As the federal government hastens to distribute trillions of dollars to soften the economic pain of the coronavirus pandemic, a troubling pattern is increasingly clear: Money is not reaching many of those Americans who are in greatest need.
Millions of lower-income households are still waiting for the federal stimulus payments that have landed in the bank accounts of middle-class families.
Many who lost jobs are struggling to register for unemployment benefits.
Only a quarter of small businesses have received federal aid.
For the second time since the crisis began, the end of a month is approaching, and bills are coming due. For all the government has done so far, it is starkly clear that more is required.
Some aid programs are underfunded. Others are poorly designed. And the federal, state and local agencies responsible for handing out money, understaffed in normal times, have been overwhelmed by the crisis. But perhaps the most important reason for the uneven distribution of aid is that it’s always harder to help those who need it most.
Lower-income households and smaller businesses tend to have less information about available aid, less time to complete forms, less experience navigating bureaucracy.
The problem is not that policymakers are trying to help only those who are better off, but that they are not trying hard enough to help those in greatest need. A successful campaign to broaden the use of food stamps in the early 2000s offers a useful model. State governments, with federal permission, made it easier to apply and easier to qualify. Participation rose from 54 percent of eligible households in 2002 to 85 percent in 2016.
A similar effort at every level of government is now required.
Congress and the Trump administration decided that increasing unemployment benefits was the best way to carry workers through the crisis. The stimulus bill passed in late March added a $600 weekly payment on top of existing state jobless benefits.
But states have been overwhelmed by claims, leaving many workers unable to register for benefits. In Michigan, 23.8 percent of the state’s workers have filed for unemployment successfully since the crisis began. In New York, where many workers have struggled to get through to the agency that handles unemployment claims, the figure is just 14.6 percent.
The bailout bill also expanded eligibility for unemployment benefits to include many self-employed and part-time workers. But only 10 states are approving applications from such workers, according to the Labor Department. Ohio has said it won’t start until May 15.
The problems may be worst in Florida, which implemented a series of changes over the past decade to make it harder to qualify for unemployment benefits, thus allowing the state to reduce taxes on businesses. The state’s online filing system, outsourced in 2011, has crashed repeatedly, forcing hundreds of workers to wait in long lines to file in person. Even among those who have completed the process and qualified for benefits, the state said Thursday, only 17 percent have received any money. And the maximum weekly benefit of $875, including the federal government’s $600, is among the lowest in the nation.
The federal government, meanwhile, is struggling to distribute stimulus payments of $1,200 to most American adults. The money has reached a little more than half of those who are eligible — but those still waiting tend to be the people who need it most.
People who did not file tax returns for 2018 or 2019 — including roughly 10 million American families whose incomes were so low that they were not required to file — will not get stimulus payments unless they submit an application to the I.R.S. The Trump administration has made little effort to contact such people, although some states are trying to fill the void: New York, for example, is teaming up with community groups to spread the word.
The administration has taken other steps to increase distribution — for example, by deciding to send checks automatically to people who already get other kinds of government benefits, like Social Security. But it announced earlier this week that such recipients needed to complete an online form to get extra payments of $500 for any dependent children.
It also announced that most people had less than two days to file the form — a deadline that passed on Wednesday. Congressional Democrats are pressing Treasury to reopen the application process. Otherwise, the decision, which affects households with roughly one million children in total, means many will not receive the money Congress voted to give them.
The government’s bailout program for small business suffers similar problems. Congress provided $349 billion in late March, which experts warned was grossly insufficient. Indeed, just 1.6 million companies — or about 26 percent of eligible small businesses — received aid before the money was exhausted. And the winners tended to be larger firms.
The program was advertised as first-come, first-served, but larger firms enjoyed a number of important advantages. They were better equipped to complete necessary paperwork. Banks prioritized companies that already numbered among their borrowers. JPMorgan, the nation’s largest bank, created two check-in lines — one reserved for its larger clients.
Lawmakers could have addressed the inequities by providing enough money to meet the need. Instead, Congress on Thursday authorized another $310 billion in aid, which analysts say will soon be exhausted, too. The new round does include changes to broaden distribution, however, like directing $60 billion through small banks and minority-owned institutions.
While the allocation of the funds has been unfair, most of the recipients genuinely needed aid. But the government compounded the funding shortage by awarding large chunks of money to a small number of bigger companies that do not need federal support.
Shake Shack got $10 million, which it agreed to return after raising funding from investors. Companies controlled by Montgomery Bennett, a wealthy hotelier, have collected almost $60 million in federal support from the small-business program. Meanwhile, one of those companies just paid $10 million in dividends to its investors, including Mr. Bennett.
(The government created a separate bailout program for universities. There, too, some wealthy institutions like Cornell and Notre Dame have taken money that should have been reserved for institutions without billion-dollar endowments. Others, like Harvard and Stanford, have responded to public criticism by saying that they will not accept funding.)
Lining the pockets of investors is not an acceptable use of taxpayer resources — all the more so because every dollar comes at the expense of small companies in genuine need. The Treasury Department on Thursday issued a strongly worded reminder that businesses receiving aid must be prepared to demonstrate that they need it. Words are cheap, however. The real test will come with the distribution of the new pot of federal aid.