(CBS Miami) — The possibility of a fourth stimulus check still looms large, as the third round of economic relief payments winds down. Over 165 million payments of up to $1,400 per person have been distributed since the American Rescue Plan (ARP) passed over two months ago. Many plus-up payments, for those who didn’t originally receive what they were due, have also been sent. Taken together this covers most of the $422 billion set aside in President Biden’s $1.9 trillion third stimulus package.
These relief payments are part of a broad effort to cushion COVID’s economic impact on households and support the economy during the ongoing pandemic recovery. The stimulus package also extends unemployment benefits, enhances the child tax credit, and much more. The latest round of checks followed the $1,200 CARES Act payments at the pandemic’s outset and the $600 payments from January.
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In the first quarter of 2021, the U.S. economy grew at an annualized rate of 6.4 percent, faster than the 4.3 percent rate from the fourth quarter of 2020. The Conference Board forecasts 8.6 percent growth in the second quarter, though an annual rate of growth in the double-digits is possible. The country’s gross domestic product (GDP), an estimate of economic activity in the economy, is close to where it was before the pandemic. Experts believe it will return to its pre-pandemic level this summer. According to the Bureau of Economic Analysis, “the increase in first quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic.”
Large segments of the workforce have felt little economic impact from the pandemic. Many jobs accomplished at a desk in an office are just as easily accomplished at a desk in someone’s home. And with fewer outlets for spending during the pandemic, plus three stimulus checks, many Americans saved more money. The personal saving rate ballooned to 33.7 percent in April of 2020 and has remained well above pre-pandemic levels ever since. In March of 2021, it spiked again to 27.6 percent, likely due to the latest round of stimulus checks and tax refunds. Many households have accumulated much more savings than they had before the pandemic. As the economy opens up, that pent-up demand will continue to push the broader economy.
The housing market has also surged, thanks to low interest rates and people stuck at home realizing the limitations of their living space. The National Association of Realtors recently reported that the national median sales price for a home hit $341,600 in April, up 19.1 percent from April of 2020. That number rose all over the country. Much of that rise was likely pushed by houses priced above the median. Housing inventory increased over March, but was still down 20.5 percent year over year. And of the homes that sold in March, 88 percent were for sale for less than a month.
The stock market continues to perform well too. The Dow Jones closed Wednesday at 34,304. That’s pretty close to highs reached in early May, even as concerns about rising prices and supply chain issues continue. Individual investors, flush with extra cash from three rounds of stimulus, have poured into the market. Bigger investors are betting on a strong economic recovery as the year progresses. While some experts foresee some of the strongest economic growth in decades, many are also worried about higher inflation. Recent projections show prices rising about 4.4 percent in 2021, as compared to 2.3 percent in 2019 and 1.7 percent in 2020. April prices moved up 0.8 percent from March for the biggest one-month jump in over a decade. Some of the rise is likely due to depressed prices returning as the economy moves on from the pandemic.
According to Yeva Nersisyan, Associate Professor of Economics at Franklin & Marshall College, “we had a whole year where prices didn’t really increase. And for some stuff they actually decreased. So, if you’re comparing this year to that year, then the reading is going to be higher than if the prices had continued to just go up. If there wasn’t a pandemic, the prices would just go up more steadily, and we wouldn’t see that kind of a jump that we saw recently.”
Price hikes and shortages across a whole range of products will likely continue to plague consumers in the short-term. Companies have to revive and retool their supply chains in the midst of drastic changes in consumer demand patterns. COVID has changed how and what people consume. The way these changes play out in a post-COVID world remains to be seen. Companies, however, have to guess now where demand for their product will be when all the dust settles. Predicting the future is hard enough in a normal economy. It becomes much harder in an economy emerging from a pandemic. These price changes and shortages are additional side effects of COVID, though economists predict they should improve with time.
Weak Economic Recovery For Others
The pandemic has spotlighted growing disparities across the broader economy. While many households are flourishing financially during COVID, many others have fallen far behind where they were in early 2020. Much of the disparity hinges on whether wage earners could work remotely or needed to be on-site.
