- Top Democratic economists say another wave of stimulus payments is likely needed to help people confront the economic fallout from the coronavirus.
- More Democratic lawmakers are also getting behind the idea, including Alexandria Ocasio-Cortez, Kamala Harris, and Bernie Sanders.
- “Given the extent of layoffs and the absence of paid leave, another round of checks to households will likely be warranted,” one top economist told Business Insider.
- Visit Business Insider’s homepage for more stories.
Over 80 million people received $US1,200 stimulus checks from the government last week as part of the largest federal relief effort since the end of World War II.
A centrepiece of the $US2.2 trillion economic stimulus package approved last month, the direct payments are designed to shore up household finances and provide an extra source of income for Americans during the coronavirus pandemic.
Now there’s a growing consensus among top Democratic economists and lawmakers that it’s not enough – and another round is needed to provide further assistance to people facing a significant cash-crunch as expenses pile up.
“Given the extent of layoffs and the absence of paid leave, another round of checks to households will likely be warranted,” said Jared Bernstein, a senior fellow at the Centre on Budget and Policy Priorities and formerly a top economist for presumptive Democratic nominee Joe Biden.
“People’s rent is coming due again,” he told Business Insider, noting he believes targeting aid – without a delay, if possible – to low-income renters and essential workers barely making $US15 an hour could be effective in another wave of payments.
There are early signs people are using their federal cash to cover the basics, such as groceries, rent, credit card and debt payments, or gas, The Washington Post reported. In the meantime, shelter-at-home orders have virtually shuttered the American economy and it’s shedding jobs at a historic pace.
A staggering 26 million Americans filed for unemployment over the last five weeks, underscoring a precipitous economic collapse that the International Monetary Fund says could be the worst since the Great Depression.
Still, the checks help illustrate the economic challenges ahead for many people, especially those who were left out, like college students claimed as dependents on their parents’ tax returns or adult dependents.
The CEO of a $US29 billion asset manager who’s steered his firm since 9/11 told us why pessimism about the coronavirus crisis is overblown – and shared 3 stock picks for a new normal in healthcare
A recent Morning Consult/Money poll indicated more than half of Americans said the checks wouldn’t tide them over financially during the pandemic.
But Democrats are increasingly open to the idea of more stimulus checks.
House Speaker Nancy Pelosi said in a letter sent to House Democrats earlier this month that another large stimulus package would include “additional direct payments” for families on top of other liberal priorities.
More Democrats are getting behind the idea of recurring direct payments
Economists say Congress has a colossal task before it: to craft and pass another major legislative package that ensures the nation’s economic survival and puts America in a position to confront an extraordinary public health emergency.
Some key concerns among lawmakers are addressing depleted budgets for state governments dealing with plummeting tax revenue. Many are pleading for a massive infusion of aid to weather the drastic hit from the pandemic. Democrats are also pushing to expand unemployment benefits and strengthen other safety net programs, as well as ramp up funding for virus testing.
But stimulus checks are also shaping up to be a big priority for Democrats in a “Phase 4” stimulus package that could easily top $US1 trillion.
Earlier this month, over 50 Democratic lawmakers sent a letter to congressional leaders calling for recurring relief payments to help low-income people, though it lacked specifics about a dollar amount.
Signatories included New York Rep. Alexandria Ocasio-Cortez and California Sen. Kamala Harris, a former presidential candidate – highlighting a consensus that’s emerged between centrist and progressive Democrats to provide ongoing federal help.
Bills have also been introduced by Democratic Reps. Ro Khanna and Tim Ryan to give $US2,000 per month to every American over the age of 16 until the pandemic is over. Sen. Bernie Sanders has proposed something similar.
“A one-time, $US1,200 check isn’t going to cut it,” Khanna said in a statement announcing the plan.
The flurry of recurring payment proposals underscore a recognition among lawmakers that the economic downturn will stretch on for a long time. The Congressional Budget Office said in an analysis last month that unemployment could be as high as 9% at the end of 2021.
“Lawmakers understand this problem is not going to be solved very quickly,” Jason Furman, who chaired the Council of Economic Advisers under President Obama, told Business Insider. “Even if every governor ordered their states reopened, lots of people aren’t going to go to lots of stuff and there’s still going to be much economic pain for a while.”
Furman, now a professor at Harvard University, said he favours sending checks to Americans every four months during the pandemic, though not necessarily the full $US1,200 amount as has already been done.
Additional stimulus checks are a big Democratic priority – for now
Within Congress, the debate is underway among Democrats gearing up for another round of negotiations with Republicans.
But Senate Majority Leader Mitch McConnell slammed the brakes on Tuesday, citing the “extraordinary” national debt. He urged waiting until the Senate was back in session on May 4 to determine the outline of another aid bill.
A top Democratic Senate aide familiar with coronavirus relief negotiations told Business Insider that stimulus checks would be “one of the main asks” for Democrats, particularly progressives who are seeking to widen eligibility to college-aged dependents and undocumented immigrants, as well as to make them recurring payments.
“It will definitely be part of the phase four discussion,” the aide said, while adding that no hard dollar amounts have been seriously discussed yet as planning is still in its early stages.
The aide also said direct payments were “part of a long list of things that need to get done,” which included emergency aid to states and a boost to the food stamp program.
Senate Minority Leader Chuck Schumer said Democrats will be pressing for a “big, broad, bold” relief bill.
“For anyone who thinks this is the last train out of the station, that is not even close to the case,” he said on Tuesday.
A possible hurdle to an expansive relief bill could be McConnell’s insistence that further coronavirus bills shouldn’t explode the federal debt, which stands at $US24.2 trillion.
On Wednesday, the Kentucky Republican told conservative radio host Hugh Hewitt that states should be allowed to declare bankruptcy instead of await a federal bailout, casting Democratic-led states in particular as irresponsible spenders.
The comments came only a day after the Senate approved an interim $US484 billion package to replenish government funding for a program aiding small businesses both Republicans and Democrats sought and increased health spending.
McConnell’s reluctance to shovel more money onto the federal response could stymie the likelihood of direct payments in a Phase 4 package. The checks made up $US290 billion of the CARES Act, according to Bloomberg.
Many economists, though, point to low interest rates that reduce borrowing costs and argue any alarm about the perils of deficit-spending should be swept aside to deal with the economic crisis.
Furman said lawmakers shouldn’t be concerned about the federal debt at the moment.
“There is no debt constraint on well-designed actions. If there is something useful that can be done, money should not be an obstacle to it,” he said, adding he believed the economy “could easily absorb” between $US3 trillion and $US5 trillion more in borrowing.
That argument was also mirrored by Bernstein, who said he would “assign zero concern to that, probably even negative concern.”
“It is far more important to provide relief to people and businesses who we are insisting they shelter in place,” Bernstein said. “The idea that you would fail to do enough because of some abstract concerns of big numbers is economically misguided and politically wrong.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.