatedly pushed for such a change.

Derek Thompson: The four rules of pandemic economics

Rather than let the bonus payments end, why not expand them instead, given the success of the CARES Act? Why not use cash payments to cut the poverty rate when financial times are good? Why not support low-wage families with cash regardless of the macroeconomic circumstances? Workers’ lack of leverage against their employers is an endemic problem, so why not give them more bargaining power? Why not end poverty using cash, period?

A small pilot program in Stockton, California, is doing just that. Zohna Everett got laid off from a steady job at the Department of Defense two years ago, and struggled with unemployment. Her finances became more and more tenuous. Then, the organizers of the Stockton Economic Empowerment Demonstration—a guaranteed-income program launched by the mayor’s office and funded by private donations—notified her that she would receive $500 a month, no strings attached, for months on end. “I was Door Dash–ing here and there when I could, but if I couldn’t put gas in the car, I couldn’t do it,” she told me. “My financial problems—it was all just messed up for me. I get shots in my head for migraines, so I didn’t have benefits and was even more messed up. [The money] was just a blessing.”

The cash tided her over until she found contract work and eventually permanent work as a production associate at Tesla. It also helped her when she contracted COVID-19 this spring, she told me. “I couldn’t hardly breathe, I was suffocating even sitting up, like somebody was putting a pillow over my head,” she said, describing diarrhea, extreme exhaustion, delirium, and traumatic distress caused by the illness. But not concerns about having at least some cash in the bank. The $500-a-month check from the Stockton program would come, no matter what. “Everybody’s having hardship,” she said. “I did not have to worry.”

The ability not to worry: That is what the economy denies so many millions of workers, even when economic times are good. Freedom from fear is something that society should provide low-income families, especially now.

Annie Lowrey is a staff writer at The Atlantic, where she covers economic policy.