Lyman Stone on Cash Transfer vs. Means-testing

Solidarity with the Poor Aug 20, 2021

Excerpted from an episode of the Solidarity Policy Podcast->

Tim Wainwright: Yeah. Okay. We're all parents here; when I talk to other sorts of normal Joe parents like normal non-wonky types, it's just "Okay, that somehow sounds good, but there's a lot of acronyms, and I am exhausted because I've been changing diapers and I just got back from my job. I guess this sounds good, but will I ever see it? Maybe."

So what's your perspective like? Why are we addicted to this weird means-testing leveling? Like why not just cut a check and do direct and simplify it?

Lyman Stone: Childcare is like the perfect example of this, right?

Because you've got the childcare development fund, which is a fund that pays for block grants, date use, however they want to subsidize childcare for low-income people. And then you also have TANF, which look, even as an expert, I don't fully understand if the TANF childcare funds are the same as the CCDF childcare [00:06:00] funds.

And you have the childcare dependent child dependent care tax credit, which is this other thing? And then Biden is also talking to them. It's a little unclear if they're just talking about increasing CCDF and CTC or if they're also talking about an additional program to have childcare expanded. There's like a layer that is so complicated.

So why not just give a consolidated program? And the answer is there's a couple of answers. One is the way policy happens. As policy happens, when it comes time for the compromise, often not everyone can agree on a "just one big thing" approach. So you end up with a compromise where we can't do just one big thing.

So we do four little things that we were able to get people to agree on is just the reality. And yeah, it's frustrating to non-experts, but get over it. We live in a world of compromise. There's going to be complexity. And that's I think the more legitimate one.

But then the other reason or a second reason is [00:07:00] about how we measure need.

We say things like, if you give a CA, if you took all of our child tax credits and small solutions out, and all the exact same beneficiaries got the exact same amount of spending, but they got it in cash instead of daycare or whatever. Some of those families would use it for some other things, right?

They'd use it to pay off housing debt or credit card debt or buy a car or whatever. And they, in a survey, would still report difficulty paying for childcare, right? Because of the number of challenges a family faces, the number of demands on that budget is practically unlimited.

There's always one more thing that the money can and should go towards. If families have a different preference set than policymakers, which is very likely to occur (it's a certainty to occur in at least some cases), then some of those families are still going to report stuff that, from the policymakers' perspective, looks like unmet need.

So if they [00:08:00] get that money to the policymakers hoping to go to daycare and they spend it on paying off the car loan, which may be very important because they need to use the car to get their kid to school or to get themselves to work, from the policymakers' perspective, this wasn't a success, right?

Because we still have an unmet need for daycare. Because need measurement is highly targeted instead of looking at something very general, like subjective wellbeing or life satisfaction or some more holistic measure, you're in this treadmill where anytime you get people cash it is less effective at achieving any specific goal because some of the people who get the cash will use it for something they see as a higher priority.

So this is often seen as a problem. I see this as a pro in favor of cash programs; the policymaker might be a bad judge of what the family needs, and the family might be a better judge.

But then this comes to the [00:09:00] third reason why we don't do this. And this is the belief that some people, some parents are very bad judges of what their family needs. And you get this paternalism in various forms. We don't want a parent to use the money we give them to buy drugs. I think pretty much everybody agrees that Child allowances paying for crack would not be a good result. But, if you're just giving cash, you can't really control that. And there is a strong desire not to subsidize adverse outcomes.

So this is about loss avoidance, right? That even if 99% of the money may go to things that we all agree are really good, the 1% of the money that goes to stuff we all agree is really bad looms larger in our minds, in the public consciousness, and frankly, in the way we do audits, right? When you audit a government program, you don't [00:10:00] report the 99 times that it worked exactly as planned.


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