Financial insecurity is still widespread, with 40 percent of respondents in a recent TransUnion survey saying their current income falls short of their pre-pandemic income. Nine percent of American adults (approximately 18 million people) reported a shortage of food in their household over the previous week, according to U.S. Census survey data from early May. Approximately 15 percent of renters (10.9 million people) have fallen behind on their rent, including 19 percent of renters with children in their household. (The federal eviction moratorium set to expire on June 30 doesn’t forgive rent owed, it pushes the debt into the future.) Millions are also struggling to pay their mortgage.
As of early May, over a quarter of American adults (62 million people) reported some difficulty keeping up with expenses in the prior week. A survey from the Federal Reserve Bank of New York determined that over 58 percent of those receiving a third stimulus check have or will use the money on consumption or paying down debt. That includes debt incurred during the pandemic. A Bloomberg/Morning Consult poll from last February listed food and housing costs as the second and third most popular uses of the then-upcoming stimulus.
Employment also remains well below pre-pandemic levels. Hiring for April fell well short of expectations, with the unemployment rate moving up slightly. Millions of low-wage jobs lost during the pandemic have not returned. Approximately 406,000 people initially applied for unemployment insurance last week, the lowest number since the start of the pandemic. (A typical pre-pandemic week saw about 250,000 new unemployment applications.) Another 93,000 applied for Pandemic Unemployment Assistance (PUA), which supports freelance and self-employed workers. As of the week ending May 8, just under 16 million workers were receiving some form of unemployment aid. But many jobless Americans have not received unemployment insurance and other government benefits, because of long waits, perceived ineligibility and other issues.
It’s unclear why job growth continues to lag expectations. Some have argued that overly generous benefits are making unemployment more attractive than working. Others believe those willing to work cannot find jobs with the wages and benefits they need to survive. As Marie Newman, a U.S. Representative from Illinois, put it, “there is not a shortage of Americans looking for work, there is a shortage of Americans willing to work for starvation wages with no benefits, no health care, and no protections during a pandemic.”
The previous round of stimulus checks has helped those Americans still awaiting the recovery to pay bills and put food on the table. But they were a short-term fix for a longer-term problem. The money may run out well before many people can once again earn a living wage. And some politicians feel that the last stimulus check, on top of previous stimulus checks, still isn’t 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, sent a letter to President Joe Biden at the end of March 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 May 17 letter from members of the House Ways and Means Committee also pushed for additional stimulus. “The ARP’s $1,400 checks alone will keep 11 million people out of poverty this year, with UI (unemployment insurance) expansion and other provisions in the bill accounting for the another five million. A fourth and fifth check could keep an additional 12 million out of poverty. Combined with the effects of the ARP, direct payments could reduce the number in poverty in 2021 from 44 million to 16 million.”
READ MORE: Child Tax Credit: When Will Your First Monthly Check Come?A majority of Americans also favor recurring relief payments. According to a January poll from 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. A struggling restaurant owner’s online petition calling for $2,000 monthly payments for every American adult has received over to 2.2 million signatures. The Urban Institute estimates that another stimulus payment could reduce poverty by at least 6.4 percent in 2021. 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.”
California Governor Gavin Newsom is pushing a fourth stimulus check for state residents. His recent $100 billion budget proposal includes a $600 payment to individuals and households making between $30,000 and $75,000 per year. The state’s previous stimulus went to those with an annual income under $30,000.
The Biden administration, which authored the third round of stimulus, has not stated its position on a fourth check. The president made no mention of the possibility in his first speech to Congress. And neither the American Jobs Plan nor the American Families Plan that followed includes another relief payment in its proposed form.
Why Is A Fourth Stimulus Check Unlikely?
All of this voiced support keeps the possibility of another round of stimulus checks — or recurring stimulus checks — alive. It doesn’t make it likely, however. And there are a number of reasons why.
