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Two Versions of Digital Dollar Emerge as Contenders, but Unlikely to Come Soon

Two Versions of Digital Dollar Emerge as Contenders, but Unlikely to Come Soon

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The CARES Act shed light on the possibility of a digital dollar. Meanwhile, a blockchain-based solution is also being explored. Will one of them launch soon?

The coronavirus pandemic is the biggest global crisis since the events that sparked the creation of Bitcoin (BTC) in 2008, and is one that will also have long-lasting effects on the economy. World governments are taking unprecedented measures to cope with the economic fallout of the virus, namely through the third coronavirus relief bill, which was approved by the United States Congress earlier this month and constitutes the biggest stimulus package in the country’s history at $2.2 trillion.

During the negotiations for the third emergency bill, one of the drafts submitted by House Democrats — the first version of the Take Responsibility for Workers and Families Act — caught the attention of the cryptosphere with mentions of a digital dollar, hinting at the creation of a U.S. central bank digital currency that could possibly be underlied by blockchain technology.

Although all mentions of the digital dollar were scrapped from the final version and did not appear in the signed Coronavirus Aid, Relief, and Economic Security Act — known as the CARES Act — the cat seems to be out of the bag. In a recent conference, House Speaker Nancy Pelosi said it is likely that the digital dollar, which was referred to as direct payments, will appear again. With rumours of a fourth stimulus bill, and with additional support from a few members of both the House and the Senate, it may be sooner rather than later.

According to the authors of the bill, the digital dollar would have served as a means to deliver stimulus payments into the hands of struggling citizens that have not provided their direct deposit bank account information to the Internal Revenue Service. A recent analysis of previous stimulus packages showed that the wait could take up to two months or more for those who receive aid through stimulus checks.

However, the digital dollar referred to in the bill was a different concept than the one crypto enthusiasts had previously heard about and may bring consequences that extend far beyond the technological aspects of electronic payments.

The crypto digital dollar

The term “digital dollar” has been most noticeably used by J. Christopher Giancarlo, the former chairman of the Commodity Futures Trading Commission. He established the Digital Dollar Foundation back in January to promote and help guide the creation of a blockchain-based CBDC, dubbed the digital dollar.

While the technology used would be permissioned and centralized in practice, the use of a distributed ledger would be a tentative step in the right direction, as it can bring advantages for citizens when it comes to security and privacy, although the technology comes with a few performance and compatibility trade-offs. In an opinion piece in the Wall Street Journal, Giancarlo wrote:

“We propose a digital dollar — a government-sanctioned blockchain protocol, created and maintained by an independent nongovernmental group but administered by banks and other trusted payment organizations.”

According to Giancarlo, focusing on decentralization is key to compete with cryptocurrencies like Bitcoin, corporate blockchain projects like Libra or Celo, and with other CBDCs like China's digital yuan, which has been in the works since 2015 and may pose a threat to the U.S. dollar by making the Chinese yuan more accessible to foreigners.

The central bank digital dollar

Giancarlo’s digital dollar has kept a fairly low profile since its inception, but the term has now resurfaced alongside the government's efforts to keep the economy afloat. During the negotiation process for the third coronavirus-related bill, three drafts mentioned the digital dollar.

Although the final CARES Act dropped the digital dollar idea and any other types of electronic alternative for stimulus checks, the topic may soon resurface as additional legislation to mitigate the coronavirus crisis is likely to be required. When asked about the timeframe for the stimulus checks during her March 26 press conference, House Speaker Nancy Pelosi emphasized the need for electronic payments:

“I said, ‘Why don't we do the direct payments technologically so that they can be received more immediately?’ I don't know if that's their plan, but I hope that it would be. [...] We had bigger direct payments in our bill, I don't think we have seen the end of direct payments.”

It is important to understand the difference between Giancarlo’s digital dollar and the one proposed to the Senate in the first draft of the Take Responsibility for Workers and Families Act, as the two couldn’t be further apart but have been conflated by many in the crypto community and by industry leaders. Giancarlo recently told Cointelegraph:

“We did not have anything to do with what was in that House bill. We’ve been using the phrase ‘digital dollar’ quite consistently to refer to a US central bank digital currency.”

