Means-Tested Stimulus

While the impulse is understandable, it defeats the purpose.

POLITICO explores “Who wins in the Senate GOP’s big bailout” and this jumped out at me:

Most American adults would get checks of up to $1,200, plus $500 for every child. But people who made more than $99,000 in 2018 would get zilch, as well as couples who file joint tax returns and make a total of more than $198,000 a year.

Thankfully, I’m in the zilch category here, both individually and jointly.

But here’s the thing: while I understand the impulse to not want to send relief checks to those of us who are well off, using last year‘s income as a basis rather defeats the purpose.

While my wife and I are federal employees and—again, thankfully—continuing to get paid, a lot of people who had good jobs in 2019 are currently making nothing because of the Covid-19 closures.

Wouldn’t it have made more sense to simply send everyone the check and then clawed it back next April with 2020 tax filings?

FILED UNDER: COVID-19, Economics and Business, Government, Health
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Mikey says:

    Wouldn’t it have made more sense to simply send everyone the check and then clawed it back next April with 2020 tax filings?

    That’s the most sensible way to do it, yes, but America and sensible parted ways long ago. And in this instance, a good chunk of the blame lies with the Democrats, who put means-testing on the table to start with.

    Perhaps most of the money will still make it to those who need it most, since the people with the lowest job security tend also to sit at the lowest rungs of the economic ladder and therefore their 2018 income won’t be anywhere near the phase-out point.

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  2. Sleeping Dog says:

    You’re right, but the thinking is that means testing will blunt criticism that money is going to those who don’t need it and more importantly the comfortable will be assuaged through the tax code.

    That the tax code changes will likely only benefit the 10% and that you’ll receive nothing is your just deserves for the choice you made as a young man and continue to as well, to serve your country, rather than run off to Wall Street to make millions. Let no good deed go unpunished.

    My wife and I were just commenting, that while we’re significantly poorer than we were a few weeks ago, we’re not relying on jobs to keep the roof over our heads. We’ll get the checks, since our income will qualify, but we don’t need them.

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  3. gVOR08 says:

    What should have caught your eye, and I’m sure would have had POLITICO mentioned it, is

    The poorest families, those with no federal income tax liability, would see smaller benefits, though the minimum would be set at $600.

    Whether this should be means tested depends, is this meant as hardship relief or stimulus? If stimulus, no, it should not be means tested. But we could have another discussion about whether it’s effective stimulus. If it’s hardship relief, it’s a moot question, because it isn’t hardship relief.

    If it’s relief the analog isn’t Social Security, which is not, and should not, be means tested. The analog is unemployment insurance which we for some reason target on the unemployed. The NYT Editorial Board made the usual argument yesterday that the government can’t know who’ll be unemployed. That is true. But the state unemployment offices will find out pretty quickly.

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  4. mattbernius says:

    But here’s the thing: while I understand the impulse to not want to send relief checks to those of us who are well off, using last year‘s income as a basis rather defeats the purpose.

    Jeebus 100% this.

    My new org, Code For America, created the platform that serves 2/3 of the people applying for SNAP benefits in California. In just a few days, the number of applications have gone up by 7X percent — see this chart: https://twitter.com/trapeeze22/status/1240731890941702144.

    Even though I’m based in NY and working on Criminal Justice stuff, I’m begin trained to staff the chat support helpline because we’re overwhelmed. And as a researcher, I’m also helping code (basically add themes like “head of house hold” or “mandate effected industry”) to the comments field from the applications. The majority of cases I tagged yesterday were people whose businesses have been shutdown as part of the government mandates to flatten the curve.

    That’s happening in EVERY state.

    Basing this on last year’s income is absolutely asinine and will hurt the people this is intended to help most.

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  5. CSK says:

    Federal tax filing day has been moved to July 15.

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  6. Jen says:

    Basing this on last year’s income is absolutely asinine and will hurt the people this is intended to help most.

    Agreed, 100%. I have no idea what the numbers look like, but I’d have to guess that there are likely a LOT of people who have seen income drop to near zero who probably had very decent years recently. Since most people do NOT have sufficient emergency savings, my guess would be that a lot of people are going to be in real trouble, very quickly.

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  7. Mu Yixiao says:

    Send the checks to everyone, in the hope that more of it will go to those who need it.

    On Wednesday I contacted the local bank and started the process where those who don’t need the stimulus checks and drop them at the bank, and 100% of that money goes to the local food pantry. The pantry already has the infrastructure, knowledge, and staff to handle distributing things to those in need (and those who may become in need), and they’re a trusted organization in the community. Even if only a couple checks get donated that’ll still help people get through things for a longer time.

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  8. gromitt gunn says:

    @gVOR08: The cliff on the bottom is just plain cruel. People with an income below around $6500 (that may be an old number) do not have to file a tax return unless they expect to receive a refund. So if you can only get a check if you filed a tax return in 2018, that is going to cut out a lot of the people who are likely to need assistance the most.

