Cash benefits are key to addressing financial hardship for Michiganders

A version of this column originally appeared in Michigan Advance.

Prices for food, gas, housing, childcare, healthcare and other basic needs are on the rise and Michiganders’ wages aren’t keeping up. Meanwhile, families are facing federal cuts to social safety net programs and the wealth gap in America is the worst it’s ever been. It doesn’t have to be this way.

Last week, the Michigan League for Public Policy hosted a webinar and published a brief on the power of cash benefits in building economic security for Michiganders. The concept offers transformative solutions for the 41% of families in our state that are living in poverty or are considered “ALICE” (Asset Limited, Income Constrained and Employed) households. The ALICE survival threshold represents a minimum household budget a family would need to meet in order to afford basic necessities without making sacrifices.

To put this into perspective, a family of three (for this example, a parent and two school-aged children) needs to earn $27,320 annually to be above the poverty threshold. That same family would need to earn $56,484 to be above the ALICE survival threshold. Families like this live in every county in Michigan and they face impossible choices. They often have to decide between keeping the lights on at home or putting food on the table, or whether to forgo filling a prescription in order to make a necessary car repair. For these families, the power of unrestricted, no-strings-attached direct cash programs is undeniable. 

If financial hardship is simply not having enough to make ends meet, then the only solution for poverty is cash. This has long been recognized by policymakers, philosophers and anyone who has been in the position of just needing a bit more money to get by. Direct cash programs are more effective than modern-day financial assistance programs because they aren’t restrictive or temporary. They also don’t leave people behind, as they more directly tackle hardship without the hurdles that many current programs present. A glaring example of this is the Temporary Assistance for Needy Families (TANF) block grant program, which currently provides cash benefits to a mere 2% of Michiganders living below the federal poverty level by way of the TANF-funded Family Independence Program due to restrictive state and federal policies.

Direct cash programs are not a new concept. They have been discussed by political leaders and academics alike for hundreds of years, dating back to Thomas Paine’s 1797 pamphlet, “Agrarian Justice,” which proposed a national fund to provide cash payments to every person at the age of 21. More recently, we saw it in practice nationally during the COVID-19 pandemic when the federal government took extraordinary measures to mitigate a disastrous economic downturn by providing economic impact payments and enhanced Child Tax Credits to Americans. These measures prevented many families from falling into poverty or sinking deeper into poverty. In fact, here in Michigan, it slashed the Child Supplemental Poverty Rate by an astounding 73.5%. The League continues to advocate for Michigan to join the 15 states that already have a statewide Child Tax Credit as we know it could significantly reduce child poverty for kids growing up in our state today.

We also have recently seen cash benefits play out here in Michigan with the Rx Kids program, which guarantees pregnant individuals a lump sum payment during pregnancy and $500 per month for up to the first year of their child’s life. It has been highly successful in enhancing maternal health and improving child well-being through stronger economic security, and since being piloted in Flint, the program has continued to expand to other areas throughout Michigan. 

The success of this program speaks for itself, with 84% of families saying it helped them make ends meet and feel more financially stable, 97% of participating infants having attended at least one pediatric appointment, and 64% of mothers saying it helped them get the healthcare they needed. Rx Kids has been a slam dunk for Michigan communities and we at the League believe it should be made into a statewide program. 

Beyond Michigan, more than 150 other guaranteed income pilots and other inventive direct cash programs have worked across the U.S. A growing body of evidence shows that these types of initiatives have the ability to dramatically reduce income volatility, have no negative effect on employment and have benefits to physical and mental health. They also have the potential to put more money back into the economy.

Guaranteed income programs are not designed to replace existing social safety net programs, but rather to supplement them so that families that are falling down the income ladder have support. A well-designed guaranteed income program provides unrestricted, regular cash to a broad group within a community with no strings attached, providing flexibility for families, acknowledging everyday unpaid labor and reducing stigma. The programs are often more cost efficient since less red tape and administrative staffing are required. 

We know these programs work. In addition to reforming programs like TANF, implementing a state Child Tax Credit, and expanding support for programs like Rx Kids, Michigan should implement a statewide pilot or full guaranteed income program. It would be especially impactful right now as so much is being stripped away from Michiganders as a result of unconscionable decisions made by some federal leaders.