DM brought this up after class. I hadn't heard about it, but I looked into it: people in prison are eligible for stimulus checks related to the bill they're working on right now. Why is that so?
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Digression 1: a year ago, no one knew how to send checks to everyone. This is a brand new thing, first passed by Congress as part of CARES act last March, and put into practice by the Treasury Department. Former Secretary Mnuchin deserves some credit here: he's the one who would've been fired if it hadn't worked out.
In short, Congress said to send everyone a check (within certain limits), and it was the job of Treasury to figure out how to do that. They ended up with a 2-pronged method: send debit cards to everyone they could find (mostly those who'd filed taxes electronically, and then let everyone else get sent a paper check.
This was repeated in the second stimulus package last December.
There was almost no experience with how to do this.
- In 2001, the Bush administration sent people checks, but these were refunds of previously paid taxes (in 2000), to people expected to get a tax cut when they next filed (their 2001 taxes in the spring of 2002). The government was running a surplus, and this is how they returned some of that to taxpayers. But if you hadn't payed first, and you weren't expecting a cut later, you got nothing.
- In 2008, in the now forgotten Bush stimulus package, they did something similar. This time they sent a check to everyone who'd filed taxes.
- In 2009, the Obama stimulus package did something different, that turns out to be unhelpful when 2020 came around. Here, they reduced the amount withheld from everyone's paycheck. So you did have more money, and less paperwork, but also a less visible benefit.
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Digression 2: I think it's fairly obvious that none of the 2 and now seemingly 3 round of checks would have happened if the idea of universal basic income was not in open discussion. To me, this is the best example of an Overton Window in many years. UBI was an idea with zero traction 5 years ago.
In face, the U.S. is now the largest experimenter with what amounts to UBI. So that government we all love to hate (because they never do anything), and that Trump administration that drove half the country crazy, and another quarter into embarrassed acceptance ... did something huge and innovative ... on super short notice ... with bipartisan support.
(It's OK not to like your government, but I do think you should absolutely always ask yourself which one you'd rather have, if only because the set is so small).
Here's a thing though: most economists (myself included) who see some benefit in UBI are always thinking that this would be best if it was a substitute for our current system of overlapping welfare programs. In short, help people who need help, not the bureaucrats seeking permanent job tenure managing welfare programs. Unfortunately, the stimulus checks of the past year have blown right by that notion. That's bad.
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Digression 3: as an economist or economics student, you should have a mental alarm that goes absolutely bonker every time people in Congress start to talk about means testing. Pelosi did it according to the second linked article, and it's built into the bill that's about to pass (my stimulus check will be a tad smaller than yours — if you're getting one — because my household is "rich").
This has been covered in a lot of places in SUU Macroblog over the last 10 years. To find these, you can use this search I saved, or this one. They keywords were "bracket" and "casey mulligan".
If you don't know, means testing means that we might have some program that's going to benefit some group, often the poor. But it has a cutoff where benefits either start to decline or just end.
In practice, these work like tax brackets. Or for aid programs, maybe they could be called subsidy brackets. Either way, they are what economists call "distorting". That is, they make people make decisions differently around the borderlines of those brackets. This is bad: people end up gaming the brackets, instead of going out and working more, or taking more leisure time with their families (which is also valuable).
Politicians use means testing as a way to reduce the announced costs of a program. So basically, they're goofing macroeconomically to satisfy bean counters. It's a bad thing.
I bring this up because one of the nice things about the stimulus checks sent out over the last year is that, to the extent they went to more people in identical amounts, the less distortion induced.
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Digression 4: do not forget that a big part of the discussion a year ago was how do we keep people off the streets when they don't have a job or an income. The stimulus checks were intended to help people make the decision to stay home and socially distance.
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OK, so back to the original question. Are prisoners eligible for checks?
The answer is yes.
There's a human tendency to attribute bad outcomes to decision-makers who are bad people. This sentiment is common, but I urge you to always, always, give more credit to stupidity and carelessness. And in this case, it appears that prisoners are eligible for checks because in the 3 COVID-19 stimulus bills, no member of Congress has seen fit to add language to exclude prisoners from applying, or give a bureaucrat somewhere the authority to not send the check out. So this really isn't a very legitimate beef to have with the new plan. What's worse, the IRS did try to stop doing this last year, and they were advised that they had no legal basis to do so. So they dropped it and sent the checks.
BUT, there's two interesting bits.
First off, prisoners can have outstanding bills. In particular, if they can't afford their fines, they don't usually get waived. Basically, the government is prepared if some prisoner somewhere inherits money from a rich relative. So a lot of the stimulus checks that prisoners actively applied for got intercepted on the way to them.
Second, for security, the government hasn't been sending out checks for many years now. Instead, they issue prepaid debit cards. And this is kind of awesome: prisoners have nowhere they can use them. But (and I should not gloat), it might be even better than that: prisoners can obtain the cards, and pass them to family members on the outside who often need the extra financial support ... and I think that's kinda' nice.
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