Well into the 21st century, the federal government still lacks the capacity to deliver aid to the poorest and most vulnerable Americans in a crisis. To anyone who has followed the Federal Emergency Management Agency’s (FEMA) struggles to distribute relief in the aftermath of natural disasters, this fact has been obvious since Hurricane Katrina. But COVID-19 puts it in even starker relief. As many as 12 million eligible Americans did not receive a stimulus payment in 2020 – most of whom did not file taxes because of their low income – and there is no reason to believe that the latest round of payments has improved on this dismal figure.
What is needed is a universal system of public distribution that operates through electronic payments into bank accounts. Unfortunately, over 6 percent of U.S. households – comprising 14 million adults – are currently unbanked, and these figures are 17 percent and 14 percent, respectively, for Black and Hispanic households.
The challenge of achieving both universal benefit distribution and universal bank accounts may seem daunting, yet the Treasury Department has already developed a solution to both problems. The Treasury’s little-known Direct Express debit card holds the key to attaining both universal benefit distribution and universal bank accounts in America.
The Direct Express card was born of Congress’s desire to reduce paper waste. In 1996 Congress required the Treasury to make all payments, except tax refunds, electronically by 1999. But by 2001 the Treasury was still disbursing nearly a quarter of federal benefit payments by paper checks. The Treasury’s biggest obstacle in instituting electronic payments was the substantial number of federal beneficiaries that were unbanked. In 2008, an estimated 3.9 million federal beneficiaries did not have bank accounts.
In response, the Treasury developed the Direct Express card to serve Social Security recipients and other federal beneficiaries that were unbanked. The design of the card is simple. Federal benefit payments are automatically loaded onto the card. The Direct Express card can then be used like a debit card at any store that takes MasterCard, including online vendors. It can also be used to withdraw money from an ATM or purchase money orders at the U.S. Post Office. However, a Direct Express cardholder cannot deposit additional funds onto their card.
The Direct Express card has been a resounding success. By 2020, over 99 percent of federal beneficiaries received their payments electronically, and millions of formerly unbanked beneficiaries now access financial services through the Direct Express card.
With just two modifications, the Direct Express card can solve the problem of both universal benefit distribution and universal banking in America. First, the Direct Express card should be made freely available to all Americans…
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