The technicalities

While most have focused on the technological aspects of this concept, the digital dollar as presented in recent legislative drafts would not rely on any technological innovation, decentralized or otherwise.

While not specified, the digital dollar would likely rely on commonplace technology used by banks today. The draft hinted at this when mentioning that stimulus payments would be made through two options: check or direct deposit, including a pass-through digital dollar wallet. Crypto trader and YouTuber Tone Vays, who previously criticized the digital dollar initiative for this lack of innovation, told Cointelegraph:

“I believe that digital currencies are already here. 97% of currencies are already digital. If they have a different digital dollar than the current digital dollar then it’s just a gimmick because there will be absolutely no difference between the two. The digital dollar will still be consicatable and they will still be censored if the banks want it to be.”

The key difference lies with who is providing and managing this account. The digital dollar would allow a central bank to offer bank accounts to individuals. Giancarlo has previously denounced this idea, saying he doesn’t see the “Federal Reserve becoming a deposit-taking institution,” which further cements the difference between the two projects.

FedAccounts: central banking for all

The concept presented in the draft was not new and can be found in work published by Morgan Ricks, a professor at Vanderbilt University Law School who worked with members of Congress to bring forth the digital dollar. Ricks, along with John Crawford and Lev Menand, published a paper in 2018 titled “Central Banking for All: A Public Option for Bank Accounts.”

Here, wallets are called FedAccounts, which were also briefly mentioned in the draft bill when referring to a ‘‘pass-through FedAccount.” FedAccounts would be easier to open, free of fees and minimum balances, and would have the same interest rate that commercial banks receive on deposits. One of the main value propositions of this concept is the financial inclusion of the unbanked and underbanked among the U.S. population.

Although the term “digital dollar” is an established one, it could be argued that it’s not a step toward Bitcoin, as it brings no technological innovation and further accentuates centralization into one single entity. The aforementioned paper does mention blockchain technology, but quickly dismisses it due to its decentralized nature and technical limitations. The paper reads:

“Given that much of the excitement about distributed ledgers arises from distrust of government and of central intermediaries, the central bank’s role here seems strange. Besides, in their current forms distributed ledgers are painfully slow and costly compared with centralized systems like Fedwire.”

Advantages of the digital dollar

In essence, both the end users of the digital dollar and the population as a whole can benefit from a digital dollar regardless of whatever shape it comes in. Users wouldn’t need to pay account maintenance or interchange fees, nor would they need to have a minimum balance. Transaction speed would also be improved, and the interest received on these accounts would be matched to the higher rate currently available to commercial banks. Moreover, balances would also be fully sovereign money, which means there would be no possibility of default on balances, removing the need for deposit insurance.

The individual advantages mentioned above have the potential of increasing financial inclusion for U.S. citizens. Improved financial and macroeconomic stability would be achieved by eliminating cash equivalents, which have been problematic throughout history. Lastly, the creation of FedAccounts could potentially help streamline and simplify regulation while generating fiscal revenue through increased remittance fees. Vays also outlined another short-term advantage for the digital dollar, while highlighting one of the potential issues:

“What the bill has done is that now there’s a potential for direct money infusion from the central banks to the end consumer. This is very important because in 2008 when the banks were given all this money, they did not want to lend it out to the consumer. Because of that issue, now there is a chance people will get money directly from the Federal Reserve but at the same time that also destroys the capitalistic model of private banks.”

The dangers of centralization?

However, there are concerns such as privacy and security risks that are not addressed in the paper, which fails to account for changing regulatory and technological conditions. For example, when addressing the benefits of FedAccounts in spotting suspicious activity such as money laundering and tax evasion, the paper mentions the Bank Secrecy Act of 1970, which has been amended by the Patriot Act.

