The conversation
Economists: Biden’s $ 1,400 COVID-19 checks may be good politics, but they’s dubious
Most people used the first coronavirus check to pay off their savings or pay off debt. AP Photo / Eric Gay The US $ 1,400 direct checks to humans are the most expensive and perhaps most popular part of the $ 1.9 billion coronavirus relief package currently moving through Congress. The House will vote on March 6 on a final version of the package approved by the Senate before going to President Joe Biden’s desk for his signature. Moderate Senate Democrats, expressing concern about how many people would receive direct payments in the original House-approved proposal, have managed to make them more targeted at lower-income households, meaning that approx. 17 million fewer people will get a check. The coronavirus package contains many provisions that will help struggling Americans, and we understand why the checks are so popular – with 78% support among adults in a recent survey. Nobody turns down extra money. But as economists, we also believe that these direct payments make little economic sense – even with the lower income threshold. And this is true, whether you think the purpose of the checks is relief or stimulus. Lighting must be targeted. Let us first consider the checks as relief. The purpose of a measure designed primarily as relief during an economic crisis is to help those most affected. The latest jobs report shows that about 10 million people are unemployed, including 4.1 million who have been out of work for at least 27 weeks. This is about the millions of other people who left the workforce completely due to the pandemic. These people – mostly workers in the hospitality and leisure industry, excessively low incomes and people of color – urgently need help and support, without which poverty and homelessness are real possibilities. But for the vast majority of Americans, it is as if the pandemic has never happened financially. It is mostly office workers and other professionals who had to work the entire pandemic from home but saw no change in their income. A recent Pew survey found that 79% of Americans argued their family’s financial situation was about the same as a year ago. Most pain was surprising among lower-income households, with 31% saying they were worse off than a year ago – but even among this group, more than two-thirds said their situation was the same or better. The House standard would be completely phased out with $ 100,000 in income for singles and $ 200,000 for couples. According to the Institute for Taxation and Economic Policy, a non-partisan think tank, the Senate version will benefit at $ 80,000 and $ 160,000, which still benefits about 280 million people, including children. This is a fairly marginal change and still means that checks go to many people who do not really need them. Stimulus should stimulate OK, what then of the checks as a stimulus? So, even if many people who are not in desperate need get a payment, they will at least spend it and help the economy recover from the COVID-19 shock, right? There are two problems with it. The first is that it is not clear that the economy currently needs a lot of stimulus. While the job report showed millions of people remain unemployed, the February numbers came in much better than expected, adding to the signs that the U.S. economy is doing pretty well. There is also growing concern about inflation, given the sharp rise in some market interest rates, which could accelerate too much stimulus. The other problem is that previous coronavirus tests have not been as stimulating. The government began cutting $ 1,200 “economic impact” checks for most Americans in March and sent out another round of checks in December. Research on the first round of checks found that the vast majority of Americans saved or used the most money to pay off debt. About 40% of the money was spent on purchases to support industries such as food, beauty and other non-durable consumer products that had already seen an increase in spending before the checks went out. In other words, the checks were not very stimulating. In addition, a third of the likely recipients of the next round of checks said they would save the money. A better use of the money. So you may be wondering, what better way to spend the several hundred billion dollars spent on checks? The emergency relief payments should be kept to a minimum, such as people who have lost their jobs or work fewer hours due to illness. But we think a better way would be to increase the supplementary unemployment checks of the $ 300 lawmakers who agreed to $ 600, since the first coronavirus measure was included last March. Or follow the UK approach and offer efficient but generous income replacement to workers affected by COVID-19. Another very useful and focused measure is to help people pay their mortgages and rents – otherwise a massive housing crisis looms on the post-pandemic horizon. We believe that President Biden’s COVID-19 relief bill gets a lot right, such as significant assistance to state and local governments, increased benefits for food stamps, and additional support for small businesses. There are no one-time $ 1400 checks to people who have no economic problems during the pandemic. [Deep knowledge, daily. Sign up for The Conversation’s newsletter.]This article was published from The Conversation, a non-profit news site dedicated to sharing ideas from academic experts. It was written by: Robert H. Scott III, Monmouth University and Kenneth Mitchell, Monmouth University. Read more: Support for Biden’s $ 1.9 billion coronavirus relief package may not be as broad as it seems – it’s all a matter of perspective Relief or stimulus: What’s the difference and what it means for Biden’s $ 1.9 trillion coronavirus package? The authors do not work for it, consult, own shares or receive funding from any company or organization that benefits from this article, and have not disclosed any applicable commitments outside of their academic appointment.