Cornelius Johnson

Asset limits in means-tested transfers can allow for the distribution of scarce aid to families most in need but may offer a disincentive to beneficiaries to build savings necessary to weather economic shocks. In this Economic Commentary, we examine the net worth of transfer recipients along the income distribution and review the economic literature on the matter with a discussion of universal basic income (UBI) as a policy alternative. Using the 2018 Survey of Income and Program Participation, we document that recipients have a smaller average net worth than nonrecipients at every quintile of the income distribution. We also find that participants at the very bottom of the income distribution are in asset poverty, with an average level of assets surrounding testing thresholds. Recent research suggests that the elimination of testing limits, such as in policies similar to a UBI, could present a welfare-improving alternative to the current system, though not without large economic trade-offs.

Did the Great Recession give local governments a better idea of how much savings they needed to weather another economic downturn? To find out, our economists studied financial statements from 25 cities and 25 counties in the Fourth District at two points in time: the most recent statements available and at the close of the 2007, just before the Great Recession.