Coincidentally, the Patriot Act has made it harder for U.S. citizens to open a bank account, which has led to a higher number of unbanked or underbanked citizens and has put the privacy of bank account holders in check. When asked about the possible dangers of the Fed’s digital dollar, James Lee, the founder of privacy-centric blockchain projects Komodo and PirateChain, told Cointelegraph:

“It should be self-evident what the dangers are, if the government knows exactly how much you have, and everything you spend your DD on, maybe it gets combined with some scoring system of what you post on social media and if you post things that are not allowed, then all your funds are frozen. This type of threat will basically eliminate free speech.”

Continuing on, the paper mentions the IRS as a “useful model” for privacy in the FedAccount system, although it fell victim to a historic data leak in 2005 that saw hundreds of thousands of taxpayers' information stolen and distributed. Moreover, centralizing this information in one single entity may create an incentive for further hacks. Vitalik Buterin, the founder of Ethereum, expressed such security and privacy concerns in a podcast earlier this month:

“The main challenge with central bank and even corporate currency is basically the concentration of power, the concentration or data collection — that you become dependent on potentially central intermediaries that can exercise a very fine-grained degree of control over who has the ability to participate in these systems and who can’t.”

Crypto digital dollar vs the Fed’s digital dollar

Despite sharing the same name, these two versions of the digital dollar have many differences. While the Fed’s digital dollar would not use blockchain technology, the crypto digital dollar would place it at the heart of the project. It goes without saying that the Fed’s digital dollar would be centralized by design, while Giancarlo’s digital dollar aims to take another path.

While there are arguments to be made for both cases, Giancarlo’s vision seems more aligned with that of Bitcoin advocates. It proposes a “government-sanctioned blockchain protocol,” one that would still allow for issuance to be controlled by the government but would ultimately involve more entities in the process, as the ledger would be maintained and administered by independent private entities.

Not only would the prospect of a distributed ledger decentralize the issuance process to some degree, the structure described above would also strengthen security and privacy, as any attack by malicious actors would require several entities to be compromised. As long as the majority of administrators remain uncompromised, attacks can be theoretically avoided.

Although blockchain has been in the forefront of the currency digitalization race, this may be owed to the popularity of the distributed ledger technologies rather than the underlying technology itself, which has been known to show some limitations when it comes to performance. On that note, Sonja Davidovic, an economist with the International Monetary Fund, recently stated, “What we've seen a lot is that there's a hype out there, and people are quickly jumping to choosing that technology just because it's popular."

From project to reality: when and how

While CBDCs have been gaining traction, the leap to a blockchain-based currency is one that will most likely take years for any country to achieve, if achieved at all. Given that the technology is still in its infancy and has been, unfairly or not, associated with criminal activity, governments will likely be even more cautious than they usually are when it comes to relying on new technology.

So, when can a digital dollar, blockchain-based or otherwise, appear? While the aforementioned projects have clear differences, they still have one thing in common: a focus on digitalization, which is becoming a prevalent factor when looking at a currency from a competitive point of view. Judy Shelton, President Donald Trump’s nominee to the Federal Reserve Board of Governors, said, “We need the digital currency a little bit less I would argue internally, but rather to help preserve the primacy of the dollar worldwide.”

With Treasury Secretary Steven Mnuchin stating that the Fed does not see the need to issue a new digital currency within the next five years, one is not likely to appear soon. While this statement may be true when it comes to a blockchain-based CBDC, the digital dollar proposed in the stimulus bill in response to the coronavirus pandemic is a whole other story.

Ricks, who worked on the development of the digital dollar proposal found in the coronavirus relief bills, has stated that while the concept will not be used for direct payments right now, it will likely be implemented some time next year. Giancarlo has also stated that any implementation of the digital dollar will need to be carefully considered. He told Cointelegraph:

“The United States has to proceed thoughtfully, intelligently, deliberately. We advocate pilot programs as a way to explore the utilization of the digital dollar and how it can be used, including how it can be used in a crisis. But I think one needs to be very cautious about trying to launch something as big as this amidst a crisis.”

