LT/ Cash >>> IKB

Hamilton ’18 (Leah Hamilton, Assistant Professor of Social Work at Appalachian State University, received a BSW from Metropolitan State University of Denver, an MSW from the University of Denver and a PhD in Public Policy at the University of Arkansas. “Why Welfare Doesn’t Work: And What We Should Do Instead” 06/29/18 ), dani

Democrats and Republicans don’t see eye to eye very often, but they can safely agree on one point: welfare doesn’t work. Liberals are concerned that an ever-shrinking social safety net reaches fewer and fewer families in need. Republicans worry that welfare benefits create dependence. They are both right.

The primary cash assistance program in the United States, Temporary Assistance to Needy Families, served 68% of low-income families in 1996. Today, only 23% of poor families receive assistance. This change has been largely brought about by the imposition of five-year lifetime limits (states are allowed to set lower limits) and stricter eligibility criteria. Welfare caseload reductions have been solidly linked to the rise of deep poverty in America, family strain and increased foster care placements. 1.46 million US households (including 2.8 million children) now live on less than $2 per person, per day (the World Bank’s measurement of extreme poverty).

Meanwhile, welfare eligibility rules designed to encourage independence have achieved the opposite effect. For example, though many states impose strict work requirements, states which loosen these rules actually see recipients move to higher wage, higher benefit work, presumably because they have the breathing room to search for a good job rather than take the first one that comes along. Similarly, in states with strict limitations on recipient assets, poor families are less likely to own a car, making it nearly impossible to maintain employment in areas without public transportation. Even worse, some researchers are discovering a “cliff effect” in which welfare recipients immediately lose all benefits (including child care assistance) after a small increase in income. As a result, many parents turn down promotional opportunities because they would be ultimately worse off financially. Any parent would make the same decision if it meant the ability to feed their children and afford quality childcare.

We must redesign this entire system. In the most prosperous nation in the world, it is ludicrous that children are growing up in the kind of deprivation we normally associate with developing countries. Simultaneously, we must ensure that no one is discouraged from growing their income or assets. One potential solution is a universal basic income, which would provide an annual benefit to every citizen.

The plan represents the only durable safety net – targeted transfers are unsustainable

Kasy 18, PhD, Associate Professor, Department of Economics, Harvard University (Maximilian, “Why a Universal Basic Income Is Better Than Subsidies of Low-Wage Work,” https://maxkasy.github.io/home/files/papers/UBI_EITC_Kasy.pdf)

A Universal Basic Income Would Be Popular and Politically Sustainable

The fourth argument for a UBI is that universal benefits have greater potential for broad and sustained political support. Industrialized countries differ in the width of their social safety nets. Some countries traditionally provide narrowly targeted benefits (income transfers, housing, etc.) for the poor, without providing much in terms of transfers or public services to those slightly further up the income distribution. The consequence of such narrowly targeted programs is that only a small group of people benefits from the transfers and services. In general, those who benefit comprise a group of people with little political leverage, and benefit recipients are often socially stigmatized. This marginalization of beneficiaries increases the political ease with which policymakers may further dismantle the already narrowly targeted benefits. By contrast, countries with broad-based social safety nets and broad public provision of goods tend to see broader support for their social spending programs. Broad-based programs—this would include Medicare and Social Security in the U.S.—garner broad support and are much harder to undo politically. It stands to reason, then, that a universal basic income could be a democratically popular and stable policy that can provide a strong social safety net for the long run.

Cash transfers are comparatively the best way to reduce inequality

Charles Kenny, 9-25-2015, senior fellow at the Center for Global Development, "The Best Way to Reform Welfare: Give Poor People Cash," Atlantic, https://www.theatlantic.com/international/archive/2015/09/welfare-reform-direct-cash-poor/407236/

Before he was a leading contender for the Republican presidential nomination, Ben Carson appeared on The View to talk welfare reform—an issue that continues to be debated in GOP circles on and off the campaign trail. He argued that the social safety net could breed dependency among America’s poor. “You rob someone of their incentive to go out there and improve themselves,” he said, and that’s “not doing them any favors.”

What would be more empowering, Carson suggested, “is to use our intellect and our resources to give those people a way up and out.” That’s surely correct. And the good news is that growing evidence around the world suggests there’s a simple design for a safety-net system that may not create dependency—and may help lift people up and out of poverty: Give poor people cash without conditions attached, and it turns out they use it to buy goods and services that improve their lives and increase their future earnings potential.

It’s a system that policymakers in many countries are loathe to try. They worry, in part, that recipients will waste the money—spending it on, say, flat-screen televisions, cigarettes, and alcohol rather than nutritious food or school supplies. For example, the United States has a very (very) small cash-transfer program called Temporary Assistance for Needy Families, which provides a maximum of $497 per month to a family of four. Even though this cash assistance amounts to only about 8 percent of average household income in the United States, lawmakers frequently feel it necessary to limit how beneficiaries spend the money. Take the Kansas legislature, which in April passed a law specifying that the assistance could not be used to get a tattoo, go to a movie, get your nails done, buy lingerie, or purchase cruise tickets.

