A possible fourth stimulus check remains a popular topic with the third round of economic relief payments almost concluded.
About 161 million payments of up to $1,400 per person have been issued since the third stimulus package passed in mid-March. Paper checks and EIP cards continue to show up in mailboxes. And plus-up payments, for those who didn’t receive what they were due, have also been going out for weeks. Together they add up to most of the $422 billion allotted in President Biden’s $1.9 trillion American Rescue Plan Act.
These relief payments are part of a larger effort to cushion COVID’s economic impact on households and support the economy while the pandemic recovery continues. The stimulus package also extends unemployment benefits, enhances the child tax credit, and much more. The recent round of checks follows the $1,200 CARES Act payments at the pandemic’s outset and the $600 payments from January.
How Is The Economic Recovery Going?
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 annual rate of growth could reach double-digits in the second quarter. 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 performed at a desk in an office were just as easily performed at a desk in someone’s home. And with fewer outlets for spending, plus three stimulus checks, many Americans managed to save more money. The personal saving rate ballooned to 33.7 percent last April and, at 13.7 percent for February 2021, remains almost double where it was before the pandemic. Households have accumulated a whopping $4.1 trillion in savings, more than triple what it was before the pandemic.
The housing market has surged, as people stuck at home realized the limitations of their living space. The National Association of Realtors recently reported that the national median sales price for a home hit $329,100 in March, up 17.2 percent from March of 2020. That number rose in every region of the country. Much of that rise was likely pushed by houses priced above the median. Housing inventory increased slightly, but was still down 28.2 percent from the previous February. And of the homes that sold that month, 83 percent were for sale for less than a month.
The stock market also continues to boom. The Dow Jones is still hovering near record territory, closing Thursday at 34,055. Individual investors, flush with extra cash from three rounds of stimulus, have poured into the market. Bigger investors continue to bet on a strong economic recovery as the year progresses. While some experts foresee some of the strongest economic growth in decades, others are worried about higher inflation. Recent predictions show prices rising about 2.7 percent in 2021, as compared to 2.3 percent in 2019 and 1.7 percent in 2020. Some of the predicted rise will likely result from depressed prices returning as the economy moves out from under the pandemic. All of this suggests worries about inflation may be overblown.
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.”
Many households are still far from where they were in early 2020, before COVID crippled the economy. Financial insecurity is 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 (18 million people) reported a shortage of food in their household over the previous week, according to U.S. Census survey data from the second half of March. Approximately 15 percent of renters (10.7 million people) have fallen behind on their rent, including 21 percent of renters with children in their household. (The federal eviction moratorium currently in effect doesn’t forgive rent owed, it pushes the debt into the future.) Millions are also struggling to pay their mortgage.
As of the second half of March, nearly a third of American adults 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. Millions of jobs lost during the pandemic have not returned. And more than half of the job loss during the COVID crisis has come in low-wage industries. Approximately 553,000 people initially applied for unemployment insurance for the third full week of April, slightly down from the previous week’s adjusted level. (A typical pre-pandemic week saw about 250,000 new unemployment applications.) The four-week moving average is at its lowest since the start of the pandemic. Another 122,000 applied for Pandemic Unemployment Assistance (PUA), which supports freelance and self-employed workers. Many jobless Americans have not received unemployment insurance and other government benefits, because of long waits, perceived ineligibility and other issues. And hiring (or re-hiring) for jobs in hard-hit industries like food service and hospitality is proceeding slowly, even as hiring picks up across the economy overall.
The most recent round of stimulus checks is helping those Americans still awaiting the recovery to pay bills and put food on the table. But they remain a short-term fix for a longer-term problem. The money will likely run out long before many people are once again able to earn a living wage. And some politicians feel that this latest stimulus check, on top of previous stimulus checks, still won’t be 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, recently sent a letter to President Joe Biden 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 majority of Americans also favor recurring relief payments. According to a January poll from the 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. 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.”
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 a recent speech to Congress. And the recently announced American Families Plan does not include another relief payment.
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 them 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. Three different options are available to the public again since the pause has been lifted on the Johnson & Johnson vaccine. Actually putting needles in arms will take more time, even as supply catches up to demand. Americans have received over 237 million doses, with 43.3 percent of the population having received at least one dose and 30 percent completely vaccinated. Vaccination numbers continue to increase at a rate of well over two million doses per day.
With vaccinations rising, the economy is showing additional signs of recovery as well. State and local economies are reopening, as restrictions loosen. Hiring has picked up in some sectors. The average for new unemployment claims over four weeks continues to push downward. Consumer confidence continues to climb, reaching 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 increased people’s spending power. An improved financial position generally also raises optimism in 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.”
The American Rescue Plan Act passed along party lines. Republicans were not interested in spending anywhere close to $1.9 trillion, though some did support the third round of stimulus checks. 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 an avenue 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 recently introduced infrastructure plan, which also faces Republican opposition. The American Jobs Plan, worth over $2 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. One could, in theory, be added at a higher 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 included. 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. It also reduces the odds of them using reconciliation to pass a fourth stimulus check outside of a larger package.
What Other Aid Is Coming?
While a fourth stimulus check is unlikely, more direct payments to Americans have already been signed into law. The American Rescue Plan Act 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 issued when the recipient files their 2021 taxes. (IRS Commissioner Charles Rettig recently confirmed a July launch “with payments going out on a monthly basis.”) 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 Act also extended the weekly federal unemployment insurance bonus of $300 through Labor Day. 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 Act 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.
Much of this additional money in people’s pockets is still hypothetical, of course. Both plans must first find their way through Congress.