Research, University News

Using Administrative Data for Economic Stimulus

Amy O'Hara and Izzy Youngs
July 21, 2020

The coronavirus pandemic is causing economic damage the US has not seen in a generation, and the aftershocks of the health, economic, and social crisis will undoubtedly be felt for years.

In an attempt to cushion the immediate effects of the financial crisis, Congress is passing a series of stimulus bills, beginning with the CARES Act.  The record-breaking $2 trillion stimulus package delivers $269 billion (PDF) to individuals through one-time economic impact payments of $1,200 for individuals with income under $75,000.

While our social and democratic institutions are being strained at every level of government and daily life, these payments are a stopgap measure to shore up our safety net systems.

Who can get the economic impact payments?

To get the economic impact payment, people need to have a Social Security number (SSN) and they need to be in the Internal Revenue Service (IRS) data for 2018 or 2019. While that covers millions of people, it does not cover everyone.

Typically, anyone born in the US and naturalized citizens and have SSNs, and non-citizens also have SSNs if they have the appropriate work authorization or visa paperwork. Other workers who lack SSNs still pay their taxes using IRS-issued individual taxpayer identification numbers, but they will not receive economic impact payments.

In addition, not everyone with an SSN are in the tax data. Millions of people may be missing (PDF) from the IRS database for a variety of reasons. People who may not have filed taxes includes dependents or people who make under $12,200 a year.

In addition, there are millions of people who may have SSNs but are not eligible for the economic impact payments because they are working informally (PDF) in jobs such as childcare, construction, or housekeeping, so they are also not reflected in the IRS database. This leaves huge gaps in economic assistance for these workers.

Is it efficient?

Relative to other administrative programs and systems, directing the economic impact payments through the IRS is the most efficient way to get millions of people their checks. The IRS has a scalable, secure system, and in 2018, they processed 190 million individual income tax returns. In 2008 (PDF), the IRS distributed $96 billion in economic impact payments to 119 million filers, and in 2020 (PDF), the IRS is expected to issue $269 billion to filers.

Could direct payments be targeted differently, perhaps distributing the payouts more equitably? It is unlikely, since there is no other federal data system which can be used to target everyone, or even all adults or all earners, and issue payments with accuracy. Even the 2020 Census, which will count everyone, is a statistical data collection, and people’s responses cannot be shared with other government agencies to issue payments.

Adults are very likely to be in various federal government databases, including Medicare, Medicaid, Federal Student Aid, and Department of Defense files, but there is no combined government dataset that links across these sources. None of these programs could target payments to adults and deliver them as efficiently as the IRS can. 

The next bill, more stimulus and stability?

The economic impact payments strengthen the safety net – for some. While The CARES Act also boosted Unemployment Insurance compensation by $600 a week to support workers, it did not expand eligibility for non-cash benefits like food security programs like the Supplemental Nutrition Assistance Program (SNAP), which helped 38 million households in 2019.

However, these benefit programs are state-administered, and each state would need to modify their existing eligibility requirements to reach more households. Broadening the economic stimulus to human services programs like SNAP or Temporary Assistance to Needy Families (TANF) could result in a more equitable distribution of stimulus funds across the income distribution. 

Additional stimulus bills are in the works to prop up American businesses. Alongside these critical loan and grant programs to ensure an economic recovery, we need to expand aid to households, not just those with SSNs in the tax data.

This can be done using federal administrative records held by the Department of Agriculture, Health and Human Services, Housing and Urban Development, or the Department of Labor, along with streamlining application and verification processes to deliver benefits to newly qualifying households. These steps could ensure the stimulus reaches across more sectors and communities.