Truthout - April 28, 2020
"The existing frictions in our financial infrastructure enable not just the richer companies to move fastest, it also allows profit-making and cronyism to flourish in the corporate bailout programs."
The coronavirus — both the pandemic itself and the economic recession it caused — are hitting marginalized groups the hardest: low-wage workers, women and people of color (especially women of color) and small businesses. But instead of providing equitable relief targeted to the most disadvantaged households and businesses, Congress and the Federal Reserve are reinforcing many of the existing disparities that made our health care system and economy so fragile to begin with. Indeed, richer companies edged out smaller ones for pandemic aid, and wealthier individuals have already received their stimulus payment via direct deposit, while lower-incomehouseholdsstill wait to receive their check in the mail.
Delivery systems for getting aid to individuals are either laggard or nonexistent in the U.S. The best we have is Social Security and the Supplemental Nutrition Assistance Program (SNAP). There are 65 million individuals each receiving monthly Social Security payments. But that system is targeted only to the elderly and people receiving other supplemental social security assistance — one of the few cohorts of people our society deems “worthy.” There are 40 million U.S. residents receiving SNAP, but this program is under constant threat of cuts by the Trump administration, even during the pandemic. Meanwhile, unemployment systems are meant to be able to get money to individuals, but coronavirus has shown how brittle and broken these systems are. Some people are unable to access their state’s unemployment website. Others either cannot get through to their state’s unemployment hotline, or must wait for hours to be connected.
And the corrosion isn’t by accident — states have deliberately underinvested in systems in order to deter individuals and families from receiving aid. It’s also the result of state-sanctioned indirect theft out of state unemployment trust funds, as companies like Uber, Lyft, DoorDash and Grubhub get away without paying into the system by misclassifying their workers as contractors, which gets them out of paying what they owe into state unemployment funds.
By contrast, the government is quite efficient at deploying money quickly to corporations and to wealthier individuals. While there were cutoffs for the stimulus check, topping out at incomes of $198,000 for a couple filing jointly, it is relatively wealthier individuals who will get their money first, as they are most likely to have their direct deposit information on file with the IRS. Meanwhile, millions of lower-income households may have to wait for paper checks in the mail weeks later and long after rent has come due and savings have been depleted (further delayed because Trump wanted his name on the check).
But while this botched and unequal rollout may appear to be the result of clogs in the system, it’s actually a reflection of where our policymakers chose to lay financial pipes in the first place. Inequality is embedded in the very design of our nation’s financial plumbing. And any relief package, if it is to be effective, will need to provide for the financial infrastructure to enable the government to actually get money to those who need it: postal banking, public access to direct accounts with the Federal Reserve and a National Investment Authority.
The USPS Could Democratize Banking
According to the Federal Deposit Insurance Corporation, the agency that backs all bank customers’ deposits, 14.1 million Americans don’t have a bank account, more than half of them because they “do not have enough money to keep in an account.” Nearly half of Black and Latino households have little to no access to checking and savings accounts. Ninety-three percent of the nearly 2,000 banks shut down from 2008-2013 were in zip codes where the household income was below the national median, which was $52,250 in 2013. And high fees are the most-cited reason why low- and moderate-income households don’t access bank accounts.
One way to solve this problem would be with postal banking. In 2012, law professor Mehrsa Baradaran proposed the creation of a banking system run through the U.S. postal system. The United States Postal Service (USPS) is uniquely situated to tackle some of these existing inequities. Due to its legal requirement to serve all Americans, regardless of geography, the USPS has over 31,000 branches serving every community in the country. Fifty-nine percent of post offices are in zip codes with either no bank or only one bank. Many have embraced this idea, including the American Postal Workers Union, who have a campaign for advancing postal banking. The Office of the Inspector General of the USPS wrote a report in 2014 noting that since it already provides money orders, it could explore expanding certain financial services. And Sen. Kirsten Gillibrand has supported this idea with her Postal Banking Act legislation, which she is advocating as a part of her work to save the USPS during the pandemic. ...
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