Why the next stimulus check seems inevitable

A month ago, when the House of Representatives passed the Heroes Act on May 15, it seemed like we were on the other side of the pandemic. States were beginning to open, to enter their versions of a “Phase 2”, and various economic indicators seemed to show that the effects of the sudden closure were diminishing. Unemployment, although still at historical levels, fell from 14.70% in April 2020 to 13.30% in May 2020.

By all economic indicators, it seemed that no additional stimulus was necessary. The stock market had receded, unemployment was changing course, and Washington DC rhetoric seemed to coincide. At a Fox News virtual town hall in May, President Trump said the next stimulus package should have a payroll tax cut and that “there was no rush” in the next package. As the $ 600 unemployment benefit was about to expire, Republicans proposed “return to work” bonuses as an incentive for people to return to work.

Then, as some states opened faster than others with varying degrees of social distancing and facemasking, we saw an increase in the number of confirmed cases. Our most populous states like California, Texas and Florida began breaking their daily coronavirus case increase count in a single day.

Those states put a pause on its reopening and, in some cases, began to close again.

Many of the economic indicators are lagging indicators. They only show what happened after it happened, but we know that economic activity slows when it closes.

It came as no surprise to anyone in the United States that a recession began after economic activity peaked in February.

We did not need the National Bureau of Economic Research to tell us that: closing an economy has that effect on economic activity. Just as the first shutdown impacted the economy and put us into recession, this is likely to have a similar effect.

And you can see that politicians are beginning to change their tone about the stimulus.

Just a few days ago, President Trump said the next stimulus package would be “generous” and announced it in the coming weeks. Then he said privately that he supports “to a large extent sending Americans another round of stimulus checks.” Treasury Secretary Steven Mnuchin said the administration is “very seriously considering” more stimulus controls.

Politicians will analyze economic figures to determine if the American people need more encouragement; you can do it too.

The stock market is always a popular metric, but it’s not the one many look at when they think about the health of the economy. You need to keep an eye on unemployment figures to get a good idea of ​​how strong the economic engine is working. The United States Bureau of Labor Statistics reports a large amount of data, including unemployment, on a regular schedule that you can review here.

Keep an eye on Trump poll numbers

An inexpensive number to look at? President Trump’s poll numbers.

The administration made a point to adjust the deployment of the first stimulus check to include a letter from President Trump. This felt like a smart marketing move, making Americans feel like they were getting a stimulus check because of the President.

As your poll numbers drop, you may see additional stimulus as a way to increase support for your reelection chances in November.

How could the next stimulus check be

As you dig deeper into the economic numbers, the economic pain of the pandemic’s closure has been uneven. While unemployment may be at highs not seen since the Great Depression, where that unemployment is most important. Leisure and hospitality were two of the most affected industries in the last three months:

What a travel stimulus looks like

That’s why you’ve seen some proposals around a $ 4,000 travel stimulus tax credit. The United States Tax Incentive and Refund Program Act (TRIP), introduced by Senator Martha McSally (R-AZ), would grant a tax credit of $ 4,000 per adult to use on travel and leisure activities for at least 50 miles from home. I would add an additional $ 500 per qualifying child.

The problem with that type of tax credit is that only those who have the financial means to travel can use it. It is also ineffective in the short term because it is a tax credit, which you would receive when you file your return next year, and because states are starting to close again. It can help in a year, when there may be a vaccine, but now it is not helpful and will do nothing to stimulate the economy.

What a wider stimulus looks like

The next stimulus control could be what was passed in the Heroes Act: a widely distributed $ 1,200 stimulus control similar to the Care Act. The income thresholds in the Hero Act are the same as the Care Act, which started at $ 75,000 for single taxpayers and $ 150,000 for married taxpayers. It also includes $ 1,200 per child with a maximum of three.

A family of four who earned less than $ 150,000 would receive a check for $ 4,800.

The Hero Law would also solve some of the oversights in the Care Law. The Care Act excluded families with a non-citizen spouse from receiving a stimulus check, an omission that was likely oversight. Senator Marco Rubio (R-FL) just introduced a bill to address this specific problem. It would also change the Care Act to include all dependents, not just qualified children age 16 and under.

According to data from the US Census Bureau, we know that many Americans spent much of their first spending stimulus check. This was especially true for those who earned less than the median income in the United States. About 60% of households used their expense checks, while households that earned less than $ 50,000 saw that number increase to more than 70%. Some politicians pointed to the rapid increase in the personal savings rate as a sign that many Americans kept their check, but the data does not support it.

While some Republicans have said that the Heroes Law would go nowhere, we could see that the chamber addresses the Heroes Law debate given the new economic reality when he returns after his July recess.

What a stimulus back to work looks like

A “Back to Work” cash voucher is popular with Republicans because they want to link a voucher to a return to work. So far, there have been two proposals related to return-to-work style bonuses.

The first is a temporary bonus in addition to your weekly paycheck. Senator Rob Portman (R-OH) proposed a weekly payment of $ 450 to be added to his check.

The following is a $ 600 weekly bonus paid twice after I return to work. You can think of it as a $ 1,200 hiring bonus. It was proposed by Representative Kevin Brady (R-TX) in his 2020 U.S. Reopening of Worker Support Act.

While these only help those who were previously unemployed, they are much more challenging than a travel tax credit. The only downside is that it excludes people who currently work or have worked throughout the pandemic.

While we wait, and as the numbers continue to change, it appears that a stimulus test of some kind is inevitable.

Additional resources

IRS will pay interest on your ‘late’ tax refund

How are Americans actually spending stimulus checks?

The chances of a second stimulus control are much better

Another travel stimulus proposal: Would you take a $ 4,000 tax credit vacation right now?

President Trump: The next stimulus bill will be “very generous” and will be announced in a “couple of weeks”

The second stimulus check will not be a $ 4,000 Explore America tax credit

Will you get a “back to work” cash bonus and how would it work?

What could be in Bill’s next stimulus ‘Options Menu’?

How to find stimulus checks offered by state and local governments

What to do if you haven’t received your stimulus check yet

Beyond stimulus controls: 5 little-known benefits of the CARES Act