(CBS DFW) — A fourth stimulus check has been suggested, even as the third round of economic relief is still reaching eligible Americans. Around 159 million payments of up to $1,400 per person have been issued over the last few weeks. That’s most of the $422 billion allotted in President Biden’s $1.9 trillion American Rescue Plan Act. Paper checks and EIP cards continue to arrive by mail.
These relief payments are part of a larger effort to cushion COVID’s economic impact on households and support the economy while the pandemic recovery continues. The stimulus package also extends unemployment benefits, strengthens the child tax credit, and much more. The recent round of checks follows the $1,200 CARES Act payments at the pandemic’s outset and the $600 payments in early January.
How Does The Economic Recovery Look?
Many households are far from where they started last year. Financial insecurity is widespread, with 40 percent of respondents in one survey saying their current income falls short of their pre-pandemic income. Nine percent of American adults recently reported a shortage of food in their household over the previous week, according to U.S. Census survey data from March. Over 10 million people have fallen behind on their rent, including 21 percent of renters with children in their household. (The federal eviction moratorium currently in effect doesn’t forgive rent owed, it pushes the debt into the future.) Millions more are struggling to pay their mortgage. Close to 30 percent of adults reported some difficulty keeping up with expenses.
Employment also remains well below pre-pandemic levels. Somewhere around 9.5 million of the jobs lost during the pandemic have not returned. More than half of the job loss during the COVID crisis has come in low-wage industries. Last week, approximately 576,000 people initially applied for unemployment insurance, significantly down from the previous week. (A typical pre-pandemic week saw about 250,000 new unemployment applications.) Another 132,000 applied for Pandemic Unemployment Assistance (PUA), which supports freelance and self-employed workers. Many jobless Americans have not received unemployment insurance and other government benefits, because of long waits, perceived ineligibility and other issues. And hiring (or re-hiring) for jobs in hard-hit industries like food service and hospitality is proceeding slowly.
However, large parts of the workforce felt little economic impact from the pandemic. Many jobs performed at a desk in an office can just as easily be performed at a desk in someone’s home. And with fewer outlets for spending, some actually managed to save more money. The personal saving rate ballooned to 33.7 percent last April and, at 13.7 percent for February 2021, remains almost double where it was before the pandemic.
The housing market also took off, as people stuck at home realized the limitations of their living space. By February of 2021, the national median sales price for an existing home was $313,000, 15.8 percent above where it was in February of 2020. And that number rose in every region of the country. Much of that rise was pushed by houses priced above the median. Housing inventory had also reached a record low, down 29.5 percent from the previous February. And of the homes that sold that month, 74 percent were for sale for less than a month.
The stock market also continues to boom. The Dow Jones extended its run Friday, reaching 34,200 for another record close. Individual investors, flush with extra cash from three rounds of stimulus, have poured into the market. Bigger investors continue to bet on a strong economic recovery as the year progresses. Some forecasters believe that growth could hit 6 or 7 percent, which would be the highest in decades. Such strong growth suggests to many experts the danger of higher inflation. The latest stimulus package would certainly add fuel to the fire.
“What you’re seeing is some parts of the economy are doing very well, have fully recovered, have even more than fully recovered in some cases,” said Federal Reserve Chairman Jerome Powell in an interview with 60 Minutes‘ Scott Pelley. “And some parts haven’t recovered very much at all yet. And those tend to be the ones that involve direct contact with the public. Travel, entertainment, restaurants, things like that.”
The most recent round of stimulus checks is helping those Americans still waiting for the recovery to pay bills and put food on the table. But they remain a short-term fix for a longer-term problem. The money will likely run out long before many people are once again able to earn a living wage. And some politicians feel that this latest stimulus check, on top of previous stimulus checks, still won’t be enough.
Who Supports A Fourth Stimulus Check?
A group of Democratic Senators, including Ron Wyden of Oregon, Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, recently sent a letter to President Joe Biden requesting “recurring direct payments and automatic unemployment insurance extensions tied to economic conditions.”
As the Senators reasoned in their letter, “this crisis is far from over, and families deserve certainty that they can put food on the table and keep a roof over their heads. Families should not be at the mercy of constantly-shifting legislative timelines and ad hoc solutions.”
An earlier letter to President Biden and Vice President Kamala Harris from 53 Representatives, led by Ilhan Omar of Minnesota, staked out a similar position. “Recurring direct payments until the economy recovers will help ensure that people can meet their basic needs, provide racially equitable solutions, and shorten the length of the recession.”
Additional co-signers included New York’s Alexandria Ocasio-Cortez and Michigan’s Rashida Tlaib, two other notable names among House Progressives. The letter didn’t place a number on the requested stimulus payments. But a tweet soon after put it at $2,000 per month for the length of the pandemic.
$2,000 monthly payments until the pandemic is over. https://t.co/6tuia6prFJ
— Ilhan Omar (@IlhanMN) January 28, 2021
A majority of Americans also favor recurring relief payments. According to a January poll from the Data For Progress, nearly two-thirds of all voters support $2,000 monthly payments to all Americans for the length of the pandemic. Supporters include a majority of Independents and Republicans. Many economists are also onboard. A 2020 open letter from experts in the field argued “direct cash payments are an essential tool that will boost economic security, drive consumer spending, hasten the recovery, and promote certainty at all levels of government and the economy – for as long as necessary.”
Why A Fourth Stimulus Check Is Unlikely
All of this voiced support keeps the possibility of another round of stimulus checks — or recurring stimulus checks — alive. It doesn’t make them likely, however. And there are a number of reasons why.
