How would a second stimulus check affect the economy?

After months of painstaking negotiations, Congress on Monday passed a $ 900 billion coronavirus relief bill that would send a second stimulus check to millions of Americans still recovering from the pandemic – probably increasing consumer spending. and avoiding the increase in poverty.

12 MILLION AMERICANS FACE LOSS OF UNEMPLOYMENT BENEFITS DAY AFTER CHRISTMAS

The measure includes a cash payment of $ 600 for Americans who earned less than $ 75,000 in 2019, half the size of checks sent earlier this year with the approval of the CARES Act in March, as well as $ 600 per child. If agreed by President Trump, payments would be reduced gradually for those who earn more (5% of the amount by which their adjusted gross incomes exceeded the initial limit) and eliminated completely for individuals who earn more than $ 87,000.

An October study published by the Peter G. Peterson Foundation, a non-partisan group, found that the economy had a “modest boost” thanks to increased spending by less wealthy Americans. Check recipients were more likely to spend money on needs such as food, household supplies, utilities, rent, mortgages and credit cards, which means that these sectors have seen the greatest benefits.

“As payments helped to mitigate the loss of employment-based income for many low- and middle-income families, these families were more likely to use the funds to pay their expenses instead of saving them or using them to pay existing debts. “said the study.

KEY DEMOCRATS SEE THE $ 900 billion COVID RELIEF PACKAGE JUST BEGINNING

Overall, the study found that payments boosted the country’s economic output by 0.6% in 2020, much less than the increase provided by $ 600 a week unemployment insurance and the Salary Protection Program.

A separate study published by the National Bureau of Economic Research found that families responded quickly as soon as they received the money, with spending increasing from $ 0.25 to $ 0.40 per dollar of stimulus during the first few weeks.

A buyer leaves a department store on Tuesday, October 27, 2020, in Boston. (AP Photo / Steven Senne)

Spending was higher among households with lower incomes, greater declines in income and lower levels of liquidity, according to the study, “highlighting the importance of targeting”.

“Liquidity plays the most important role, with no significant spending response for families with large current account balances,” said the study.

12 MILLION AMERICANS FACE LOSS OF UNEMPLOYMENT BENEFITS DAY AFTER CHRISTMAS

A previous analysis by Columbia University’s Center for Poverty and Social Policy showed that, without passing the $ 2.2 trillion CARES Act, the country’s only measure of the country’s poverty level would have increased by 12.8% before the crisis. to 16.3%. During the 2008 financial crisis, the level of poverty peaked at around 16%, according to the US Census Bureau.

But the government’s massive response to the virus outbreak and subsequent economic blockade helped the poverty rate to remain largely unchanged at 12.7 percent, the researchers said.

Tuesday night Trump demanded that Congress increase the size of stimulus checks to $ 2,000, calling the $ 600 proposal “ridiculously low” and threatening to torpedo the aid deal.

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Democrats are planning to force a vote this week on more than tripling the payment amount.

“Ultimately, the president agreed to $ 2,000,” wrote House Speaker Nancy Pelosi on Twitter. “Democrats are ready to present this to the floor this week by unanimous consent. Let’s do this!”

A source told FOX Business that Democrats will try to approve a $ 2,000 standalone bill in direct payments on Thursday, although it is unclear whether he will receive the unanimous consent needed to pass the Republican-controlled House or Senate.

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