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  9. OzarkHillbilly says:

    Wouldn’t it have made more sense to simply send everyone the check and then clawed it back next April with 2020 tax filings?

    Yes. Any more silly questions? 🙂

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  10. Kathy says:

    Wait. Isn’t it better to spend millions on means testing, which will leave some needy people out, than to give hundreds of thousands to people who don’t need it? Is that not the right cruel thing to do?

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  11. gVOR08 says:

    @Kathy: No, it’s better to send enough money to help to people who need it than to shotgun a pittance out to everyone. I’m sorry, but I’m tired of this attitude that we just can’t do anything any better. It’s learned helplessness from fifty years of GOP propaganda.

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  12. DrDaveT says:

    @gVOR08:

    No, it’s better to send enough money to help to people who need it than to shotgun a pittance out to everyone.

    How about we send enough money to get by on to everyone, then collect it back from those who didn’t need it after all next year? That way we don’t waste any of it (or precious time) on figuring out who needs it now. It’s hard enough just generating a list of payees and mailing addresses for checks — as noted above, not everyone who’s needy filed a tax return last year, or still lives in the same place as last year, or is otherwise known and reachable. The census would be trivial otherwise.

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  13. Lynn says:

    @Mu Yixiao: “On Wednesday I contacted the local bank and started the process where those who don’t need the stimulus checks and drop them at the bank, and 100% of that money goes to the local food pantry.”

    Good idea, but how did you do that?

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  14. Barry says:

    @gVOR08: “No, it’s better to send enough money to help to people who need it than to shotgun a pittance out to everyone. ”

    Means testing takes time, costs money, and still many of those who most need it will not get it, because they are less able to navigate any system.

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  15. gVOR08 says:

    @DrDaveT: That would be a big improvement. But only if we increase the amount to reflect what we expect to get back. The point is not some moral objection to sending money to people who don’t need it, the point is to free up more money to send to those who do.

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  16. gVOR08 says:

    This from NYT makes sense.

    But now the administration and Congress must act — and as important, get the right order of action. First and most important, this means rapid federal funding and other executive action to expand and strengthen the health care system. Then we can see what has happened to the broader economy before deciding what to do. Don’t just guess, fearmonger or unethically throw money at the problem. This is what leadership is about — focus, coolheadedness and decisions based on evidence.

    These are the obvious needs for federal funding: a billion test kits distributed everywhere to figure out what is the actual spread and possible reoccurrence of the new virus; an elevation of the United States ratio of hospital beds per person from roughly number 30 in the world, equal with Turkey, to tie with Japan for No. 1; urgent development and distribution of treatment choices for the afflicted, especially including at least a 10-times increase in the number of ventilators, as well as an effective means to send them where needed; doubling or tripling the number of health care workers, people who risk their lives to save ours.

    Most important, do not send cash to every adult. The 100,000 people Amazon is now hiring do not need this money; all those who can work via Zoom do not need cash. The country can do without the bread-and-circus approach to this crisis.

    Instead let’s have Congress send a $10,000 bonus to everyone in health care and give hospital administrators $20,000 for each new person they recruit to their valiant fighters. These folks are putting their lives on the line and they don’t deserve to watch bystanders get free money.
    In perhaps a couple of weeks we can figure out if the data supports a macroeconomic stimulus program and what its size and composition should be.

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  17. Mu Yixiao says:

    @Lynn:

    I just called the bank and asked for whomever handles their charitable activities. I got passed along a couple times, and ended up speaking with the bank president (it’s a small-town bank). I told him what I wanted to do, and he said he’d get it started.

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  18. DrDaveT says:

    @gVOR08:

    NYT editorial: Instead let’s have Congress send a $10,000 bonus to everyone in health care and give hospital administrators $20,000 for each new person they recruit to their valiant fighters. These folks are putting their lives on the line and they don’t deserve to watch bystanders get free money.
    In perhaps a couple of weeks we can figure out if the data supports a macroeconomic stimulus program and what its size and composition should be.

    This completely misses the fact that the purpose of the money is to pay for food and rent of people who are no longer earning because of the lockdowns. It’s not a stimulus. It also breezes past the (really much larger than anyone seems to realize) difficulty of figuring out who the people are that you want to send a check to. The government does not have a list of name and current address of “everyone in health care”.

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  19. Barry says:

    @gVOR08: “Instead let’s have Congress send a $10,000 bonus to everyone in health care and give hospital administrators $20,000 for each new person they recruit to their valiant fighters. These folks are putting their lives on the line and they don’t deserve to watch bystanders get free money.”

    As has been pointed out, this is ridiculous.

    “In perhaps a couple of weeks we can figure out if the data supports a macroeconomic stimulus program and what its size and composition should be”

    It does. That’s been clear to anybody who has watched states get locked down, states close most businesses, and a stock market crash not seen since 1929.