While the details remain, for the most part, unknown, one thing is certain: The desire to digitalize the U.S. dollar will drive the creation of some version of a digital dollar. And since the U.S. government will continue to look for ways to give the dollar an edge over other national currencies, it's just a question of when and how.

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Airline, travel companies face Chapter 11 bankruptcy, default risk

New data from Creditsafe shows that three big-name brands face significant cash issues.

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It's actually fairly rare that a company files for Chapter 11 bankruptcy without throwing off signs that it's in deep financial trouble. Observant customers sometimes see the signs.

You might notice lower staffing levels or poor inventory in a retail setting. Restaurants facing financial troubles might drop the quality of their ingredients, cut portion sizes, or find other ways to cut corners.

Related: Fast-food chain closes restaurants after Chapter 11 bankruptcy

It's generally impossible to cut your way to a good financial position unless you were making huge mistakes in the first place. A company might find some savings by examining its operations and focuing on waste in areas customers don't see, but giving people less almost never works.

In many businesses, especially when companies are publicly traded, signs of upcoming financial trouble are obvious. 

Public companies have to report their financial results and when there's more money going out than coming in, and cash balances get low, observant analysts can see a company likely to default on its bills that may be headed for bankruptcy well before it happens.

CreditSafe Head of Brand Ragini Bhalla recently shared her company's Financial & Bankruptcy Outlook: Transportation Report and some comments on it with TheStreet. 

The report shows that three big-name companies in the travel/transportation space are facing significant financial risk, which is reflected in their stock prices. Bhalla gave some color as to why companies in those markets are struggling.

Air travel has bounced back from the covid pandemic.

Image source: Shutterstock

The transportation industry faces a crisis  

Bhalla shared her thoughts on what Creditsafe found.

"We are reflecting on the current challenges faced by transportation companies and the total industry outlook. During the pandemic, M&A activity in the industry soared, as transportation players and investors made deals to extend capabilities and acquire high-performing assets. To that end, deal values soared from $51 billion in 2020 to more than $150 billion in 2021, before it dipped to $95 billion in 2022," she said in an email to TheStreet.

Bhalla said she sees a different pattern in 2024.

"While M&A activity in the transportation industry cooled down in 2023, industry insiders are projecting that 2024 will be the year of consolidation. If that’s the case, then it will be more important than ever for both sides (sellers and buyers) to do their due diligence," she wrote.

Not every company that would benefit from being acquired will survive the M&A scrutiny.

"This should include various elements, such as running business credit checks on potential acquisitions to make sure they would be a good investment and aren’t in dire financial straits. It should also include running comprehensive compliance checks to make sure potential acquisitions aren’t violating sanctions, haven’t been convicted of regulatory violations, and aren’t involved in unethical practices like bribery, corruption, fraud, and the use of child/forced labor," she added.

One airline, two rental cars are at risk

Spirit Airlines  (SAVE) has been on unofficial bankruptcy watch since the company's merger with JetBlue  (JBLU)  fell apart. There are real questions as to whether the super-low-cost airline model works, and Creditsafe sees a real risk of the airline ending up filing for Chapter 11 bankruptcy.

"Earlier this year, Spirit Airlines said it was looking to refinance its debt and hopes to refinance $1.1 billion of debt due in 2025," according to Creditsafe. "To make matters worse, the airline doesn’t have a stable track record of paying bills on time."

Not paying bills on time is often a sign that a company is running out of cash.

"Late payments increased over several months in 2023. For example, the number of late payments (1-30 days) rose from 7.00% in September 2023 to 30.87% in October 2023. A similar pattern occurred soon after when the number of late payments (1-30 days) rose from 6.37% in November 2023 to 30.54% in December 2023 and then again to 51.08% in January 2024," Creditsafe data showed.

Investors are shying from the stock. Shares were at $4.29 down 73.8% on the year as of Friday.

Two rental car companies, Avis Budget Group  (CAR) and Hertz (HTZ) are facing similar woes.

"Avis Budget Group's long-term debt has consistently increased for the last three years, and how late the company paid its bills spiked drastically from 8 days late in March to 31 days in April and remained high until September 2023," Creditsafe shared.

