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Noah Smith

Cash Is Turning Out to Be the Most Effective Welfare

For too long people in need have been stereotyped as lazy and dependent. Cash payments give them the breathing room to chart a better life course.

Cash is king when it comes to government assistance

Cash is king when it comes to government assistance

Photographer: John Moore/Getty Images 

Biden’s $1.9 trillion Covid-19 relief bill has passed the Senate, clearing the way for it to become law. Much of the legislation is dedicated to handing out cash to individual Americans. This is a sign post for a tectonic shift that’s underway in U.S. policy thinking toward unconditional money transfers as the optimal way to help people in need.

When I was a kid in the 1980s and 1990s, everyone was talking about “a hand up, not a handout.” This was the mantra of workfare -- the idea of using government programs to incentivize labor and self-betterment. In 1996, President Bill Clinton signed the Personal Responsibility and Work Opportunity Act, which turned the old Aid to Families with Dependent Children welfare program into a state-administered block grant with work requirements. Meanwhile, the flagship next-generation welfare programs touted by economists and so-called “third way” reformers were the Earned Income Tax Credit and the Child Tax Credit, which only give people money if they also manage to earn some income for themselves.