(CBS) – The IRS has issued more than 169 million payments in the third round of direct stimulus aid, with another 2.3 million people last month receiving the $1,400 checks. But some 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 delivered $3,200 to each eligible adult: $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, with about 4 in 10 people saying their income remains below its pre-pandemic levels, according to a survey from financial services firm TransUnion. The pandemic worsened the hardship that many families experienced even before the crisis, with more than 1 in 4 households unable to pay for basics like rent or food in at least one of three years from 2014 to 2016, according to a new analysis of data from the Center on Budget and Policy Priorities.
Nationwide, about 14.6 million people are currently receiving some form of jobless assistance. The unemployment rate stands at 5.9 percent, far higher than its pre-pandemic level of 3.5 percent. And while businesses are hiring, there are still nearly 7 million fewer people are on payrolls today than before the pandemic. A quarter of Americans struggled to pay their household expenses in the previous week, according to Census survey data from mid-June.
For many people, in short, the latest round of $1,400 checks may not last long — an issue that is on the minds of many Americans who continue to struggle with joblessness and a weak labor market. Indeed, more than 2.6 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 lawmakers have picked up the idea. Twenty-one senators — all Democrats — signed a March 30 letter to Mr. Biden in support of recurring stimulus payments, pointing out that the $1,400 payment being distributed by the IRS won’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, millions of California residents are in line to get another stimulus check via a new effort from Governor Gavin Newsom. Earlier this month, he signed a $100 billion plan that includes $600 stimulus checks to state residents, with about two-thirds of Californians likely to receive a stimulus payment under the new plan.
The letter from the U.S. senators doesn’t specify how large are the payments they are seeking, but a separate effort from Democratic lawmakers in January pushed for $2,000 monthly checks until the pandemic ends. Instead, the American Rescue Plan authorized $1,400 for each eligible adult and dependent.
Child Tax Credit: July 15 deposits
Some families received another form of stimulus aid on July 15 when the IRS deposited the first of six monthly cash payments into bank accounts of parents who qualify for the Child Tax Credit (CTC).
Eligible families will receive 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 is due to the expanded CTC, which is part of President Joe Biden’s American Rescue Plan.
Families who qualify will receive $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.
“Many people are going to be surprised when that first check comes in,” Greg Nasif, political director of Humanity Forward, a nonprofit pushing for recurring stimulus payments, said. “That obviously is going to add to the surge in popularity for the checks.”
Families may enjoy more of a tax break in coming years, if Biden’s American Families Plan moves forward. Under that plan, the Child Tax Credit’s expansion would last through 2025, giving families an additional four years of bigger tax breaks for children.
Emergency funds, saving
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.
Still, many people said they planned to spend their stimulus funds on the basics — food and housing costs were cited as the top two uses of the third stimulus check following savings, according to a February poll from Bloomberg/Morning Consult.
Almost 7 in 10 Americans who have received, or believe they will soon get, a third payment say it’s important for their near-term finances, Bankrate.com said in April. That’s down from about 8 in 10 people in March 2020, when the pandemic caused widespread unemployment, but overall the share of people who need additional support remains elevated more than a year later, according to the personal finance firm.
About 1 in 3 people said the stimulus aid would help support them for less than one month, the survey found.
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.
Still living paycheck to paycheck
Some top economists have called for more direct aid to Americans. More than 150 economists, including former Obama administration economist Jason Furman, signed a letter last year that argued for “recurring direct stimulus payments, lasting until the economy recovers.”
Although the economy is improving, millions of people continue to suffer from reduced income and have not been able to tap government aid programs, Nasif said. 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.
“You’ll see reports about how the economy is starting to grow, but there are a lot of Americans living paycheck to paycheck, and for a lot of them the government relief programs haven’t been able to help,” Nasif said.
How likely is a fourth stimulus check?
Don’t hold your breath, according to Wall Street analysts. “I think it’s unlikely at this time,” Raymond James analyst Ed Mills told CNBC. One reason is that the Biden administration is focused on advancing its nearly $2 trillion infrastructure plan, which would reshape the economy by rebuilding aging schools, roads and airports, as well as investing in projects ranging from affordable housing to broadband.
The proposal, which the White House says would be funded by boosting the corporate tax rate from 21% to 28%, may be “tougher to pass” than the relief bill that provided the $1,400 checks to most Americans because of opposition from both Republicans and some Democrats, noted Stifel chief Washington policy strategist Brian Gardner.
Even so, only about one-third of Americans believe the American Rescue Plan will help them a lot, according to a poll from Politico-Harvard. That suggests some households feel they need more aid to help get through the next several months.
At the same time, the economy is expected to rebound this year thanks to rising COVID-19 vaccination rates and as states start to reopen. JPMorgan Chase CEO Jamie Dimon predicted in his latest annual letter to shareholders that an economic boom could last into 2023.
“[W]ith excess savings, new stimulus savings, huge deficit spending, more [quantitative easing by the Federal Reserve], a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom. This boom could easily run into 2023 because all the spending could extend well into 2023,” Dimon wrote in the April 7 letter.
That could diminish the rationale for the government offering more direct aid, especially if the jobless rate recovers and more workers come off the sidelines.
By year-end, the nation’s unemployment rate could fall to 4.3 percent, according to Oxford Economics. Even so, the path to recovery “remains long” as there are still 4 million workers who have dropped out of the workforce, noted Oxford Economics economists Oren Klachkin and Gregory Daco in a research note.
“Looking ahead, the labor market is poised for an impressive run as expanding vaccine distribution, more reopenings and fiscal stimulus drive a hiring surge,” they forecast.