For what seems like the hundredth time this year, COVID relief bill negotiations are apparently back on, but key differences remain between the two sides, leaving many skeptical that Congress will ever reach a deal. Speaker Pelosi is adamant about providing relief to state and local governments, while Leader McConnell refuses to budge on liability protection for any company whose employees contract the coronavirus – both of which are non-starters for the other side.
Even the new, bipartisan $908 billion proposal that’s gaining steam on the Hill this week has faced heavy criticism from many Democrats for not including a second round of $1,200 stimulus checks. We believe that these checks are a vital part of any potential relief bill, so we want to take a closer look at what’s at stake in these negotiations and why these checks are such an effective form of stimulus.
The need for sweeping stimulus is clear. Without relief from Congress, 12 million people stand to lose unemployment insurance, 30-40 million could face eviction by the end of the year – even as cases spike – and as many as 17.1 million could face food insecurity. Meanwhile, millions of renters will owe an average of $5,850 in back rent and utilities by January. Folks need money immediately, so the solution should be obvious: just give people more money.
Beyond the moral justifications, sending stimulus checks is simply good economics. Remember: the economy runs on consumer spending, so having millions of unemployed, homeless, and debt-ridden Americans is a recipe for economic disaster. Therefore, stimulus checks will help countless folks stay above water in the short term, keep them out of crushing debt cycles in the long term, and immediately generate billions of dollars in consumer spending, supporting the economy from the ground up.
Stimulus checks are also remarkably effective, even compared to other COVID support measures and provisions. In fact, economists estimate that the poverty rate was over 2 points lower in April and May than it was at the start of the year, largely thanks to the first round of stimulus checks passed in March. The study also credited the now-lapsed $600 per week enhanced unemployment insurance, clearly demonstrating the benefits of a universal $15 per hour minimum wage. Additionally, consumer spending rose in both May and June, proving that consumers recirculate stimulus money into the economy immediately. This supports research from the Congressional Budget Office which showed that a dollar spent on corporations or wealthy folks only generates $0.40 and $0.60 respectively in additional economic activity, while each dollar given directly to everyday Americans generates $2.10.
Another benefit of stimulus checks is that they are widely available to every citizen who desperately needs it. The best way to make sure nobody falls through the cracks or gets left behind is to reduce bureaucratic barriers and expand eligibility so that this money can reach the hands of the folks who need it most as quickly and effectively as possible. Additionally, checks help get money to folks who haven’t lost their jobs, but might be struggling with unexpected medical or childcare costs – or might still lose their job as more businesses close and more places are imposing a second round of COVID restrictions. Simply put, the more money in the pockets of working Americans, the better for everyone.
Clearly, now is not the time for the federal government to pinch pennies or to hide behind the flimsy facade of deficits as an excuse to let struggling Americans suffer. As Federal Reserve Chair Jerome Powell has repeatedly stated, the risk of not doing enough far outweighs any risk of overdoing it, and inaction could hamstring recovery efforts for years to come. Congress has a clear choice: they can abandon their constituents by dealing in half-measures (or worse, doing nothing at all), or they can pass a comprehensive bill that includes direct stimulus checks – one of the most effective forms of stimulus there is.
