Will coronavirus stimulus checks help? This California city has some experience
Washington, D.C. is about to send cash payments to nearly everyone. But in Stockton, 125 people have been getting similar payments for a year.
And while Stockton recipients and program officials welcome the new federal payment, they don’t see it doing the job they’re aiming to do.
“I don’t think it will work,” said Stacia Martin-West, an assistant professor at the College of Social Work at the University of Tennessee who is studying the Stockton program.
The problem with the one-time-only payment is one that experts around the country have lamented for years: It helps people pay bills for a brief period of time, but does not ease their longer-term economic problems.
“$1,200 is great. But it’s only for a month,” said Sukhi Samra, director of Stockton’s Economic Empowerment Demonstration program.
Independent analysts had similar views. “I wouldn’t say it doesn’t do anything, but the idea of having something to rely on does make a difference,” said Andrew Stettner, senior fellow at the Century Foundation, a research group.
Thanks to the $2.2 trillion economic aid program President Donald Trump signed into law Friday, most adults will get payments of $1,200 each, plus $500 per child. The payments will come either by mail or direct deposit, probably starting in mid-April.
Stockton has had a guaranteed income program since February 2019, the first to be led by a city. It provides $500 a month to people like retiree Virginia Medina.
The money takes the edge off what could be a tough financial situation. It helps Medina, 61, pay off credit card debt. It makes it easier to buy gasoline to see her sister nine hours away in Oregon.
Her house, where she and her husband have lived for five years, was built in 1948 and needs work. It also needs curtains and blinds.
The Stockton payment stops in July. Medina is confident her family will get by now that those payments helped ease her financial situation. She gets a state pension, since she worked for the prison system, and her husband gets Social Security. But boy, those $500 payments helped.
“By the end of the year I want to have all my debts paid,” she said.
A key lesson from the program, said Samra, is that “it points to how, now more than ever, we need a recurring cash payment for people. We knew before the pandemic this was needed.”
Researchers have found that the regular payments have an impact that may not be immediately visible. People are healthier because stress levels are down, Stettner said, and there’s some evidence children do better on tests.
There are efforts in Congress to do just that, and lawmakers are considering another stimulus plan, possibly as soon as late April. Nineteen Democratic senators, including California’s Kamala Harris, are backing a plan to provide two immediate payments and then quarterly payments to lower and middle income people as long as the economy is in a tailspin. Those receiving Social Security, disability or veterans benefits could also qualify.
In the House, Rep. Pramila Jayapal, D-Washington, co-chair of the Congressional Progressive Caucus, is spearheading an effort to provide immediate, monthly payments of up to $2,000 per income-eligible adult and another $1,000 for families with children for up to six months. If needed, the payments could be extended another six months.
Samra wants the Stockton experiment to help build momentum for a national program. “The hope is that our data and stories are so compelling that we can agree on a state and national level that we need an income floor,” she said.
The Stockton recipients are a diverse group. About 43% of participants are working full- or part-time.. Additionally, 20% have a disability that interferes with their ability to work, 10% are looking for work, 10% work as home-based caregivers, 8% have retired and 5% are students.
Their median monthly income was about $1,800, about half of city residents’ median of about $3,500. Funding for the program all comes from private sources.
In data compiled through November, researchers found recipients had spent 36% of the $500 on food, 22% on merchandise, 11% on utilities, 10% on auto care, 8% on services and 3% each on medical bills, transportation, recreation and insurance.
The experience with one-time payments, though, has been different. After the federal government sent similar cash payments to people in 2008, roughly 80% used the money for savings or to pay bills, according to a study by the nonpartisan National Bureau of Economic Research.
“The rebates in 2008 provided low ‘bang for the buck’ as economic stimulus. Putting cash into the hands of the consumers who use it to save or pay off debt boosts their well-being, but it does not necessarily make them spend,” the researchers found.
Analysts do see value to the one-time payments. “People will be able to make their payments to banks and utilities and they won’t get in trouble,” said Chad Stone, chief economist at Washington’s Center on Budget and Policy Priorities, a progressive research group.
But what happens after the payment is exhausted? And what happens to the 125 people getting $500 a month in Stockton after July?
Martin-West and Amy Castro Baker, an assistant professor of social policy and practice at the University of Pennsylvania can’t be sure. The $500 was coming in when jobs were available and the economy was humming.
The sudden economic downturn due to the coronavirus, “changes the research question,” said Castro Baker, who is helping lead the study of the program. “It adds a new layer.”
This story was originally published April 1, 2020 at 5:00 AM.
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