    BTW, last I heard, the incomplete total of new jobless claims is record-setting, and that’s with a partial week’s data. Goldman Sachs is forecasting that this week will see ~8x the record count of new claims. And that’s with the systems overloaded, so that a lot of people just can’t file.

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  20. An Interested Party says:

    It’s nice to see that Republicans would use even this to try to penalize poor people…the GOP, the party of assholes…

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  21. DrDaveT says:

    It was pointed out to me today that the most recent information the IRS has about most people is from the 2018 tax year return. How many people’s marital status has changed since then? Address? Number of children?

    Morons. Not one of them understands anything about how the government actually works.

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  22. de stijl says:

    I’m amazed at the chutzpah.

    After slagging Keynesianism under Obama, it’s pretty galling.

    Apparently, once the bullets start flying, there are no small government free-marketeers in foxholes.

    I am shocked R principles are so malleable and mercenary. Next, you’ll tell me state’s rights is a sham too.

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  23. An Interested Party says:

    I am shocked R principles are so malleable and mercenary.

    Since when did Republicans ever have principles?

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  24. gVOR08 says:

    A little back of the envelope. The US labor force is something like 160 million. There are about 200 million taxpayers, the difference being mostly 50 million or so retirees. Mnuchin is talking 20% unemployment. He pulled that out of his…the air, but until we get a better estimate, let’s run with 20%. That would be 32 million unemployed. I just can’t see spending 200 billion to get a woefully inadequate $1,000 each to 32 million people. 84% overhead strikes me as prohibitive.

    Mailing checks out could be made better. A tax clawback scheme could work, but it does very little for the people we’re trying to help unless we bump the checks up. If we say $5,000 per taxpayer we spend a trillion now and pull back 800 billion next year. I don’t think that’s gonna go over big.

    Chuck Schumer favors expanding unemployment insurance.

    There are many, many who have lost their jobs and one check when they may be out of their jobs for three, four, five months isn’t going to be enough. Unemployment insurance gives money the whole period of time the crisis exists at your present salary level and covers just about everyone,

    And Lindsey Graham is going against his party to agree.

    I’d rather take that $250 billion and put it in a system that will give people sustainable income, … Direct payments make sense when the economy is beginning to restart, makes no sense now because it’s just money.

    As much as I still think shotgunning 1K$ checks out to everybody is a poor way to provide relief, it’s starting to smell inevitable. We have to do something, and this is something.

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  25. gVOR08 says:

    @An Interested Party:

    Since when did Republicans ever have principles?

    Republicans have lots of principles.

    Those are my principles, and if you don’t like them… well, I have others.- Groucho Marx

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  26. Michael Reynolds says:

    Can we stop calling this a stimulus? There’s nothing to stimulate. This is a bail-out for the rich and welfare for the working class. This is a social safety net built on the fly. This is not 1929, an idiot may be president, but he’s not Herbert Hoover, because people in 2020 expect the federal government to be competent and will hold it responsible.

    Meanwhile, I guarantee you that it isn’t just Burr – Trump and his brats will find a way to profiteer. Hopefully it will be offset by Mar-a-Lago and Trump Hotel.

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  27. gVOR08 says:

    I’ll link to Kevin Drum. . Partly because he’s not much impressed with mailing out checks, but mostly because I got a chuckle out of his choice of illustration. Great minds or something.

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  28. Mister Bluster says:

    @gVOR08:..or something.

    I’ll concede that I am the last one to discover Drum’s Friday Kitten Bloging. Now I’ve got to look for more, compulsive cat lover that I am.
    But Kevin…Stripey, Blackie, Gray?
    While I admit that I thought Momcat was a clever handle when I named her in 1977 (she lived 17 years before I had to put her down) cats should be tagged with some verve. Like my late lamented pets the calico Cauliflower, her brother Bozo and the memorable tomcat Ratso Rizzo after Dustin Hoffman’s character in Midnight Cowboy.
    Years ago when I was in High School my hard of hearing Grandfather was visiting and asked my sister what our black cats name was.
    “Popcorn Gramps.” she yelled “The cat’s name is Popcorn!”
    “Hello Boxcar.” Gramps said. “Boxcar? That’s a silly name for a cat!”
    Of course from that day on we had a black cat called Boxcar.

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  29. de stijl says:

    @Mister Bluster:

    Boxcar is a great name.

    I once won naming rights over Greg’s new fish friend by winning a backgammon tournament. We chose a stupid round robin schema that took forever.

    I’m not really all that good, but I have a consistent advance the troops play style, and I got obscenely lucky on key dice rolls. We didn’t finish until dawn. Any Persian or afghani would have kicked my ass.

    I got really lucky on key dice rolls.

    I chose to name him Steve. Then there was a debate about gender. None of us knew fish genatalia.

    Stevette. If male, little Steve. If female, also works.

    Stevette and all of her or his fishy friends died in the course of 2 days in January and we didn’t know why. Fed properly, right temp, algae scraped. Fish are finicky.

    Bummer, but we had a killer funeral wake, though. That was stupid fun.

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