Americans are still wondering if a second round of stimulus checks is coming as Congress struggles to agree on new aid amid an ongoing pandemic and widespread protests against police brutality.
Experts generally agree that more stimulus is needed, though some say another round of stimulus checks for Americans is not the best option. But they diverged on what stimulus specifically is needed.
“We clearly need another big stimulus, and if we don't have it, you're just talking about the economy going off a cliff,” Dean Baker, chief economist at the Center for Economic and Policy Research, told Yahoo Money. “With a big stimulus, we could talk about a horrible story. If we don't have a big stimulus, total economic wreckage is the story we’re talking about.”
Baker added that new stimulus should be a more targeted approach than just sending checks to Americans.
“The focus should have been to keep people on the payroll,” Baker said. “Between the unemployment benefits and the PPP, I think most people have been kept reasonably whole.”
The first round of stimulus checks “provided relief, but it's not as meaningful as other forms of payments to folks who really need the assistance,” like unemployment insurance, Ben Gitis senior policy analyst for the Bipartisan Policy Center told Yahoo Money.
Rachel Greszler, a fellow at Heritage Foundation, echoed Barker and Gitis in saying that any new aid should be targeted and stimulus checks don’t accomplish that.
“While there have been a lot of hardships, the government has already done a lot to cover those,” she said. “It doesn't make sense to just send everybody the exact same amount of checks.”
‘It's not as meaningful as other forms of payments’
Despite over 40 million Americans losing their jobs in the last 10 weeks, personal income went up more than 10% in April, according to data by the U.S. Bureau of Economic Analysis. This was largely driven by the stimulus payments and by the expanded unemployment benefits of additional $600 a week under the CARES Act.
The $2.2 trillion CARES Act provided Americans who have lost their jobs with an additional $600 a week until the end of July, in addition to the unemployment benefits workers would typically get from their state.
“We do have 40 million folks who have claimed unemployment insurance so there's a lot of joblessness,” Gitis said. “There's a lot of folks who really need support right now, and I think it's important that we target those people.”
On Friday, Senate Majority Leader Mitch McConnell (R-KY) said any potential “fourth and final bill” would be “narrowly crafted, designed to help us where we are a month from now, not where we were three months ago.” In other words, Congress is not close to passing a new stimulus package.
McConnell called the HEROES Act, which recently passed the Democrat-controlled House, “a liberal wish list.” The $3 trillion act would provide up to $1,200 per individual with a maximum amount of $6,000 per household. Other Democratic lawmakers have proposed recurring monthly payments of up to $2,000.
Target with unemployment benefits
The experts noted that the biggest flaw of the stimulus checks is that while many people who needed assistance got it, some people who weren’t negatively affected by the economic fallout of the pandemic received money from the hastily-arranged legislation.
“I think that did help Americans who lost their jobs to serve as kind of a stopgap between when they lost their job and when they were able to receive the unemployment benefits,” Greszler said. “Then there are a lot of other Americans who didn't lose their jobs and some of them may have even had a slight increase in income, so that's not the best use of taxpayer dollars to provide windfall benefits.”
For instance, eligible workers in New York can get between $104 and $504 a week, while in Nebraska, weekly benefits go up to $440. The $600 from the aid package is added to the calculated weekly benefit.
The CARES Act also provides access to pandemic unemployment assistance (PUA) to self-employed workers, independent contractors, and others who are usually ineligible for unemployment insurance (UI).
With the additional $600 expiring at the end of July, some experts agreed that it’s better for those benefits to be extended, even at a reduced amount, rather than sending out more checks.
“I'm fine with lowering that, but we still should have some supplement to that — something like $200 of pandemic unemployment claims that runs through the end of the year,” Baker said. “That's a good thing. So keeping those in place, that will help the unemployed.”
Gitis suggested scaling back the benefits gradually to incentivize people to return to work.
“When it's safe to go back to work, start scaling back the weekly benefit while extending the duration of those benefits that are available,” he said. “That way, folks who are unable to find work are still receiving financial support, but there's still an incentive there for folks to find work.”
What about PPP?
Baker thinks the Paycheck Protection Program, which provides forgivable loans to small businesses that guarantee eight weeks of payroll and other costs, should be extended so workers get another eight weeks of paychecks.
“The best thing would have been to try to follow the example of a number of European countries, basically pay employers to keep people on the payroll,” Baker said. “We sort of had that with the PPP, but they were a little late rolling that out. But the focus should have been to keep people on the payroll.”
Gitis called the PPP “among the most important provisions enacted in this crisis” and lawmakers should make sure that the program remains properly funded “as the economic toll worsens.”
But Greszler doesn’t support extending the PPP or unemployment benefits now that the economy has begun to reopen.
“I don't think that there should be much extension going forward because the more data that we're getting in shows that it is based on most parts of society reopening,” she said, “and that's really the only way that we're going to recover.”