The next coronavirus relief bill needs to solve America’s unbanked and unwired crises
Just two weeks after Congress passed the $2.2 trillion CARES Act to provide relief to businesses and families hammered by the coronavirus lockdown, discussions are turning to another legislative package, which simply must address two urgent problems: Too many Americans don’t have access to banks, and they don’t have high-speed broadband. If they don’t get both soon, they will be in desperate straits.
We already know that low-income people and people of color are being infected and dying at higher rates and are facing the worst economic fallout. Rural areas – many of which have similar health and economic vulnerabilities – could face the same problems when coronavirus hits their communities. Getting immediate access to relief funds and to high-speed internet is, literally, a matter of life and death for millions of Americans.
Consider that, this week, Americans will start receiving some of the $290 billion in direct payments authorized under CARES Act. The average household will get $1,523, and 60 million payments will be made immediately by Treasury through direct deposit to people with bank account information on file with the IRS.
But another 90 million to 110 million Americans could wait as long as 20 weeks for mailed checks because the IRS is only capable of churning out 5 million per week. That relief will come far too late for millions of households, 40 percent of which said they could not afford an unexpected $400 expense, according to a widely publicized 2018 study by the Federal Reserve.
Many of the people scheduled to get mailed checks do have bank accounts and can get their relief funds faster if they provide their account information online to the IRS. But more than eight million households – about 6.5 percent of all American households – have no bank account at all, and they’re the ones who most need these relief funds.
We’ve long known that as we move to a cashless society, people without bank accounts will be left further and further behind; they can’t save, build credit or get loans. Now, they could be stuck waiting weeks or months for relief checks that they desperately need and will cost them money to cash.
The next coronavirus relief package will almost certainly feature more direct payments to families, but, this time, it should include provisions to immediately bring as many households as possible into the banking system. For example, Congress could direct banks to cash stimulus checks or receive wire transfers without any fees, even for people who don’t have accounts with them. Congress also could change the Community Reinvestment Act to include the issuance of bank accounts with no account minimums and no (or minimal) fees or revisit the idea of allowing Americans to open up checking or savings accounts at post offices. These proposals can get future coronavirus relief payments to families more quickly and, when this crisis is over, give millions the foothold in the financial system that they need to start building savings and wealth for the future. There is a lot of historic mistrust among immigrants, low-income people and communities of color toward the banking system, and just giving them access to accounts won’t magically waive that mistrust away. But it’s a start.
Along with no access to banking, a newly urgent problem is America’s digital divide: 23 percent of Americans in urban areas and 28 percent in rural areas don’t have access to or can’t afford high-speed internet, according to a recent study from IHS Markit.
This isn’t tenable at a moment when tens of millions of kids are out of school (New York City just announced they’ll be out until at least September) and online learning almost certainly will be more heavily integrated when they come back. Meanwhile, access to telemedicine for patients nationwide is more essential than it has ever been, with so many ERs and hospitals overwhelmed.
Major U.S. telecom providers did the right thing when they announced on March 14 that they won’t cut off internet service for the next 60 days to anyone who is behind on or can’t pay their bills. But that’s merely a bandage. The CARES Act featured only minimal funds to address the digital divide, and the next bill needs to significantly expand funding for federal programs like the FCC’s Lifeline, which subsidizes phone and internet services for low-income Americans.
Getting these provisions into the next coronavirus relief bill will not be easy. Senate Majority Leader Mitch McConnell (R-Ky.) already is trying to limit its scope, saying: “I’m not going to allow this to be an opportunity for the Democrats to achieve unrelated policy items they wouldn’t otherwise be able to pass.”
But Sen. McConnell isn’t Moses on Mount Sinai, and his is not the last word on what policies are or are not “related” to helping people through this crisis. Let’s be clear: Access to banking and to broadband is related, it’s urgent and it is needed to ensure there is equity in the trillions Washington is spending.
Fred P. Hochberg, former president and COO of Lillian Vernon Corp., was chairman and president of the U.S. Export-Import Bank, 2009-2017, and deputy and then acting administrator of the Small Business Administration during the Clinton administration. He has co-chaired the board of the Human Rights Campaign and served on the board of the Woodrow Wilson International Center for Scholars. He is the author of “Trade is Not a Four-Letter Word: How Six Everyday Products Make the Case for Trade” (2020).