Vaccinations are progressing steadily, with two different options available to the public and a third only recently placed on pause due to a blood clot issue. The President recently stated that 90 percent of American adults will be eligible by the middle of April. Actually putting needles in arms takes longer, though most states have lowered the qualifying age to 16 years old. The administration has surpassed its revised goal of administering 200 million doses in its first 100 days. Americans have received over 202 million doses, with 38.5 percent of the population having received at least one dose and 24.3 percent completely vaccinated. Vaccination numbers continue to increase at a rate of over three million doses per day.
With vaccinations rising, the economy is showing additional signs of recovery as well. State and local economies are reopening, as restrictions loosen. Hiring has picked up in some sectors. The average for new unemployment claims over four weeks is the lowest its been in over a year. Consumer confidence continues to climb, reaching its highest level since the start of the pandemic. Close to 41 percent of consumers also see business conditions improving over the next six months, up over 10 percent from the month before.
Consumer spending drives two-thirds of the country’s economy. And the third stimulus check, along with excess pandemic savings, has increased people’s spending power. An improved financial position generally also raises optimism in the future. The ongoing vaccinations, which will continue to allow the economy to safely reopen, certainly help. All that additional spending, along with the release of pent-up demand, should lead to more jobs as companies hire to address consumer needs. With the economy opening up and continuing to improve, a fourth round of stimulus checks loses much of its urgency.
As Powell sees it, “we feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming in much more quickly. So the principal risk to our economy right now really is that the disease would spread again.”
The American Rescue Plan Act passed along party lines. Republicans were not interested in spending anywhere close to $1.9 trillion, though some did support the third round of stimulus checks. They termed the package a “blue state bailout,” claiming it went well beyond the scope of COVID and would increase the deficit, leading to inflation.
The Democrats used a process called reconciliation to pass the bill in the Senate without Republican support. That allows budget-related matters to proceed with a simple majority rather than the filibuster-proof 60 votes. Generally only one reconciliation bill can pass per fiscal year. But a recent ruling by the Senate parliamentarian, who interprets the legislative body’s rules, opened up an avenue for additional spending legislation. Without reconciliation, any bill would need at least 10 Republican votes, along with every Democratic vote.
But the Biden administration has other priorities. One of its biggest is passing the recently introduced infrastructure plan, which also faces Republican opposition. The American Jobs Plan, worth $2 trillion, aims to rebuild roads, repair bridges, do away with lead pipes, extend broadband, modernize the country’s electric grid and much more. It does not include another stimulus check. One could, in theory, be added at a higher price tag. Republicans oppose the plan, in part, for its reliance on higher corporate taxes. They would be disinclined to support an even larger corporate tax hike.
The American Family Plan is due to be announced in the coming weeks. It could cost another $1 to $2 trillion. What it will contain has not been revealed, so another stimulus check is again theoretically possible. According to the administration, funding would come from higher taxes on wealthy individuals. Republicans will likely also oppose these tax increases too.
Plenty of negotiating and possible paring down seems inevitable before either plan comes to a vote. And Biden will face an uphill battle attracting 10 Republican supporters in the Senate in both cases. As a result, Democrats may very well be anticipating the need to use reconciliation again to push through these signature pieces of legislation. But Joe Manchin of West Virginia, among the most centrist Democratic Senators, has warned against overusing the process. He also seems unwilling to do away with the filibuster, which would lower the number of votes needed to pass legislation to 51. With bipartisanship a seemingly faint dream, that places the Biden administration in a tough spot. It also reduces the odds of them using reconciliation to pass a fourth stimulus check outside of a larger package.
What Other Aid Is Coming?
While a fourth stimulus check is unlikely, more direct payments to Americans have already been signed into law. The American Rescue Plan Act includes an improved Child Tax Credit and extended unemployment benefits.
Under the revised Child Tax Credit, the Internal Revenue Service (IRS) will pay out $3,600 per year for each child up to five years old and $3,000 per year for each child ages six through 17. Payments will be issued automatically on a periodic basis from July to December of 2021, with the remainder issued when the recipient files their 2021 taxes. (Many expect that “periodic” will actually mean monthly or possibly quarterly, but the IRS still has to determine that.) The benefit will not depend on the recipient’s current tax burden. In other words, qualifying families will receive the full amount, regardless of how much — or little — they owe in taxes. Payments will start to phase out beyond a $75,000 annual income for individuals and beyond $150,000 for married couples. The more generous credit will apply only for 2021, though Democrats will probably look to extend it.
The American Rescue Plan Act also extended the weekly federal unemployment insurance bonus of $300 through Labor Day. Recipients with household incomes below $150,000 will not have to pay taxes on the first $10,200 in unemployment benefits. Those eligible for Pandemic Emergency Unemployment Compensation (PEUC), which covers people who have used up their state benefits, and PUA will also see their benefits extended through early September. PEUC runs out after 53 weeks. PUA expires after 79 weeks. The Act also added $21.6 billion to the Emergency Rental Assistance Program, which is being distributed to states and local governments, who then assist households.
The far-reaching American Jobs Plan includes some elements not traditionally associated with infrastructure. Those range from $213 billion earmarked for affordable housing to $100 billion set aside for workforce development among underserved groups. The plan also looks to increase pay for caregivers who tend to the elderly and disabled. Each of these efforts would mean more money for those affected. On a broader scale, the plan also has the potential to create many jobs across a wide swath of the economy. The additional money in people’s pockets is still hypothetical, of course. The plan must still find its way through Congress.
Originally published on April 5 @ 4:45 p.m. ET.
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Author: WCCO | CBS Minnesota