Vaccinations are progressing steadily. Adults and those at least 16 years old are now eligible to be inoculated in all 50 states. Some places allow vaccinations for those as young as 12. Three different options are available to the public again since April’s pause on the Johnson & Johnson vaccine was lifted. Actually putting needles in arms will take more time, even since supply has caught up to demand. Americans have received over 289 million doses, with 49.7 percent of the population having received at least one dose and 39.7 percent completely vaccinated. Vaccination numbers continue to increase at a rate of about 1.5 million doses per day. The Centers for Disease Control and Prevention (CDC) recently advised that the fully vaccinated can forgo masks and social distancing in most indoor and outdoor settings.
With vaccinations rising and guidance moderating, the nation’s economy is showing additional signs of recovery as well. State and local governments have loosened restrictions, which helps businesses. Hiring has picked up in some sectors. The average for new unemployment claims over four weeks continues to push downward. Consumer confidence is holding steady near its highest level since the start of the pandemic. Consumers are also generally optimistic about business conditions and the job market.
Consumer spending drives two-thirds of the country’s economy. And the third stimulus check, along with excess pandemic savings, has boosted people’s spending power. That spending power will increase even more when monthly Child Tax Credit payments start in July. An improved financial position generally also raises optimism for 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.
In Nersisyan’s view, “let’s see if people still need more assistance. Let’s see how the economy’s doing as things keep opening up and the vaccination rates go up and things go back to some sense of normal. And let’s see where the unemployment numbers are. Are people still running behind on their rents and mortgages and so on? And based on that, let’s decide whether we need to inject more spending into the economy. I would say wait and see right now.”
Some states are going a step further to push people back into the job market. These states, all led by Republicans, are planning to turn down the federal unemployment benefit bonus for its citizens. Earlier this week, Nebraska and Florida announced their discontinuation of these benefits. Nebraska’s will end on June 19, and Florida’s on June 26. Texas added its name to the list last week, when governor Governor Greg Abbott announced the June 26 end to federal benefits. All of these follow similar announcements from Alaska, Arizona, Georgia, Indiana, Ohio, and West Virginia. A total of at least 24 states are making the same kind of move.
Aside from the generally improving economy, the political machinations of Washington make a fourth stimulus check a challenge. The American Rescue Plan, which included the third stimulus check, passed along party lines. Republicans were not interested in spending anywhere close to $1.9 trillion, though some did support the third relief payment. 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 subsequent ruling by the Senate parliamentarian, who interprets the legislative body’s rules, opened up a path 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 infrastructure plan, which also faces Republican opposition. The American Jobs Plan, worth $2.3 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. In theory, one could be added at a higher overall 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 to fund another payment.
The American Families Plan, focusing on childcare, education and paid family leave, would cost another $1.8 trillion. Another stimulus check is not included in the current version of this plan either, though one could theoretically still be added. According to the administration, funding for the American Families Plan would come from higher taxes on wealthy individuals. Republicans will likely 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 broad pieces of legislation. But Joe Manchin of West Virginia, among the most centrist Democratic Senators, has warned against overusing the process. He is also apparently 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. They’re unlikely to add a fourth stimulus check to either plan, driving up the price tag by hundreds of billions of dollars. They’re also unlikely to use reconciliation to pass another stimulus check on its own.
What Other Aid Is Coming?
While a fourth stimulus check is improbable, more direct payments to Americans have already been signed into law. The American Rescue Plan 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 monthly basis from July to December of 2021, with the remainder to be issued when the recipient files their 2021 taxes. 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 Biden has stated his interest in extending it through 2025.
The American Rescue Plan also extended the weekly federal unemployment insurance bonus of $300 through Labor Day. (As mentioned before, multiple states will be ending the additional unemployment in the coming weeks.) 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 ARP 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 American Families Plan includes 12 weeks of paid family leave that could reach as high as $4,000 per month, depending on a worker’s income. It also boosts the Child and Dependent Care Tax Credit and places a ceiling on the cost of childcare for many families. The plan sets aside $200 billion for universal preschool. In addition to helping working parents pay for childcare, the plan hopes to allow more parents to return to the workforce.
Additional money in people’s pockets from the American Jobs Plan and American Families Plan is still hypothetical, of course. Both plans must first find their way through Congress.
MORE NEWS: Child Tax Credit: How Much Will Your Monthly Check Be?Originally published on April 5 @ 4:45 p.m. ET.
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