Fourth dunning check to date: what is behind the surge in recurring payments?
The IRS issued more than 169 million payments during the third round of direct stimulus aid, with more than 2 million people in July receiving checks for $ 1,400. 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 assistance, millions of Americans remain in financial difficulty and the spread of thecreates new economic headwinds. A quarter of Americans struggled to pay for household expenses in the past week, according to census survey data from late July to early August.
Nationally, around 14.6 million people are currently receiving some form of unemployment assistance. Unemployment rate, still above its pre-pandemic level of 3.5%. And while companies hire, there are still around 6 million fewer people on payrolls today than before the pandemic. Economists worried about the spread of the Delta variant, with Oxford Economics slashing its forecast for 2021 global economic growth on Monday to 5.9% from 6.4%.
“Uncertainty and reluctance may ultimately lead to a slower recovery from here than our baseline assumes,” wrote Ben May, director of global macro research at Oxford Economics, in the report. Monday.
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 2.8 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, some states are creating their own form of stimulus checks. About two-thirds of California residents are likely to qualify for a “Golden State Stimulusverify via a new effort from Governor Gavin Newsom. This effort will provide $ 600 to low and middle income residents who have filed their 2020 income tax returns.
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). Families received an average of $ 423 in their first CTC payment, according to an analysis of census data from the left-wing advocacy group Economic Security Project.
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.
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 spend money on savings, 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.
Nearly 7 in 10 Americans who received, or thought they would soon receive, a third payment said it was important to their finances in the short term, 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 additional support remains high over a year over. 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 the stimulus faltered, such as last fall when Congress stalled on another round of aid, the difficulties 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’ll 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, government assistance programs. were unable to help, “said Greg Nasif, political director of Humanity Forward.
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, 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 says would be funded by raising the corporate tax rate from 21% to 28%, will likely consume lawmakers this fall, Stifel’s Brian Gardner said in an Aug.11 research note.
“The fall is shaping up to be a busy time in Washington as Congress attempts to complete two infrastructure bills (one that includes tax hikes), approve annual spending bills and raise the debt ceiling, “he noted.
At the same time, the economic rebound faces headwinds as the Delta variant spreads across the country. Some states with loware experiencing a spike in COVID-19 cases that could deter people from taking restaurant service jobs and other jobs involving public exposure.
Texas’ failure to stem the COVID-19 outbreak in its state has led toand an annualized drop in production of more than $ 13 billion, according to a recent study. Fear of contracting COVID-19 is also leading to job losses in Texas, as workers choose to stay home or have to stay home to care for family members with the disease, noted the study.
Meanwhile, federal pandemic unemployment benefits will expire over the Labor Day weekend, pushing at least 7.5 million unemployed out of the program, according to the left-wing Century Foundation. This could increase the hardship for many households, experts say.
“This cliff threatens the progress in economic recovery we have made by draining the economy from consumer spending, and will put millions of workers at risk of enduring hardship,” said Andrew Stettner, senior associate of the Century Foundation, in a statement.