Fourth dunning check to date: what is behind the surge in recurring payments?
The IRS issued more than 169 million payments in the third round of direct stimulus aid, and an additional 2.3 million people received checks for $ 1,400 last month. But some lawmakers are pushing for a fourth round of stimulus aid that would effectively send recurring payments until the pandemic is over.
So far, the federal response to the economic crisis caused by theawarded $ 3,200 to each eligible adult: $ 1,200 under the Coronavirus Aid Relief and Economic Security Act in March 2020; $ 600 in a December relief measure; and $ 1,400 as part of the US bailout package signed in March by President Joe Biden.
Despite this financial help, millions of Americans remain in financial difficulty, with about 4 in 10 people saying their incomes remain below their pre-pandemic levels, according to a survey by financial services company TransUnion. The pandemic has exacerbated the hardships faced by many families even before the crisis, with more than one in four households unable to afford basic items like rent or food for at least one of three years from 2014 to 2016, according to one. new analysis data from the Center on budgetary and policy priorities.
Nationally, around 14.6 million people are currently receiving some form of unemployment assistance. Unemployment rate, well above its pre-pandemic level of 3.5%. And while companies hire, there are still nearly 7 million fewer people on payrolls today than before the pandemic. A quarter of Americans struggled to pay for household expenses in the past week, according to census data from mid-June.
For many people, in short, the latest round of $ 1,400 checks may not last long – a problem that is on the way. Change.org petition began last year calling on lawmakers to pass legislation for monthly recurring payments of $ 2,000.who continue to struggle against unemployment and a weak labor market. Indeed, more than 2.6 million people have signed a
Some lawmakers have taken up the idea. Twenty-one senators – all Democrats – signed a letter of March 30 to Mr. Biden in support of the recurring stimulus payments, noting that the $ 1,400 payment distributed by the IRS will not delay people for long.
“Almost 6 in 10 people say the payments of $ 1,400 that are to be included in the bailout will last them less than three months,” the senators wrote in the letter.
Meanwhile, millions of Californians are online to get another dunning check via a new effort by Governor Gavin Newsom. Earlier this month, he signed a $ 100 billion plan that includes $ 600 stimulus checks to residents of the state, with about two-thirds of Californians likely to receive a stimulus payment under the framework. of the new plan.
Letter from US Senators does not specify the amount of payments they seek, but a separate effort from Democratic lawmakers in Januaryfor $ 2,000 in monthly checks until the end of the pandemic. Instead, the American Rescue Plan authorized $ 1,400 for each eligible adult and dependent.
Child tax credit: July 15 installments
Some families received another form of stimulus assistance on July 15 when the IRSon the bank accounts of parents eligible for the Child Tax Credit (CTC).
Eligible families will receive up to $ 1,800 in cash until December, with the money split in equal installments over the six months from July to December. The aid is due to the expanded CTC, which is part of President Joe Biden’s US bailout.
Eligible families will receive $ 300 per month for each child under 6 and $ 250 for children 6 to 17. Several families whosaid the extra money would go towards child care, back-to-school supplies and other essentials.
“A lot of people are going to be surprised when that first check comes in,” said Greg Nasif, political director of Humanity Forward, a nonprofit that claims recurring stimulus payments. “This will obviously add to the rise in popularity of checks.”
Families could benefit from more tax relief in the years to come, if Mr BidenGo ahead. As part of the plan, the expansion of the child tax credit would last until 2025, giving families four more years of greater tax relief for children.
Emergency fund, savings
So far, people who have received all three rounds of stimulus payments have said they use most of the funds to pay off debts or save money, according to a recent report. analysis of the Federal Reserve Bank of New York. This could indicate that people are using the money to reduce debts they incurred during the pandemic as well as to build an emergency fund in the event of another shock.
Still, many people said they plan to spend their stimulus funds for the most part – the costs of food and shelter were cited as the two main uses for the third stimulus check after savings, according to one. February poll by Bloomberg / Morning Consult.
Nearly 7 in 10 Americans who have received, or expect to receive soon, a third payment say it’s important to their short-term finances, Bankrate.com noted in April. This is down from around 8 in 10 people in March 2020, when the pandemic caused widespread unemployment, but overall the share of people in need of extra support remains high over a year longer. late, according to the personal finance company.
About 1 in 3 people said stimulus aid would help them support them for less than a month, according to the survey.
Millions of Americans have been spared the three rounds of stimulus payments, researchers have found. But when stimulus faltered, as last fall when Congress stalled on yet another round of aid, the woes increased “markedly” in November and December, according to one. May Analysis data from the University of Michigan census.
Still living paycheck to paycheck
Some leading economists have called for more direct aid to Americans. More than 150 economists, including former Obama administration economist Jason Furman, have signed a letter last year, who argued for “recurring direct stimulus payments, until the economy recovers.”
Although the economy is improving, millions of people continue to suffer from reduced incomes and have not been able to benefit from government assistance programs, Nasif said. Only 4 out of 10 unemployed have actually benefited from unemployment assistance, according to a March study by economist Eliza Forsythe.
Many people never applied for unemployment benefits because they thought they were not entitled to it, while others may have given up due to long waits and other issues.
“You will see reports of how the economy is starting to grow, but there are a lot of Americans who are living paycheck to paycheck, and for many of them, aid programs government have not been able to help, ”Nasif said.
What is the probability of a fourth raise check?
Don’t hold your breath, according to Wall Street analysts. “I think that’s unlikely at the moment,” Raymond James analyst Ed Mills told CNBC. One reason is that the Biden administration is focused on advancing its almost, which would reshape the economy by rebuilding aging schools, roads and airports, as well as investing in projects ranging from affordable housing to broadband.
The proposal, which the White House said would be funded by raising the corporate tax rate from 21% to 28%, could be “more difficult to pass” than the relief bill that provided the checks. $ 1,400 to most Americans because of opposition from Republicans and some Democrats, noted Brian Gardner, chief political strategist for Stifel in Washington.
Despite this, only about a third of Americans think the US bailout will help them much, according to one. Politico-Harvard poll. This suggests that some households feel they need more help to get through the next few months.
At the same time, the economy is expected to rebound this year thanks to increased COVID-19 vaccination rates and states reopening. JPMorgan Chase CEO Jamie Dimon predicted in his latest annual report letter to shareholders than an economic boom .
“[W]excess savings, new stimulus savings, huge deficit spending, more [quantitative easing by the Federal Reserve], a potential new infrastructure bill, a successful vaccine, and the euphoria of ending the pandemic, the U.S. economy is likely to explode. This boom could easily continue until 2023 as all spending could extend to 2023, ”Dimon wrote in the April 7 letter.
This could lessen the rationale for the government to offer more direct aid, especially if the unemployment rate picks up and more workers retire.
By the end of the year, the country’s unemployment rate could drop to 4.3%, according to Oxford Economics. Even so, the road to recovery “remains long” as there are still 4 million workers who have dropped out of the workforce, Oxford Economists Oren Klachkin and Gregory Daco noted in a research note.
“Looking ahead, the job market is set to experience an impressive run as expansion of vaccine distribution, more reopenings and fiscal stimulus drive hires up,” they predict.