The COVID-19 pandemic has ground the American economy to a halt. Lockdowns, which are necessary for slowing the spread of the coronavirus, have put millions of people and small-businesses out of work. To address this issue, the U.S. government passed the CARES Act, which supplied eligible Americans with a one-time payment of $1,200.
While this seems like a large total sum, most citizens and lawmakers agree that $1,200 is not enough to keep people economically stable and active over the months-long course of the pandemic. This sentiment has prompted discussion of further stimulus payments.
Will there be another stimulus payment? What form would is take?
There has been partisan dispute over how to follow the CARES Act. Two weeks ago, Democrats proposed the Emergency Money for the People Act. This legislation would provide Americans who earned less than $130,000, and are over the age of 16, with monthly $2,000 payments that would continue for either 6 months or until the unemployment rate returns to 3.5%, where it was before the pandemic.
Marital status and number of children would also be taken into account when determining the size of the payment. Married couples who earn less than $260,000 combined would receive $4,000 a month. People would also receive an extra $500 per child, for up to 3 children per household.
While Republicans ended up agreeing to a version of the CARES Acts that involved twice as much spending as they’d previously proposed, they are hesitant about legislating monthly payments. Some in the GOP prefer a second one-time payment solution.
Art Laffer, a member of President Trump’s economic recovery task force, has proposed that the second stimulus payment come in the form of a payroll tax waiver. This would mean the deductions that usually come out of your paycheck would be cut, leaving you with extra money each payday. Though such a system has been implemented in the past, it carries a few glaring issues.
For one, it is not an immediate lump sum, meaning it might not incite people to spend. It would also gouge the resources of the social services sector. Finally, and most notably, it would only help those who are currently employed and do nothing the 25 million newly unemployed.
Do stimulus checks actually help the economy?
Many people are uncertain about whether stimulus checks are actually effective at boosting the economy. Memes have been circulating about people making frivolous purchases, and many fear that the money will just go straight into savings, making no impact on the economy at all.
Current, the digital banking service, has analyzed data on 16,595 Americans who have received their $1,200. Of this group, 45% have already spent the entire payment. The majority of the money was spent on food, groceries, and streaming services.
People are also using the money on unusual and unnecessary items, but that may not be a bad thing. The point of the stimulus money was to get people spending, even if it is on items that most would find frivolous. People have been buying guns, cannabis products, costumes, video games, and even intimate toys with their stimulus checks. While this seems somewhat inappropriate, these are solid examples of the checks spurring widespread spending.
The question of how long a stimulus check will affect the economy depends a lot on whether these are monthly or one-time payments. Monthly payments would be much more costly to the government, but would undoubtedly make people much more comfortable spending. And if the government wants a long-term solution to stagnation, it will require a long-term solution.