The Case for Monthly Coronavirus Stimulus Checks: Americans 'Need Consistent Liquidity'

By Sibile Marcellus, Yahoo! News

13 May 20

he latest Democratic proposal for the next round of stimulus is monthly checks for $2,000 for all Americans for the duration of the pandemic. The checks would continue to arrive for three months after the pandemic is no longer a public health threat.

“As a result of this horrific pandemic tens of millions of Americans are living in economic desperation not knowing where their next meal or paycheck will come from,” said Sen. Bernie Sanders, who introduced the bill on May 8 along with Senators Kamala Harris (CA) and Ed Markey (D-MA). The legislation would provide $2,000 monthly checks to every individual earning less than $120,000 a year in the U.S. 

Under this proposal, married couples who file jointly would get $4,000 per month with an additional $2,000 per child for up to three children. No U.S. resident would be excluded from stimulus payments, including adults with no Social Security numbers. These payments would be in addition to the money already being sent out through the $2 trillion stimulus package passed in March.

“Individuals and families are going to need consistent liquidity,” said Bradley Hardy, a senior fellow at Brookings Institution, who co-wrote a report making a case for such stimulus payments in March. “There are all sorts of challenges our human services agencies are facing in delivering benefits. Metaphorically, we have to stop the bleeding right now,” he said.

Now is not the time to let worries about the skyrocketing budget deficit lead to political paralysis in Washington. Inaction has a devastating cost too, says Hardy. “You can pull back once the economy seems to be doing better. You don’t have to be bound by this per say,” he said. “But when you have all the measures suggesting the scale and depth of unemployment right now, I absolutely think that the Harris-Sanders proposal is in the right direction.”

The record-breaking levels of unemployment have stressed the nation’s unemployment agencies. And as millions of Americans wait for their unemployment claims to be processed, food banks have become overwhelmed. 

The unemployment rate spiked to 14.7% in April. And the Congressional Budget Office projects unemployment will remain elevated and be as high as 11.7% by the end of the year.

While there are other proposals for a new round of fiscal stimulus, including more aid for states and municipalities, more relief directly to individuals is critical to achieve a faster economic recovery from the coronavirus pandemic, says Hardy.

“This is very much a psychological phenomenon. People need to feel more secure about their economic situation, as well as frankly the public health situation in order to begin spending again,” said Hardy. “I think that’s why [another round of] these stimulus or relief checks [is] going to be so important.” 

Economy won’t be ‘back to normal in the fall’

Consumer spending, which accounts for roughly 70% of GDP, has taken a major hit as more than 33 million Americans have lost their jobs since the coronavirus shutdown seven weeks ago. 

“If we can bail out large corporations, we can make sure that everyone in this country has enough income to pay for the basic necessities of life,” said Sanders.

According to Deutsche Bank, workers who are unemployed reduce their consumer spending by 10%. If they’re unable to find a job before their benefits are exhausted, their spending drops by 20% to 30%. 

“When we talk about [another round of] those checks, they really do need to hit into the middle class. I’m actually very concerned that many middle-class families don’t actually have large margins to withstand an economic shock,” said Hardy. “This really does hit further up the income distribution.” 

Pantheon Macroeconomics chief economist Ian Shepherdson expects that Congress will push through another round of fiscal stimulus despite ongoing political tensions.

“Nothing galvanizes politicians into action quicker than headlines telling their constituents that the economy is in meltdown, backed by the hard data that everyone understands,” Shepherdson wrote. “The economy assuredly will not be back to normal in the fall.”

Shepherdson expects another round of fiscal stimulus totaling at least $1 trillion to be passed by the end of June or earlier.