WASHINGTON, DC – MARCH 27: U.S. President Donald Trump speaks during a bill signing ceremony for … [+]
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Despite all the animosity between the left and right these days, there’s one area that many on both sides of the aisle agree with: The U.S. needs more stimulus.
The idea of sending more direct funds to individuals is backed by about three-in-four voters. Democrats in the House of Representatives have already passed a relief bill that includes a bolstered second round of stimulus checks. Then President Donald Trump, came out in strong support of a second round of stimulus earlier this week.
“We will be doing another stimulus package,” Trump said in an interview with Scripps television stations. “It’ll be very good.”
While this certainly could tie to his low approval ratings, it still bolsters the probability of a second round of stimulus. There’s still a major catch to such a payment: Senate Republicans and some within Trump’s own administration have hesitated to support such an initiative.
“As we’ve said before, we’re talking about a bunch of different ideas that we may need to do in another bill,” Treasury Secretary Steven Mnuchin said in response to Trump’s statement, according to the Associated Press. “We’re going to take our time and make sure that we’re thoughtful. Whatever we do, it will be much more targeted, much more focused on jobs.”
Meanwhile, Senate Majority Leader Mitch McConnell has shown little willingness to speed up the timeline for a second stimulus and has not committed to direct payments to taxpayers. For many weeks he has stood pat that the Senate would not take up the issue until late July, after Senators return from their July 4 recess, which runs through the 17th.
The issues lie not just in the stimulus funds, but also in the debate in extending unemployment insurance perks. The CARES Act, passed in March, provided those collecting unemployment to receive $600 more per week. But the benefit ends July 31, even as 13.3% of the U.S. remains unemployed.
The sticking point for the bill could focus on the unemployment issue and determining if the checks will go to the same collection of taxpayers – those making under $75,000 as an individual or $150,000 for a married couple – or, what Republicans keep referring to as a more “targeted” group.
“But we need targeted tailoring of any kind of stimulus measures if we really want to get it to the people who are hurting the most,” said Sen. Thom Tillis, R-N.C., to the Associated Press.
It’s why, for those hoping for the next round of stimulus, there’s still very little clarity, even after Trump’s statement.
If Congress needs more proof of the benefit of the original CARES Act, here’s some signs it stemmed many of the deep losses typical in a time of extraordinary unemployment, especially as COVID-19 continues to spike in many states.
Late Rent & Mortgage Payments Swell In June
One of the original goals of the CARES Act was to provide a safety net, to prevent a wave of rent or mortgage defaults. It seemed to initially work. In April, 24% could not pay or only paid a part of their rent. Since many of those initial checks were spent, rates of rent defaults have increased. In May and June, that rate jumped to 31% and 30% respectively, according to apartmentlists.com.
The issue seems to build on itself. Of those that struggled to make their May payment, 44% provided a partial payment in June while 26% didn’t make their payment on time this month. Of those that didn’t complete their May payment at any point in the month, only 9% paid their June rent in full.
Much of the protections in the CARES Act around foreclosures, which put a freeze on such actions by landlords if they hold a federal loan, end in July. More than one-in-three renters worry that the unfreezing of evictions could lead to them losing their home in the next six months.
Poverty Rates Swell Less Than Expected
The original CARES Act seems to have aided in reducing poverty, a significant concern within a recession. Heading into the COVID recession, the growth in poverty was expected to spike to over 16%, from 12.5%, pre-crisis. Such a jump would have resulted in millions more falling under the poverty line.
But due to the first stimulus and increased unemployment benefits under the CARES Act, the Center on Poverty and Social Policy at Columbia University found that the rise of poverty hasn’t nearly matched expectations. If 70% of people that were eligible for the stimulus and unemployment checks received them, the poverty rate would only tick up 0.2 percentage points. With a 90% level of those qualifying for the benefits actually receiving the funds, then the poverty rate declined.
Black poverty rates were expected to climb from 20% to 25%. Instead, they etched just above 20%. Hispanic rates were expected to soar from just under 20% to 27% (when rounded). Instead, it’s just over 20% as well. Those over 65 actually saw a decrease in poverty, falling from 13.6% pre-crisis to 11% with a 70% access to the CARES Act.
The most striking difference came from those receiving unemployment benefits. The extra funds have moved the projection of poverty for a newly unemployed people from 19.5% to 6.4%.
“These findings demonstrate clearly that the expanded unemployment benefits have a strong poverty reduction effect for those who recently lost their jobs and can access the unemployment benefits,” according to the authors of the Columbia research.
Those That Could, Saved Their Checks
Republican concern for a second stimulus hinges on the size of the bill. One way to reduce that size is to ensure only those that need the money, actually receive it.
But it’s important to see that those who didn’t need the money immediately, decided to stock the funds for a time when it might become useful.
According to the robo-adviser Betterment, 47% of their investors that received a stimulus check either added money to their cash reserves or put a portion of it into their emergency funds.
Thirteen percent of users increased their retirement savings.