What if Washington Just Paid People’s Bills?

As Congress prepares to debate the next, and perhaps final round of coronavirus relief legislation, two critical questions remain:

Have they learned from the mistakes and inefficiencies of the $2.2 trillion CARES Act that they passed in March? And are there better ways to get help to the businesses, workers, and families who need it?

The jury is still very much out. 

The CARES Act included several forms of assistance to shore up credit and financial markets and to provide a critical lifeline to workers and businesses. It expanded eligibility for unemployment insurance and provided recipients with an additional $600 per week from Washington on top of regular state unemployment benefits. Although the CARES Act undoubtedly helped the economy avoid sinking into the abyss, many of its specific programs have been slow to get benefits to the businesses and workers who need them the most.

Because state unemployment agencies were overwhelmed by the flood of claims, many eligible workers still have yet to receive the benefits to which they are entitled. And the federal government mistakenly sent $1,200 stimulus checks to over one million dead people.

As a result of these inefficiencies, many state and local governments have been forced to use blunt force instruments like eviction or utility payment moratoriums to keep people in their homes. These provisions do solve one problem, but they also create others elsewhere in the economy.

While some people who have been laid off or furloughed due to the pandemic are beginning to go back to work, the Federal Reserve predicts that the unemployment rate will remain high for the foreseeable future: 9.3% by the end of 2020 and 6.5% by the end of 2021. As Congress comes back from recess, it appears they might be focused primarily on extending programs from the CARES Act.

But what if the federal government could more efficiently deliver essential aid by sending funds to the thousands of companies who provide the services families have typically used their federal aid to pay for anyway? Such an approach would not replace the current unemployment insurance system, but it might be a much faster and quicker way to get help to the people and businesses who need it.

Recent reports suggest millions of Americans are on the cusp of being evicted or unable to make their mortgage payments. The COVID-19 Eviction Defense Project estimates that about 20% of all rental households are at risk of being evicted by September 30, and according to a survey conducted by Apartment List, 30% of homeowners could not afford their full mortgage payments this month. 

One way to alleviate this problem would involve direct federal aid for landlords and mortgage lenders who have lost income due to the pandemic. While eviction and rent payment moratoriums have assisted some renters who have been unable to keep up with their rent payments in the short term, they have simply passed the financial responsibility down the line from renters to their landlords, many of whom are “mom-and-pop” landlords who rely on rental income to get by.

Many vulnerable families have also struggled to pay their utility bills, and have often used their unemployment insurance benefits or stimulus checks to pay them. But what if Washington just paid people’s utility bills directly?

According to Howard Newman, managing partner of a firm that invests in energy and financial service companies, it would cost the federal government $60 billion per month to cover utility and telecommunications bills for all customers nationwide. He suggests a system in which these companies would simply bill the U.S. Treasury rather than their customers, and the government could then cover customers’ outstanding balances.

These two policies are based on a pretty simple idea. If the federal government is having difficulty getting money quickly to tens of millions of people who need it to pay their rent, mortgage, and utility bills, maybe they’d be better served paying the tens or hundreds of thousands of landlords and utility providers who offer these services.

Julia Baumel is a policy analyst with The New Center.