Yeah, like the banks need any help stealing money from the poor!

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Kansas's shocking new law will take poor people’s money and give it to big banks
By Dylan Matthews, May 22, 2015

Kansas Republicans have put forward a new policy initiative that's almost shocking in its clear intent to harm the interests of poor people. The provision, which takes effect July 1, will ban welfare recipients from taking out more than $25 in benefits a day from an ATM.

Other broadly similar benefits-restriction measures — things like laws that require drug testing for welfare or food stamp recipients, for example, or that ban food stamp recipients from buying seafood or steak — normally have at least a veneer of an anti-fraud or public health rationale. But the ATM rule is simply a financial hardship and a logistical hassle that can't possibly help anyone other than banks collecting the fees.
 
As the Washington Post's Max Ehrenfreund explains, this places a massive burden on recipient families. For one thing, it's a de facto benefit cut. As of last July, a single parent family of three in Kansas with no other earnings received $429 a month from Temporary Assistance for Needy Families (TANF, a.k.a. welfare), according to the Center on Budget and Policy Priorities. Most ATMs don't stock $5 bills, so the Kansas rule effectively limits withdrawals to $20.

Taking out that money isn't free. Many banks charge substantial fees for withdrawals from Electronic Benefit Transfer (EBT) accounts to which TANF money is distributed. I called Intrust Bank in Wichita, which says it charges $2 per EBT transaction. Emprise Bank says it charges $1.50. In addition to that, Kansas itself charges $1 per ATM withdrawal. So taking the cheaper option, withdrawing $420 from Emprise under the new rules would mean $52.50 in fees. Effectively you'd be limited to taking out $380 a month if you didn't want to go over your monthly allowance, fees inclusive.

Assuming you could only take out $420 at a time before, that's a nearly 10 percent benefit cut. If you went with Intrust, it'd be a nearly 14 percent cut. Say what you will about benefit cuts, but usually the money all goes to the state. Here, most of it goes to banks. It's like if Congress slashed food stamps and decided to hand the savings over to Citigroup.

The inconvenience tax

You don't have to withdraw the money to use it, but every other way of spending it brings fees too. You can use an EBT card like a debit card at merchants that accept it, and use it to get a small amount of cash back at stores like CVS that allow that for debit cardholders. But if you use an EBT card at a "point of sale" like that more than twice a month, Kansas will starting charging a 40-cent-per-transaction fee. You could also buy a money order if a bank lets you, but that, too, comes with a charge. If you want to use the money the way one normally would a paycheck — by depositing it in a checking account — you're out of luck.

CBPP's Liz Schott explains that while some states allow direct deposit of TANF benefits, Kansas does not. "The only way you could get it into the checking account," she says, "is through ATM withdrawals, fees and limits and all."

So let's say you're in a Kansas family of three getting $429 a month from TANF, and you need the money to pay rent. If you've somehow lucked into rent under $429 a month for a place that houses three people, you could maybe buy a money order and pay your landlord that way. If the rent's over that, you could maybe combine that money order with cash from elsewhere. But if your landlord isn't so accommodating, then you'll have to go to an ATM 18 to 19 times a month, paying $2.50 or $3 in fees each time, to get your TANF money out.

Because of the one-a-day rule, you can't stack up these withdrawals. You just have to remember to go out, every day, and pull the money. And as Ehrenfreund notes, many banks don't have locations near poor areas where many TANF recipients live. That could mean daily trips to banks or ATMs a significant drive away, trips that have to be taken while juggling kids.

Making poverty's mental toll worse

That's a major inconvenience for anybody. But it's especially so for the poor. Poverty taxes the brain; it makes juggling tasks and reasoning clearly much more difficult than when one is financially comfortable. The Harvard economist Sendhil Mullainathan and Princeton psychologist Eldar Shafir once conducted a study comparing how rich and poor participants performed on IQ tests. Before the tests, some participants were asked how they'd handle a car repair charge of $300. Others were asked about a charge of $3,000. In the former group, there were no differences between rich and poor participants. But when $3,000 was at stake, rich people scored 13 to 14 points above the poor, a bigger gap than one finds between well-rested people and people who've just gone a night without sleep. "Simply raising monetary concerns for the poor," Mullainathan and Shafir write in their book Scarcity, "erodes cognitive performance even more than being seriously sleep deprived."

The point isn't that the poor are dumb; anybody would think less clearly if put in that situation. And laws like Kansas's put yet more pressure on people operating under those conditions. I don't know that I could remember to go to an ATM every day for 18 days. If I were thinking less sharply, the nearest ATM were miles from my house, and I were raising two kids on my own? Forget it. Even if the money order alternative were available, I don't know that I'd have the time mental bandwidth to sit down and carefully weigh my options for taking the money out.

This is about punishing the poor

The rest of the Kansas law is more predictable. It bans spending at any "retail liquor store, casino, gaming establishment, jewelry store, tattoo parlor, massage parlor, body piercing parlor, spa, nail salon, lingerie shop, tobacco paraphernalia store, vapor cigarette store, psychic or fortune telling business, bail bond company, video arcade, movie theater, swimming pool, cruise ship" — you get the picture.

I hate these kinds of provisions. Everyone gets benefits from the government, but, as Emily Badger has noted, benefits for the middle class and rich never seem to come with any strings attached. No one has ever been banned from spending their mortgage interest deduction or electric vehicle tax credit on movie tickets. When it comes time to crack the whip and eliminate frivolous expenses, it seems only the poor get targeted.

As offensive as I find those measures, one can at least imagine a reason for backing them that isn't grounded in a desire to stigmatize the poor. There's just no plausible purpose for the $25-a-day limit other than making the poor worse off. Maybe that's what you want; some on the right have argued, in earnest, that it's the government's job to make poor people feel like second-class citizens. But that's the only possible way to defend what Kansas is doing.

The state will have to defend more than its morals, however. The $25-a-day limit may also be illegal. Federal law requires that states provide TANF recipients "adequate access to their cash assistance" with "minimal fees or charges." It's quite plausible that the federal government will determine the Kansas law violates that requirement, and the state will lose funding. If it comes to that, expect the state to backtrack, fast. Gov. Sam Brownback (R) has already signaled a willingness to change the law if needed to keep federal dollars.

But even if it does violate federal law, that's not the biggest problem with the $25-a-day limit. The real problem is that it's a moral travesty, a transparent effort to impose significant pain and suffering on Kansas's most vulnerable residents.
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