Hertz has been following a similar path.

"The company’s number of delinquent payments (91+ days) increased consistently during the second half of 2023. For instance, the number of delinquent payments (91+ days) rose from 4.64% in August to 6.90% in September, then rose again to 10.73% in October 2023, indicating it is having trouble paying its bills," according to Creditsafe.

Avis Budget closed Friday at $107.70 and are down 39.2% this year. Hertz finished Friday at $7.58, down 25.7% on the year.

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AI vs. elections: 4 essential reads about the threat of high-tech deception in politics

Using disinformation to sway elections is nothing new. Powerful new AI tools, however, threaten to give the deceptions unprecedented reach.

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Like it or not, AI is already playing a role in the 2024 presidential election. kirstypargeter/iStock via Getty Images

It’s official. Joe Biden and Donald Trump have secured the necessary delegates to be their parties’ nominees for president in the 2024 election. Barring unforeseen events, the two will be formally nominated at the party conventions this summer and face off at the ballot box on Nov. 5.

It’s a safe bet that, as in recent elections, this one will play out largely online and feature a potent blend of news and disinformation delivered over social media. New this year are powerful generative artificial intelligence tools such as ChatGPT and Sora that make it easier to “flood the zone” with propaganda and disinformation and produce convincing deepfakes: words coming from the mouths of politicians that they did not actually say and events replaying before our eyes that did not actually happen.

The result is an increased likelihood of voters being deceived and, perhaps as worrisome, a growing sense that you can’t trust anything you see online. Trump is already taking advantage of the so-called liar’s dividend, the opportunity to discount your actual words and deeds as deepfakes. Trump implied on his Truth Social platform on March 12, 2024, that real videos of him shown by Democratic House members were produced or altered using artificial intelligence.

The Conversation has been covering the latest developments in artificial intelligence that have the potential to undermine democracy. The following is a roundup of some of those articles from our archive.

1. Fake events

The ability to use AI to make convincing fakes is particularly troublesome for producing false evidence of events that never happened. Rochester Institute of Technology computer security researcher Christopher Schwartz has dubbed these situation deepfakes.

“The basic idea and technology of a situation deepfake are the same as with any other deepfake, but with a bolder ambition: to manipulate a real event or invent one from thin air,” he wrote.

Situation deepfakes could be used to boost or undermine a candidate or suppress voter turnout. If you encounter reports on social media of events that are surprising or extraordinary, try to learn more about them from reliable sources, such as fact-checked news reports, peer-reviewed academic articles or interviews with credentialed experts, Schwartz said. Also, recognize that deepfakes can take advantage of what you are inclined to believe.


Read more: Events that never happened could influence the 2024 presidential election – a cybersecurity researcher explains situation deepfakes


How AI puts disinformation on steroids.

2. Russia, China and Iran take aim

From the question of what AI-generated disinformation can do follows the question of who has been wielding it. Today’s AI tools put the capacity to produce disinformation in reach for most people, but of particular concern are nations that are adversaries of the United States and other democracies. In particular, Russia, China and Iran have extensive experience with disinformation campaigns and technology.

“There’s a lot more to running a disinformation campaign than generating content,” wrote security expert and Harvard Kennedy School lecturer Bruce Schneier. “The hard part is distribution. A propagandist needs a series of fake accounts on which to post, and others to boost it into the mainstream where it can go viral.”

Russia and China have a history of testing disinformation campaigns on smaller countries, according to Schneier. “Countering new disinformation campaigns requires being able to recognize them, and recognizing them requires looking for and cataloging them now,” he wrote.


Read more: AI disinformation is a threat to elections − learning to spot Russian, Chinese and Iranian meddling in other countries can help the US prepare for 2024


3. Healthy skepticism

But it doesn’t require the resources of shadowy intelligence services in powerful nations to make headlines, as the New Hampshire fake Biden robocall produced and disseminated by two individuals and aimed at dissuading some voters illustrates. That episode prompted the Federal Communications Commission to ban robocalls that use voices generated by artificial intelligence.

