Peter Navarro, the White House economic adviser, also expressed displeasure about the lack of stimulus checks. Navarro told Fox Business the $908 billion package is “about two months late and a trillion dollars short.”
“Don’t vote against it. A lot of people need these benefits. Leaving out stimulus checks is a sensible compromise,” said Bruce Meyer, an economist at the University of Chicago who studied the impact of the first round of stimulus checks.
Stimulus checks might not be that stimulative
The bipartisan package being negotiated in Congress would help because it includes forgivable loans to small businesses, extra funding to state and local governments to help with distributing vaccines and an extension of moratoriums on evictions. Crucially, it would provide $300 per week of enhanced federal unemployment benefits and extend expiring unemployment programs for gig workers and those out of work for more than 26 weeks.
Meyer said these unemployment programs are a more targeted way to help those who are truly in need.
“Those who had their hours cut or lost their jobs are the ones hurting, not the ones who still have their jobs,” said Meyer.
The worry is that another round of broad stimulus checks might not be that stimulative.
“People will just save it and not spend it,” said Gus Faucher, chief economist at PNC.
Faucher said that more targeted stimulus checks to lower-income Americans could be helpful, though it would also slow the negotiations down.
“The problem is the more complexity you raise, the more difficult it is to get the money out quickly. And to some extent, that defeats the purpose,” Faucher said.
David Kelly, chief global strategist at JPMorgan Funds, said the US economy simply “does not need” another broad round of stimulus checks that many Americans would end up saving.
More than 3.3 million Americans kept out of poverty
The stimulus checks helped boost disposable income and consumer confidence and provided a critical safety net for those most in need.
That translates to more than 3.3 million Americans who were kept out of poverty, Meyer said. In fact, the poverty rate dropped in the first few months of the pandemic — despite the millions of people suddenly out of work.
The research found that the stimulus checks had a bigger impact on lowering poverty rates than enhanced unemployment benefits did.
“It could have been a lot worse,” Meyer said. “And it’s going to get worse if we don’t have another stimulus package.”
Stimulus checks would lift the price tag above $1.2 trillion
Sanders did not explain precisely who he thinks should get stimulus checks now, simply saying in his statement these payments should go to “every working class American.” (Sanders also opposes the liability shield to corporations that is being discussed in the bill).
A Sanders spokesman told CNN Business that the senator would “likely” support stimulus checks to individuals making less than $120,000 a year. That is the threshold Sanders and others used in May when they introduced a bill providing a monthly $2,000 check during the entire pandemic.
Andrew Yang, the former Democratic presidential candidate, said in a tweet over the weekend it would be a “failure” if Congress passes a package without stimulus payments.
Despite the push from Sanders, Yang and other progressives, aides familiar with the negotiations tell CNN that $1,200 stimulus checks are not going to be included in the stimulus deal. That’s because the payments would cost between $300 billion and $500 billion, depending on who would qualify for them, turning a $908 billion relief package into one worth between $1.2 trillion and $1.4 trillion.
If the price tag gets above $1 trillion, it could lose suppose from Republicans, especially deficit hawks who are worried about the amount of debt the United States has racked up during the pandemic. (Of course, the US was already grappling with $1 trillion deficits before the health crisis as a result of spending surges and tax cuts during the Trump era).
Meanwhile, the recovery is faltering and the economy could plunge back into recession if Congress fails to act soon. And that would be especially tragic given that vaccines appear to be on the way.
“The recovery is at risk if we don’t get a substantial stimulus bill soon,” Faucher said. “The light is there at the end of the tunnel. We can get there. We just need more support.”