Ebene News – United States – Stimulus money should have gone to unemployment, economists say

As lawmakers debate increasing payments to $ 2,000, most Americans should save, not spend, their $ 600 checks

Galen Gilbert knows exactly what he will do with the check he receives from Washington as part of the pandemic relief program, regardless of the amount: put it in the bank

“I have more clients than I can handle now and have made more money than usual,” said M Gilbert, a 71 year old lawyer who lives in a suburb of Boston “So I’m not really in financial pain”

Cheryl K Smith, an author and editor who lives in Low Pass, Ore, isn’t in a rush to spend the money either.She also plans to save some of it while donating the rest to a food bank local “I’m actually saving money right now,” Ms Smith said

President Trump’s demand to increase the already approved individual payment from $ 600 to $ 2,000, with backing from Congressional Democrats, has dominated events in Washington this week and redefined the debate for more stimulus during the pandemic Mitch McConnell, the Senate majority leader, said on Wednesday he would not allow a vote on a stand-alone bill raising the checks to $ 2,000, condemning the effort, at least for now

Whatever the amount, the reality is that most Americans today are much more likely to save the money they receive

Of course, this money will be a lifeline for the roughly 20 million people who receive unemployment benefits and others who work reduced hours or earn less than before. Yet for the majority of the roughly 160 million individuals and families who will benefit, spending that money shouldn’t be a high priority.

After an initial round of $ 1,200 stimulus checks in the spring, the savings rate has skyrocketed and remains at an almost 40-year high This largely reflects the unbalanced nature of the pandemic recession that put some Americans in dire straits while leaving many others untouched

Economists on the right and left of the political spectrum have said that when otherwise financially secure people receive an unexpected windfall, they almost invariably save it Free market economist Milton Friedman pointed out this phenomenon decades ago

Many experts have said that a truly stimulating program would have affected payments to those who need it most – the unemployed

“We know where the pockets of need are,” said Greg Daco, chief economist at Oxford Economics “Putting it there would be a much more efficient use of the stimulus”

And because the money will be put to use immediately – the unemployed don’t have the luxury of saving it – it would also have a much bigger impact on the overall economy, through what experts call the Multiplier Effect Essentially, every dollar given to someone in need is likely to benefit the economy more, as it would be used to pay for, for example, groceries or rent

“Providing $ 2,400 to a family of four in the same financial situation as at the end of 2019 doesn’t do much to boost the overall economy right now,” Mr. Daco said “It’s not whether it’s positive or not It’s their potency that’s in question”

People whose adjusted gross income in 2019 does not exceed $ 75,000 will receive the payment of $ 600, and couples who earn up to $ 150,000 per year will receive double that amount There is also a payment of $ 600 for each child in families who meet these income requirements People making more than these limits will receive partial payments up to certain income thresholds

A more efficient approach, experts say, would have increased unemployment insurance benefits for the unemployed by $ 600 per week, which is the supplement provided by the stimulus package passed by Congress last spring, rather than the weekly subsidy of $ 300 provided for by the new legislation Democrats had lobbied for larger payments to the unemployed and included them in legislation passed by the House, which they control But the measure met stiff resistance from Republicans, who control the Senate, and did not was not included in the final compromise bill

The money could also have been used to extend two key unemployment programs for much longer than the 11 weeks provided for in the new bill The current extension only lasts until mid-March, well before mass vaccinations are not expected later in the spring and summer and the economy begins to return to normal

“The economy will remain constrained by the pandemic for the next six to nine months,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago

About 20 million Americans are on unemployment benefits and the unemployment rate is 67 percent A year ago it was 35 percent, a half-century low

And there are signs of an economic slowdown, more Americans are dropping out – more than half a million people have stopped looking for work and left the workforce last month, which means they are no longer counted among the unemployed

Of course, Washington money will be welcomed by most Americans, even if they are financially secure In addition to savings, others will use it to pay down debt or invest it

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A study released in August by three economists, Olivier Coibion, Yuriy Gorodnichenko and Michael Weber, found that recipients of the $ 1,200 payments sent under the CARES Act last spring largely abstained from spending the silver Only 15% of people said they spent it or planned to spend it Most said they would save the money or use it to pay off debt

The Economic Relief Program will issue payments of $ 600 and distribute a federal unemployment benefit of $ 300 for at least 10 weeks Learn more about the measure and its benefits To find out how to get help, see our Hub for help

Of course, some of the money that goes into the economy may soon reach those who need it most, and this will provide a financial cushion even for middle-class families who are safe by most. measures but stay away from the turbulence of 2020

But in terms of the multiplier effect, it is likely to pale from the impact of spring, when the unemployment rate was much higher and there were real fears that the country would experience a second great depression

“The more you push the raise button, the less impact you see,” said Scott Anderson, chief economist at Bank of the West in San Francisco And the hardest hit sectors – foodservice, entertainment, and travel – likely won’t see a big boost now, as consumers fear going out or living in states like California and New York, where restaurants and other activities are limited

Mr Anderson said the stimulus could exacerbate some of the inequalities that have become evident over the past year Many white-collar workers work from home and have largely been spared from layoffs – the unemployment rate among college graduates n is more than 42 percent

But the lowest paid service workers have been hit hard, and the unemployment rate is 77% for those with only a high school diploma Wealthy households, M Anderson said he could spend money on stocks or buy a house, which could “worsen the formation of a bubble in certain assets like stocks and housing.””

Julia Bald, librarian who lives in Beverly, Mass, isn’t looking to bet on the stock market but plans to deposit her stimulus check in the bank as a precaution If the virus reappears and the library has to close, she’s worried being fired SP Bald also has $ 10,000 in student loans outstanding and is trying to save as much money as she can

“I haven’t had a lot of financial hardship, it’s not like I have to worry about paying the rent or anything,” said Ms. Chauve, 30. “But my nervousness about where the economy might go from here makes me want to save it just in case “

Dennis Helmstetter of Frederick, Md, also plans to save the $ 600 payment He managed to keep not one, but three jobs during the pandemic – as a real estate agent, clerk at Fort Detrick, and supervisor of the bar and restaurant at his local Elks Lodge

Since he didn’t spend on travel, dining, or entertainment, he was able to save more money than usual: save around $ 1,000 per month If he’s happy to see the increase extra from his savings, M Helmstetter, 65, believes Congress should have targeted those most in need more directly

“I think they are barking in the wrong tree”, he said “The money should go to the unemployed people right now”

Others who feel similar to M Helmstetter takes it upon himself to redistribute his payments to those facing financial difficulties

Serena Cooper, 26, plans to donate all of her stimulus checks to an unemployed person SP Cooper, a public relations assistant in Los Angeles, said she felt “blessed” to have kept her employment during the pandemic, despite own financial worries At $ 32,000 a year, her salary left her struggling to pay rent and other bills

“I am by no means rich,” she said “But I think my $ 600 would have a bigger impact on someone who has had much worse struggles than me during this pandemic”

600 stimulus check, when will I get my stimulus

Ebene News – US – Stimulus money should have gone to unemployment, economists say

Source: https://www.nytimes.com/2020/12/30/business/economy/600-dollar-stimulus-check.html