AI-powered disinformation campaigns are difficult to counter because they can be delivered over different channels, including robocalls, social media, email, text message and websites, which complicates the digital forensics of tracking down the sources of the disinformation, wrote Joan Donovan, a media and disinformation scholar at Boston University.

“In many ways, AI-enhanced disinformation such as the New Hampshire robocall poses the same problems as every other form of disinformation,” Donovan wrote. “People who use AI to disrupt elections are likely to do what they can to hide their tracks, which is why it’s necessary for the public to remain skeptical about claims that do not come from verified sources, such as local TV news or social media accounts of reputable news organizations.”


Read more: FCC bans robocalls using deepfake voice clones − but AI-generated disinformation still looms over elections


How to spot AI-generated images.

4. A new kind of political machine

AI-powered disinformation campaigns are also difficult to counter because they can include bots – automated social media accounts that pose as real people – and can include online interactions tailored to individuals, potentially over the course of an election and potentially with millions of people.

Harvard political scientist Archon Fung and legal scholar Lawrence Lessig described these capabilities and laid out a hypothetical scenario of national political campaigns wielding these powerful tools.

Attempts to block these machines could run afoul of the free speech protections of the First Amendment, according to Fung and Lessig. “One constitutionally safer, if smaller, step, already adopted in part by European internet regulators and in California, is to prohibit bots from passing themselves off as people,” they wrote. “For example, regulation might require that campaign messages come with disclaimers when the content they contain is generated by machines rather than humans.”


Read more: How AI could take over elections – and undermine democracy


This story is a roundup of articles from The Conversation’s archives.


This article is part of Disinformation 2024: a series examining the science, technology and politics of deception in elections.

You may also be interested in:

Disinformation is rampant on social media – a social psychologist explains the tactics used against you

Misinformation, disinformation and hoaxes: What’s the difference?

Disinformation campaigns are murky blends of truth, lies and sincere beliefs – lessons from the pandemic


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Free school meals for all may reduce childhood obesity, while easing financial and logistical burdens for families and schools

Since nutrition standards were strengthened in 2010, eating at school provides many students better diet quality compared with other major U.S. food s…

School meal waivers that started with the COVID-19 pandemic stopped with the end of the public health emergency. Jonathan Wiggs/The Boston Globe via Getty Images

School meals are critical to child health. Research has shown that school meals can be more nutritious than meals from other sources, such as meals brought from home.

A recent study that one of us conducted found the quality of school meals has steadily improved, especially since the 2010 Healthy, Hunger-Free Kids Act strengthened nutrition standards for school meals. In fact, by 2017, another study found that school meals provided the best diet quality of any major U.S. food source.

Many American families became familiar with universal free school meals during the COVID-19 pandemic. To ease the financial and logistical burdens of the pandemic on families and schools, the U.S. Department of Agriculture issued waivers that allowed schools nationwide to provide free breakfast and lunch to all students. However, these waivers expired by the 2022-23 school year.

Since that time, there has been a substantial increase in schools participating in the Community Eligibility Provision, a federal policy that allows schools in high poverty areas to provide free breakfast and lunch to all attending students. The policy became available as an option for low-income schools nationwide in 2014 and was part of the Healthy, Hunger-Free Kids Act. By the 2022-23 school year, over 40,000 schools had adopted the Community Eligibility Provision, an increase of more than 20% over the prior year.

Many families felt stressed when a federal program providing free school meals during the pandemic came to an end.

We are public health researchers who study the health effects of nutrition-related policies, particularly those that alleviate poverty. Our newly published research found that the Community Eligibility Provision was associated with a net reduction in the prevalence of childhood obesity.

Improving the health of American children

President Harry Truman established the National School Lunch Program in 1946, with the stated goal of protecting the health and well-being of American children. The program established permanent federal funding for school lunches, and participating schools were required to provide free or reduced-price lunches to children from qualifying households. Eligibility is determined by income based on federal poverty levels, both of which are revised annually.

