Dramatic Economic Decline Is Making Stimulus Checks Inadequate, More On The Way?

The weakening economy is prompting many Americans to seek more financial relief even as the government is yet to start sending the $1,200 checks as part of the first round of aid for the county hit by the coronavirus pandemic. The U.S. has the most number of confirmed cases of coronavirus at nearly 368,450, out of the world's 1.36 million.

About 63% of respondents to a survey said they would need another stimulus check within the next three months. The survey was by retirement income technology company SimplyWise, a CNBC report says.

Dramatic economic decline

The government has just begun despatching the one-time $1,200 checks to individuals and $2,400 to couples that meet specific conditions. Individuals earning up to $75,000 and couples with income up to $150,000 are eligible for the check. Their dependents could get $500.

Above those income levels, the amount reduces with an earnings cutoff limit of $99,000 for individuals and $198,000 for couples who file tax returns jointly and have no children.

However, many Americans believe the dramatic economic decline caused by the coronavirus has nullified the impact of the relief package. An indication of the worsening situation is the rising jobless claims. Nearly 10 million Americans filed for unemployment benefits in the past two weeks. The survey's responders say the $1,200 won’t cover even monthly rents in many parts of the country.

“People are feeling like they’ve lost everything,” CNBC quotes Allie Fleder, chief operating officer at SimplyWise, as saying. About 30% of those who thought the money would not be enough said they planned to look for part-time work. Another 16% said they would borrow from family or friends, 15% would sell assets, 15% would apply for unemployment insurance, 14% would withdraw money from their retirement accounts, and 10% would seek a bank loan.

Additional aid to states

Meanwhile, Goldman Sachs economists believed the federal government was likely to pass at least one more fiscal relief package, a report said. They reckoned that the next round of stimulus was likely to include additional aid to state governments, more funding for small businesses, expanded unemployment benefits, and possibly another round of direct payments to individuals, a Forbes report said.

Congress has so far passed three bipartisan relief bills in an attempt to cushion the damage from the coronavirus to the economy. The largest of those bills is the $2 trillion CARES Act under which the $1,200 checks were being sent.

However, the process of another round of relief could take time, Mark Mazur, director at the Urban-Brookings Tax Policy Center, told CNBC. Congress would need to pass new legislation. And the procedural issues could delay the transfer of funds.

Even the money from the current round of relief could reach people’s bank accounts only by the week beginning on April 13. Paper checks sent by mail could delay the funds further, up to five months. Those checks would be sent from only May 4, according to some reports.

“I think folks have expectations that they will be getting the money a lot faster than they actually will be,” Mazur said.

The Forbes report said Goldman was expecting another bill because those in government thought that the relief measures signed into law so far weren’t enough to cover the income lost in the current crisis. Private-sector losses in 2020 are estimated at between $1.4 trillion and $1.9 trillion next year.

'Appetite is there'

“Consider that we expect 15% of the labor force to be unemployed in Q3, while nearly all households will receive the $1,200 per adult payment,” the Goldman report said. “This means that most of the $290bn in payments will go to individuals not facing a job loss.”

Sen. Marco Rubio, R-Florida, who is the chair of the Senate Small Business and Entrepreneurship Committee, told CNBC that lawmakers expected that they would need to pass another relief bill in the coming weeks. “The appetite is there,” he said. “I think everyone I’ve talked to recognizes we’re going to have to go back and do more, and probably more than once.”

House Speaker Nancy Pelosi also had called for more legislation, telling CNBC that the provisions in the CARES Act were “not enough.” Pelosi said she wanted more direct payments to Americans (in addition to the $1,200 in the CARES Act), more funding for small businesses, and extended unemployment insurance.