The Cruel Catch-22 of Cash Aid

The Covid-19 pandemic’s stimulus checks and tax credits helped mainstream the idea that government could help unwealthy people through hard times by simply giving them cash—without conditions like work requirements or stringent income limits. Since then, the push for guaranteed income for the poorest Americans, for whom wage stagnation, inequality, and the disappearance of blue-collar jobs continue as a plodding catastrophe, has bloomed into a nationwide movement. Dozens of direct cash transfer pilots^[2] have sprung up, from rural Oregon to Chicago and South Texas, spearheaded by nonprofits, city governments, and even states.

There’s no shortage of evidence that no-strings-attached cash helps. Research has shown that, with extra money, participants buy necessities^[3], increase savings, or even start businesses^[4]. They have an easier time holding onto housing^[5] and fleeing domestic violence^[6].

Advocates for cash transfers argue they could be more efficient than aid programs that waste money administering rules that supposedly protect the government from being hoodwinked by the “undeserving” poor—like food stamps that can buy cold rotisserie chickens, but not hot ones^[7]. The punitive mindset that makes traditional welfare systems so unwieldy is also the reason guaranteed income hasn’t gained more of a foothold. Because even a slight rise in income can disqualify someone from receiving a wide array of public benefits, poor households considering enrolling in a GI program are often forced to choose between a cushion of cash or other income, health, or housing benefits—they can’t have both. Not only can that leave desperate people locked out of extra help, it has made the purported administrative advantages of the GI model harder to prove.

Among the many experiencing this guaranteed income dilemma is Portia, who was in high school in Flint, Michigan, estranged from her mother and bouncing between homes, when an autoimmune disease struck. The steroids doctors prescribed broke down her spine, leaving her in agony and paralyzed below the waist. She couldn’t manage the service jobs—Kohl’s, Walmart, McDonald’s—she’d come to rely on. It took a lawyer and more than a year before she was approved for the federal low-income disability benefits known as Supplemental Security Income (SSI).

Now a 27-year-old mother of a toddler and an infant, Portia, who asked that her real name not be used out of fear she could lose her $936 monthly check, says SSI barely covers their expenses—subsidized rent, clothes and diapers, medication, and groceries beyond what she buys with her meager SNAP benefits. Some months, it’s not enough, and her fridge runs empty.

Last year, Portia signed up for Rx Kids^[8], a budding guaranteed income program in Flint giving $1,500 to expectant mothers, plus another $500 per month for the year after birth, with no work requirements or rules about other income. The goal of the program’s founders, prominent Flint pediatrician Dr. Mona Hanna and Luke Shaefer, a University of Michigan poverty researcher, was to combat “the lifelong consequences of early adversity.”

But the federal government doesn’t make handing cash to young mothers like Portia easy. Social Security would consider each $500 from Rx Kids income, triggering a nearly equal reduction in her monthly SSI. If Portia managed to save more than $2,000 of the money, she could be cut loose from the disability program altogether. But she couldn’t afford to think that far ahead. “If I wouldn’t have taken the $500, that would have been another two weeks before I was able to put anything in my refrigerator,” she told me. “These are the decisions that people are forced to make.”

Guaranteed income programs do their best to compensate. In Jackson, Mississippi, a program called Magnolia Mother’s Trust^[9] gives Black mothers living in subsidized housing $1,000 per month for up to a year, knowing that, after the state reduces other benefits like food assistance, it nets out at more like $700. “We do $1,000 a month because we wanted to make sure that we were doing good without harm,” says Aisha Nyandoro, the program’s founder.

The problem has been around since at least the early 1970s, when the federal government funded a series of “income maintenance” experiments^[10] in Seattle and Denver. Researchers were puzzled by the fact that, even though the programs offered more money than what was available through welfare, eligible residents passed. Why? Those who signed up not only lost other benefits, but their subsidized rents were raised, too. The program secured waivers from relevant agencies so participants could keep their benefits, but only after enacting a tangle of rules to prevent families from deliberately or accidentally double-dipping, creating a situation in which they could not receive public benefits and the income maintenance payments in the same month. The result was a frustrating and time-­consuming ad hoc bureaucracy.

Some federal agencies and states have taken notice of the problem: The Department of Housing and Urban Development recently stopped counting up to a year of GI payments when calculating rental assistance, and last year started looking into using cash transfers to replace its cumbersome Section 8 housing vouchers. According to Shaefer, the Rx Kids program, recognizing the lessons from Seattle and Denver, worked with Michigan officials to waive income caps for state-run benefits like child care and energy assistance.

Despite these creatively structured pilots, researchers have found it difficult to properly study the potential of cash transfers to deliver public aid at scale. Stacia West, director of the University of Pennsylvania’s Center for Guaranteed Income Research^[11], is coordinating a study of 35 GI pilots with roughly 20,000 participants nationwide. “We have the biggest dataset in the world of guaranteed income recipients,” West told me. But people on SSI, for example, more than half of whom have no other income^[12], rarely opt into these studies for fear of losing their benefits, and West says they’re largely absent from the data. “I can’t research anything about how this may impact folks who are experiencing homelessness, veterans who might be on these benefits due to disability. All of these subpopulations that are impacted by a disability that would prevent them from being able to work are not included.”

West says the signal of GI’s efficiency often gets lost in the noise of the broader social safety net. Guaranteed income pilots are generally temporary, only running a year or two, and once the cash stops, participants often have to recertify their eligibility for benefits. Welfare agencies spend time calculating how much they overpaid guaranteed income recipients, then spend more clawing the money back.

All this red tape around GI efforts makes studying their net cost difficult, but it’s not clear that even reams of definitive data would matter. For all their talk of shrinking unnecessary bureaucracy, neither the Trump administration’s DOGE hatchet squad^[13] nor its allies in Congress seem interested in reducing administrative burdens in the welfare system. This past winter, Republican lawmakers^[14] weighed making it even more difficult to get public benefits^[15] by subjecting more SSI recipients to financial scrutiny and adding restrictions on their behavior—like disqualifying truant kids and people with outstanding felony warrants.

“All of these things would really burden [Social Security Administration] staff to implement, and at a time when they’re having trouble answering the phones,” says Kathleen Romig, who studies Social Security policy at the Center on Budget and Policy Priorities^[16].

“Democrats and Republicans alike scream out for the need to simplify SSI,” says former Maryland Gov. Martin O’Malley, who served as Social Security Administration commissioner in the Biden administration. “Yet those same congresspeople want to make it harder than hard for anybody to stay on SSI.”

The Social Security Administration can, in some cases, act on its own. Last fall, Rx Kids appealed to the agency to update its regulations so that payments like theirs would not put recipients’ SSI benefits at risk—in essence, to ensure someone like Portia could keep both food in her fridge and clothes on her children. O’Malley was all for it.

“We were on our way to putting forward regulations that would make clear the fact that you don’t want [SSI], a program that helps the poorest of the poor, helping them less because they happen to live in a state where legislators, in their compassion, decide that they should receive more,” O’Malley told me. Romig, temporarily working at the agency, was helping iron out details.

Then the election happened, O’Malley soon resigned, and the effort to accommodate guaranteed income evaporated. “We were so close,” Romig says.