In 1966, the Child Nutrition Act piloted the School Breakfast Program, which provides free, reduced-price and full-price breakfasts to students. This program was later made permanent through an amendment in 1975.

The Community Eligibility Provision was piloted in several states beginning in 2011 and became an option for eligible schools nationwide beginning in 2014. It operates through the national school lunch and school breakfast programs and expands on these programs.

Gloved hand placing cheese slices on bun slices
Various federal and state programs have sought to make food more accessible to children. John Moore/Getty Images

The policy allows all students in a school to receive free breakfast and lunch, rather than determine eligibility by individual households. Entire schools or school districts are eligible for free lunches if at least 40% of their students are directly certified to receive free meals, meaning their household participated in a means-based safety net program, such as the Supplemental Nutrition Assistance Program, or the child is identified as runaway, homeless, in foster care or enrolled in Head Start. Some states also use Medicaid for direct certification.

The Community Eligibility Provision increases school meal participation by reducing the stigma associated with receiving free meals, eliminating the need to complete and process applications and extending access to students in households with incomes above the eligibility threshold for free meals. As of 2023, the eligibility threshold for free meals is 130% of the federal poverty level, which amounts to US$39,000 for a family of four.

Universal free meals and obesity

We analyzed whether providing universal free meals at school through the Community Eligibility Provision was associated with lower childhood obesity before the COVID-19 pandemic.

To do this, we measured changes in obesity prevalence from 2013 to 2019 among 3,531 low-income California schools. We used over 3.5 million body mass index measurements of students in fifth, seventh and ninth grade that were taken annually and aggregated at the school level. To ensure rigorous results, we accounted for differences between schools that adopted the policy and eligible schools that did not. We also followed the same schools over time, comparing obesity prevalence before and after the policy.

Child scooping food from salad bar onto a tray; other children lean against the wall
Free school meals may help reduce health disparities among marginalized and low-income children. Whitney Hayward/Portland Portland Press Herald via Getty Images

We found that schools participating in the Community Eligibility Provision had a 2.4% relative reduction in obesity prevalence compared with eligible schools that did not participate in the provision. Although our findings are modest, even small improvements in obesity levels are notable because effective strategies to reduce obesity at a population level remain elusive. Additionally, because obesity disproportionately affects racially and ethnically marginalized and low-income children, this policy could contribute to reducing health disparities.

The Community Eligibility Provision likely reduces obesity prevalence by substituting up to half of a child’s weekly diet with healthier options and simultaneously freeing up more disposable income for low-to-middle-income families. Families receiving free breakfast and lunch save approximately $4.70 per day per child, or $850 per year. For low-income families, particularly those with multiple school-age children, this could result in meaningful savings that families can use for other health-promoting goods or services.

Expanding access to school meals

Childhood obesity has been increasing over the past several decades. Obesity often continues into adulthood and is linked to a range of chronic health conditions and premature death.

Growing research is showing the benefits of universal free school meals for the health and well-being of children. Along with our study of California schools, other researchers have found an association between universal free school meals and reduced obesity in Chile, South Korea and England, as well as among New York City schools and school districts in New York state.

Studies have also linked the Community Eligibility Provision to improvements in academic performance and reductions in suspensions.

While our research observed a reduction in the prevalence of obesity among schools participating in the Community Eligibility Provision relative to schools that did not, obesity increased over time in both groups, with a greater increase among nonparticipating schools.

Universal free meals policies may slow the rise in childhood obesity rates, but they alone will not be sufficient to reverse these trends. Alongside universal free meals, identifying other population-level strategies to reduce obesity among children is necessary to address this public health issue.

As of 2023, several states have implemented their own universal free school meals policies. States such as California, Maine, Colorado, Minnesota and New Mexico have pledged to cover the difference between school meal expenditures and federal reimbursements. As more states adopt their own universal free meals policies, understanding their effects on child health and well-being, as well as barriers and supports to successfully implementing these programs, will be critical.

Jessica Jones-Smith receives funding from the National Institutes of Health.

Anna Localio does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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