The IRS issued more than 169 million payments in the third round of direct stimulus aid, with the $1,400 checks reaching most American households. But some advocates and lawmakers are pushing for a fourth round of stimulus aid that would effectively send recurring payments until the pandemic ends.
So far, the federal response to the economic crisis caused by the coronavirus pandemic has paid out $3,200 to eligible adults: $1,200 under the Coronavirus Aid Relief and Economic Security Act in March 2020 $600 in a December relief measure; and $1,400 under the American Rescue Plan, signed in March by President Joe Biden.
Despite that financial assistance, millions of Americans remain in financial distress, and the spread of the Omicron variant is creating new economic headwinds. More than one-quarter of Americans struggled to pay their household expenses in the previous week, according to new data from a Census survey that polled people during the first two weeks of December.
The unemployment rate stands at 4.2%, still higher than its pre-pandemic level of 3.5%. And while businesses are hiring, there are still about 2.3 million fewer people on payrolls today than before the pandemic. Economists are signaling alarm over the spread of the Omicron variant, which has closed college campuses and prompted the cancellation of high-profile events including Broadway shows.
The surge in COVID-19 cases is “hitting demand in the leisure, entertainment, travel and restaurant industries, as indicated by high-frequency data,” said David Kelly, chief global strategist at JPMorgan Funds in a January 3 research note. “It will also lead to widespread absenteeism in early 2022, applying a significant drag to the economy in the first quarter, following a very strong fourth quarter.
At the same time, fiscal support for more than 30 million American families ended last month, with the final payment from the Child Tax Credit landing in bank accounts on December 15. Those checks — which provided up to $300 per eligible child — won’t continue in 2022, as the Build Back Better Act, which included a one-year extension of the program, failed to progress due to opposition from Senator Joe Manchin, a Democrat from West Virginia.
For many people, in short, stimulus aid is long gone, an issue that is on the minds of many Americans who continue to struggle with joblessness and a weak labor market. Indeed, almost 3 million people have signed a Change.org petition started last year that calls on lawmakers to pass legislation for recurring $2,000 monthly payments.
Some advocates are urging lawmakers to advance new stimulus efforts, including for one group in particular that has been hard-hit by rising inflation amid the pandemic. As of December, more than 95,000 people have signed a petition from the Senior Citizens League, an advocacy group for older Americans, to provide a one-time $1,400 check to seniors.
Rising inflation in 2021 far outpaced the 1.3% benefit increase that Social Security recipients received at the start of that year. But even with the 5.9% cost-of-living increase that goes into effect January 2022, many seniors will still fall behind inflation, which jumped 6.8% in November.
“It would help people buy an extra week of groceries for a few months,” said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League. “A stimulus payment would help them manage these higher rising costs.”
Recurring payments?
Some lawmakers have picked up the idea of recurring payments. Twenty-one senators — all Democrats — signed a March 30 letter to Mr. Biden in support of recurring stimulus payments, pointing out at the time that the $1,400 payments about to be distributed by the IRS wouldn’t tide people over for long.
“Almost 6 in 10 people say the $1,400 payments set to be included in the rescue package 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 Stimulus” check via a new effort from Governor Gavin Newsom. That effort will provide $600 for low- and middle-income residents who have filed their 2020 tax returns. Florida and parts of Texas have authorized bonuses for teachers to help offset the impact of the pandemic.
The letter from the U.S. senators doesn’t specify how large are the recurring payments they are seeking. A separate effort from Democratic lawmakers in January 2021 pushed for $2,000 monthly checks until the pandemic ends. Instead, the American Rescue Plan authorized one-time payments of up to $1,400 for each eligible adult and dependent.
Child Tax Credit: December end
Some families received another form of stimulus aid when the IRS in July deposited the first of six monthly cash payments into bank accounts of parents who qualify for the Child Tax Credit (CTC). Families on average received $423 in their first CTC payment, according to an analysis of Census data from the left-leaning advocacy group Economic Security Project.
Eligible families received up to $1,800 in cash through December, with the money parceled out in equal installments over the six months from July through December. The aid was due to the expanded CTC, which is part of President Joe Biden’s American Rescue Plan.
Families who qualify received $300 per month for each child under 6 and $250 for children between 6 to 17 years old. Several families that spoke to CBS MoneyWatch said the extra money would go toward child care, back-to-school supplies and other essentials.
While progressives and some Democrats urged lawmakers to continue the enhanced CTC, it appears stalled at the moment. That means families won’t receive a CTC payment in January or beyond.
Emergency funds, savings
So far, people who have received the three rounds of stimulus payments said they’re using most of the funds to pay down debt or sock away the money in savings, according to a recent analysis from the Federal Reserve Bank of New York. That could indicate that people are using the money to whittle down debt they incurred during the pandemic as well as to build up an emergency fund in case of another shock.
Millions of Americans were spared hardship due to the three rounds of stimulus payments, researchers have found.
But when stimulus has faltered, such as last fall when Congress was deadlocked on another round of aid, hardship increased “markedly” in November and December, according to a May analysis of Census data from the University of Michigan.
The curtailment of the CTC could provide more headwinds for families and the economy, noted Kelly of JPMorgan Funds.
“The IRS reports that these payments totaled roughly $15 billion per month and their sudden cessation could curtail recently booming spending on food and other household basics,” Kelly noted.
Still living paycheck to paycheck
Although the economy is improving, millions of people continue to suffer from reduced income and have not been able to tap government aid programs, said Greg Nasif, political director of Humanity Forward. Only 4 in 10 jobless workers actually received unemployment aid, according to a March study from economist Eliza Forsythe.
Many people never applied for unemployment benefits because they didn’t think they were eligible, while others may have given up due to long waits and other issues.
How likely is a fourth stimulus check?
Don’t hold your breath, according to Wall Street analysts.
For one, the Biden administration has focused on infrastructure spending to spark economic growth, banking that an investment in roads, trains and other direct investments will help get people back to work and spur the ongoing recovery.
Secondly, economists have pointed fingers at relief efforts such as the three rounds of stimulus checks for contributing to inflation. Because Americans had cash in their pockets, they boosted spending on goods such as furniture, cars and electronics. Combine that with the supply-chain crunch, and the result was sharply higher inflation, according to economists.
Without new stimulus efforts on the horizon, it’s likely that inflation could moderate in 2022, according to Brad McMillan, the chief investment officer at Commonwealth Financial Network. “One cause of inflation has been an explosion of demand driven by federal stimulus,” he noted in a December report. “But that stimulus has now ended.”
He added, “Yes, we will continue to face inflation and supply problems, but they are moderating and will keep doing so.”
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