It isn’t just the United States. When former Brazilian President Luiz Inacio Lula da Silva introduced a cash-transfer system called Bolsa Familia in 2003—a combination of unconditional cash transfers to Brazil’s poorest families and payments conditional on vaccinating kids and keeping them in school—opposition politicians and newspapers first suggested that the program would be mistargeted and open to fraud. But when evidence suggested the money was well-targeted, mostly reaching poor recipients, opposition moved on to focus on dependency, waste, and disincentives to work. One newspaper editorial bemoaned that “billions are distributed as alms without improving the social status of beneficiaries.”

That concern with handing out money has led to complex systems of in-kind welfare support—or, as Carson put it, “Let me give you housing subsidies, let me give you free health care because you can’t do that.” In the United States, programs range from SNAP (electronic food stamps) and free school meals to Medicaid and rental assistance. In India, the poorest can buy subsidized grains or kerosene. Especially in the developing world, these systems are often inefficient and expensive to run. The Indian government, for instance, has estimated that two-fifths of the kerosene involved in its subsidy scheme goes missing before it is distributed and only half of what is left flows to the poorest families.

But more to the point, the programs are almost certainly less effective at reducing poverty than simply giving poor people cash.

When governments give people in-kind support like food, it frequently costs more to deliver that support than it would to distribute cash—and for the same or even a lesser impact. Jesse Cunha of the Naval Postgraduate School conducted a randomized trial of cash versus in-kind transfers in rural Mexico. In addition to finding that cash recipients didn’t spend more on tobacco or alcohol, Cunha learned that those who received cash experienced the same improvements in nutrition and child-health measures as those who received food. But the food program cost at least 20 percent more to administer, and the cash program led to significantly higher non-food consumption by recipients. In other words: At less cost to the government, cash programs led to the same health outcomes as food-based programs, but also provided additional resources for recipients to spend on schooling, medicine, and transport.

This is not a one-off finding. In many cases, cash programs are simply much more effective than in-kind transfers at turning dollars spent into positive nutritional outcomes. A 2013 survey by Sarah Bailey for the Canadian Foodgrains Bank—involving Zimbabwe, Ecuador, Malawi, and Yemen, among other countries—found that cash transfers usually led to far greater increases in a “food consumption score” of dietary diversity and food frequency than did similarly priced food delivery. In Malawi, the food consumption score increased by 50 percent for cash recipients compared to 20 percent for food recipients. This despite the fact that households in the countries surveyed only report spending between 45 and 90 percent of the cash they receive on food, with the rest going to expenses like debt repayment, household items, and school fees.

Cash also has a larger multiplier effect. Bring food from elsewhere to an area, and the impact of that food stops with those who eat it. Give people cash and they spend it on goods provided by local farmers and traders, who are often poor themselves and benefit as well. A 2010 study in Zimbabwe by Cormac Staunton of Concern Worldwide and Micheal Collins of Trinity College Dublin compared food transfers to cash transfers, and estimated that each dollar provided by cash transfers circulated 2.59 times around the local economy before being spent on goods and services from elsewhere. That compared to the 1.00 multiplier of food that was simply consumed.

Perhaps most important, cash transfers often lead to productive investments. Consider the charity GiveDirectly, which transfers cash from rich people in the West directly to poor people in Africa using mobile-phone payments. A randomized evaluation in 2011, co-designed by a GiveDirectly co-founder, evaluated the organization’s activities in Kenya and focused on one-off, unconditional payments to families that ranged from $404 to $1,520. Four hundred dollars was more than twice the average local monthly household expenditure. In relative terms, it would be the equivalent of handing $12,000 to a household in the United States. As long as 14 months after the transfer, survey evidence suggested that households were still spending more on food, health, and education than non-recipients. One reason why is that they had invested in physical goods, particularly in metal roofs to replace thatched shelter and in livestock to provide milk and meat. That translated into rising incomes from farming and enterprises in the short term, and—thanks to higher spending on nutrition, health care, and education—the hope for greater earnings potential in the long term as well. As in the Mexican cash-transfer program, spending on alcohol and tobacco did not rise after the transfer. Perhaps that’s because recipients felt less need for a pick-me-up: They reported feeling happier after the transfer, and tests of cortisol in saliva revealed lower biomarkers for stress.*

In India, a pilot program between 2011 and 2012 transferred cash—roughly $4 to $6 for adults, and half that amount per child—once a month to every household in select villages in the state of Madhya Pradesh. According to evaluations in 2014 by India’s Self Employed Women’s Association, households in recipient villages proved more likely than those in non-recipient villages to have modern toilets and to use public taps or hand pumps for water rather than wells. They also used cooking fuels that produced less indoor air pollution, which is linked with poor respiratory health. Along with money spent on food, all this helps explain why children in transfer villages were healthier. Program villages saw twice the rate of progress in reducing the number of underweight girls as control villages. The proportion of 14- to 18-year-old girls in school was 65 percent in villages that received transfers, compared to 36 percent in villages not benefiting from the program. As in Kenya, the cash transfers were associated with people working longer hours and making more money thanks to investments in assets including livestock.

