Where the CARES Act went wrong

Where the CARES Act went wrong
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In 2008, President Bush signed the Economic Stimulus Act, a bill structured to provide cash aid through tax rebates and alleviate some of the impacts of the Great Recession. The bill failed to reach vulnerable people and left millions of people waiting months for relief that turned out to be insufficient. With the benefit of hindsight, one would have hoped that the creators of the CARES Act would not make the same mistakes: that it would include provisions for generous aid, and be quickly distributed with a focus on ease of access. Unfortunately, as millions of Americans will soon learn, the CARES Act falls well short of the ideal. 

Because direct cash assistance will be primarily disbursed through the IRS and with a means-test, or income-based eligibility, an estimated 12 million Americans who do not typically file federal taxes will be required to do so or submit a non-filer form

Though the federal government already has a system to administer checks to those receiving SNAP/EBT (food-stamp or other benefit cards), the bill requires that even those individuals file a return before the Treasury can offer them further aid. With Volunteer Income Tax Assistance sites closed and scrambling to provide online assistance, some will find it difficult to file at all. Those that do not have direct deposit information on file with the IRS (an estimated 92 million people) may have to wait months for their aid if they cannot provide it.


Some of the most vulnerable are ineligible to receive direct cash assistance at all. Most notably, this includes the 16.7 million U.S. residents — including legal residents — who do not have a social security number. It also excludes America’s estimated half-million homeless residents. 

Despite the media focus on checks to income-eligible individuals, this is a relatively minor part of the aid package. Far more substantial aid will come through temporary provisions in the unemployment insurance system that increase the benefit by $600 per week and expand eligibility. 

However, under the most recent guidance from the Department of Labor, self-employed and gig economy workers may still be excluded from receiving unemployment insurance. And the UI system itself is buckling under increased demand, leaving many unable to file claims. 

Worst of all, by conditioning this aid on employment status the bill perversely ensures that “essential workers,” those who continue to risk their health daily to operate public transport, staff our hospitals, stock our shelves, and deliver packages to keep the economy running, will receive little aid. In New York City, estimates find that some 24 percent of those frontline workers are below the poverty line, 53 percent are foreign-born, and 19 percent are non-citizens. Many of them will receive no aid at all.

The CARES Act’s response to COVID-19 is typical of the same welfare state philosophy that has generated a deficient U.S. social safety net characterized by the administrative burden, infrequent aid, and increasing working-class precarity. The inadequacies of our existing safety net stem from our patchwork of means-tested, targeted, and work-conditioned programs, which let millions fall through the cracks. Creating an emergency cash assistance program that utilized the same systems and philosophy was bound to generate the same problems.


These exclusions and shortcomings demonstrate why substantial, continuous cash assistance is a necessary component of an effective safety net.

A fourth stimulus bill should abandon the unnecessary complications and gaps of the CARES Act and provide cash assistance to all. Research on cash transfers suggests that its positive effects are greatest when the benefit is universal and received over an extended period. The existing bill’s burdensome targeting saves little money and perversely excludes intended recipients. Instead, legislators should distribute aid to all in the form of pre-loaded cards or electronic transfers, as they have in other countries. Precedent shows such an option is neither impractical or impossible.

Finally, legislators must recognize that the COVID-19 pandemic will not be the last shock to our economy. They should build a permanent payment infrastructure to quickly disburse aid and augment it as necessary, enabling a renewable, automatic stabilizer for our economy. 

Public postal banking could provide a universally accessible site for disbursing federal assistance with a historical precedent; from 1910 to 1967, the Post Office offered savings accounts to all. When the current crisis has passed, we should remember this period and work to build a safety net that will not fail during a crisis — one that includes universal, unconditional cash assistance as a central feature.

Stephen Nuñez has over a decade of experience in research and program evaluation related to welfare policies and economic inequality. He holds a Ph.D. in sociology from Stanford University, and in his current role, leads the Jain Family Institute (JFI)’s research on guaranteed income in the U.S. and internationally. Halah Ahmad holds a Masters in Public Policy from the University of Cambridge, where she was a Harvard Scholar. At the JFI, she leads policy communications and public relations. JFI is a nonpartisan applied research organization based in New York City.