The Indian and Kenyan experiments suggest that cash transfers aren’t just a safety net—they increase physical and human capital in poor households. That conclusion is bolstered by work from Columbia University’s Chris Blattman and colleagues in Uganda, where a $150 cash grant to poor women in the northern part of the country doubled their earnings within a year, while one-off $382 transfers to 16- to 35-year-olds were associated with 40-percent higher earnings four years later.

If resources for indirect subsidies from housing through food were redirected toward cash payments to the poorest, more (and more sustainable) poverty reduction could be achieved at less cost.

To be clear, the most generous plausible cash-transfer program would do little to make a poor Kenyan or Indian as rich as the average American. The hundred-fold rise in average incomes that requires would take massive political and institutional reform alongside many billions invested in health, education, and infrastructure. But cash transfers can encourage the world’s poorest to play a larger role in the economic transformation of their countries, helping them evolve from recipients to participants.

Cash is king

Michael Mendelson 12/2020, Maytree Fellow. He was previously Senior Scholar at the Caledon Institute of Social Policy. He has held senior public service positions in Ontario and Manitoba: Deputy Secretary (Deputy Minister) of Cabinet Office in Ontario; Assistant Deputy Minister in Ontario’s Ministries of Finance, Community Services and Health; Secretary to Treasury Board and Deputy Minister of Social Services in Manitoba. He is currently Chair of the Board of the Environics Institute and a trustee of two private investment companies. "In-Kind Versus Cash Benefits in Social Programs: Choices, Structures, and Delivery," ResearchGate, https://www.researchgate.net/publication/350638164_In-Kind_Versus_Cash_Benefits_in_Social_Programs_Choices_Structures_and_Delivery

We first describe arguments that favour the formulation of social programs as cash benefits rather than in-kind benefits. The two strongest and most recurrent points are the following:

• Cash is more economically efficient for the beneficiary than in-kind benefits having the same cost. 6 A beneficiary would always prefer (or at least be indifferent about) a given amount of money vis-à-vis a specified bundle of goods and services that could be purchased for the same amount.7 A bundle chosen by anyone else will be less valued than the bundle the beneficiary would choose—unless the two happened to coincide precisely.

• Cash transfers preserve the autonomy of the beneficiary to spend as they choose and are most like the unbiased choices that ordinary workers face in spending their own earnings. Cash benefits better preserve the beneficiary’s dignity and independence than in-kind benefits of types and levels dictated by legislation, regulation, or administrators.

Even in situations that might otherwise favour the choice of a specific in-kind benefit, there are several conditions that could weaken or eliminate its advantage over a cash benefit:

• The quantity of the target item consumed by the beneficiary is unaffected by in-kind provision because the quantity offered either on a free or subsidized basis is below the amount that they would have purchased without the preferential terms. This situation is called an infra-marginal provision of the in-kind benefit, which the next section explores in detail.

• Even if the target item is offered to beneficiaries in quantities that are not infra-marginal for most, the behavioural response to the preferential terms of the provision is minimal for any of a variety of reasons, including rigidities, indivisibilities, and highly priceinelastic demand for the item.

• The target item is a good or service of a kind that beneficiaries can trade or sell for cash in the market at relatively little cost in expense and time. Thus, a beneficiary who prefers more of other goods or services rather than the target item can readily circumvent the policy intention. In this case, the target item is said to be highly fungible, a situation discussed in the next section.

• Potential for administrative error, administrator discrimination, corruption, or other obstacles to equitable access may be greater for an in-kind benefit than for a counterpart transfer in the form of cash.

• The conditions needed for producing, distributing, regulating, monitoring, and/or enforcing an otherwise desirable in-kind benefit are excessively costly, burdensome, or intrusive to justify its use relative to a cash benefit. Additional considerations might be cited to favour cash benefits, but they could in fact cut either way depending on the specifics of program formulation and delivery:

• Cash benefits may be less costly to deliver than in-kind benefits, since writing a cheque or direct deposit involves minimal resources. However, some in-kind benefits are delivered in a similarly low-cost manner via tax provisions and may be comparable in delivery cost to cash benefits.

• Cash benefits may entail less stigma or visibility to the beneficiary than in-kind benefits, although this clearly depends on the nature of the in-kind target item, its delivery, and where and how the beneficiary has to claim, collect, or consume it. In some cases, differences may be inconsequential.

• Cash benefits may have less adverse impact on the price of the market counterpart to the target item since cash spending will be dispersed over a wider range of goods and services. Thus, cash benefits are less likely to exert an adverse pecuniary effect, particularly within a local market area.