Depends On How Much Money People Had In The Bank
The effectiveness of the stimulus checks varied widely depending on who received it. Kellogg Insight published the findings of research by Scott R. Baker of Kellogg Graduate School of Management, along with R.A. Farrokhnia and Michaela Pagel of the Columbia Business School, Constantine Yannelis at the University of Chicagos Booth School of Business, and Steffen Meyer at the University of Southern Denmark.
Dr. Baker and fellow researchers looked at how recipients spent their stimulus checks. The surprising find was the spending behavior was very different depending on how much cash people had in the bank. The people who had $3,000 or more in their checking accounts had no response to the appearance of their stimulus check. So the stimulus checks to those with cash in the bank did nothing to stimulate the economy.On the other hand, those who maintained accounts with $500 or less spent almost half of the deposits44.5 cents per every dollarwithin 10 days. The stimulus checks to those with little cash in the bank, resulted in 44.5% of the check amount going back into the economy in 10 days,which further stimulated the economy.
Our research shows that if you want to have a large fiscal multiplierthat is, the government sends out money, people spend it, and it gets circulating in the economy rapidlythen it probably makes sense to target people based on liquidity, or other indicators that might be proxies for that, Dr. Baker says.
Stimulus And Relief Package 2
The second relief package, the Families First Coronavirus Response Act , or Phase Two, was signed into law on March 18, 2020. The law allocated a budget for relief that included the following:
- Providing money for families who rely on free school lunches in light of widespread school closures
- Mandating that companies with fewer than 500 employees provide paid sick leave for those suffering from COVID-19, as well as providing a tax credit to help employers cover those costs
- Providing nearly $1 billion in additional unemployment insurance money for states, as well as loans to states to fund unemployment insurance
- Funding and cost waivers to make COVID-19 testing free for everyone
Separately, on March 18, 2020, the Federal Housing Administration and the Federal Housing Finance Agency implemented foreclosure and eviction moratoriums for single-family homeowners whose mortgages were FHA-insured or backed by Fannie Mae or Freddie Mac. The eviction moratorium on FHA and other government-backed loans was extended to Sept. 30, 2021. Additionally, the FHFA announced on Sept. 24, 2021, that Fannie Mae and Freddie Mac would continue to offer COVID-19 forbearance to multifamily property owners who were experiencing a financial hardship due to the COVID-19 emergency.
What If I Owe Child Support Payments Back Taxes Money To Creditors Or Debt Collectors Or Federal Or State Debt
Both the first and second stimulus check cannot be reduced to pay any federal or state debts. Unlike the first stimulus check, your second stimulus check cannot be reduced if you owe past-due child support payments and is protected from garnishment by creditors and debt collectors.
If you use direct deposit and owe your bank overdraft fees, the bank may deduct these from your payment.
If you are claiming the payments as part of your 2020 tax refund , the payments are no longer protected from past-due child support payments, creditor and debt collectors, and other federal or state debt that you owe . In other words, if you receive your first and second stimulus checks as part of your tax refund instead of direct checks, it may be reduced.
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The Third Stimulus Check
The latest and largest round of payments were approved slightly less than a year after the first round, included in the American Rescue Plan. In March Democrats pushed through Congress the third round of stimulus payments of $1,400 to every adult, child and this time dependent regardless of age. The total cost of the payments is estimated to be around $411 billion.
The latest report from the IRS said that as of 12 May the agency had sent out around 165 million payment since 12 March 2021 to the tune of $388 billion. The IRS will continue to send payments through the end of 2021 as it processes 2020 tax returns, either as plus-up payments or to taxpayers who the agency didnt previously have information to issue an EPI but who recently filed a tax return.
Who Is Eligible For The Second Stimulus Check
Eligibility is primarily based on four requirements:
1. Income: The income requirements to receive the full payment are the same as the first stimulus check.There is no minimum income needed to qualify for the payment. Households with adjusted gross income up to $75,000 for individuals will receive the full payment. This stimulus payment starts to phaseout for people with higher earnings. The second stimulus check maximum income limit is lower than the first stimulus check. Single filers who earned more than $87,000 in 2019 are ineligible for the second stimulus check.
View the chart below to compare income requirements for the first and second stimulus checks.
|Income to Receive Full Stimulus Payment||First Stimulus Check Maximum Income Limit||Second Stimulus Check Maximum Income Limit|
2. Social Security Number: This requirement differs from the original eligibility for the first stimulus check. Originally under the first stimulus check, if you were married filing jointly, both spouses needed valid Social Security numbers . If one spouse had an Individual Taxpayer Identification Number , then both spouses were ineligible for the stimulus check. For married military couples, the spouse with an SSN could still get the stimulus check for themselves but not the other spouse with an ITIN.
Former first stimulus check rules:
Second stimulus check rules:
Former first and second stimulus check rules for military filers:
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Breathtaking Numbers Reveal The Unsettling Cost Of Stimulus
Stimulus spending sent both the FY 2020 deficit and the national debt to all time highs. Here are the numbers that show the breathtaking scope of the cost of the stimulus packages to date and the likely cost of the next round of stimulus.
US Secretary of the Treasury Steven Mnuchin testifies during the Senate’s Committee on Banking, … Housing, and Urban Affairs hearing examining the quarterly CARES Act report to Congress on September 24, 2020, in Washington, DC.
POOL/AFP via Getty Images
The United States first went into debt in 1790. Alexander Hamilton was the Treasury Secretary at the time under President George Washington. He wanted the federal government to assume war debt held by the states, a proposal many opposed. In the Dinner Table Bargain of June 1790, Thomas Jefferson agreed to the assumption of debt in exchange for relocating the nation’s capital to its current location .
Some might argue the deal was the equivalent of Jefferson exchanging his birthright for a bowl of stew. The assumed debt was about $25 million, more than our government will spend in the time it takes you to finish this article .
President Andrew Jackson managed to wrestle the debt back down to $0 in 1835, although a financial crises followed. From that date until last year, the total public debt accumulated through good years and bad stood at $22.8 trillion.
That’s a lot of zeros: $22,800,000,000,000.00
The Impact Of The American Rescue Plan
There are no hard estimates of how much the American Rescue Plan contributed to the higher inflation the U.S. is experiencing. Asked if there were any good studies on this, Arnon said there was nothing he would call especially reliable.
The White House has pointed to work by Moodys Analytics to bolster its claim that there hasnt been much of an impact from the ARP. Moodys February report said the stimulus measure temporarily contributed to inflation, almost entirely in the first half of 2021, and that without the law, unemployment would have been higher, crediting the ARP for adding well over 4 million more jobs in 2021.
In a , Zandi, chief economist of Moodys, said the ARP contributed only 0.1 percentage points to year-over-year inflation in May and now the Russian invasion and spike in oil and other commodity prices is the #1 reason, followed by the pandemic & the housing shortage.
Zandi told us in an email that he does think the ARP added significantly to inflation a year ago, but at the time that was considered a feature and not a bug, as inflation had been uncomfortably low and well below the Federal Reserves target for more than a decade. But I dont think the ARP is adding meaningfully to inflation currently. He said the impact has largely faded.
Others disagree. As we said, Furman said his estimate was about 2.5 percentage points, with a range from 1 to 4 percentage points.
Selgin told us a good guess might be 2 to 3 percentage points.
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Commercial Paper Funding Facility
On March 23, 2020, the Fed broadened the variety of commercial paper that it would buy to lower the pricing of the debt. This was actually a relaunch of a program that ran during the Great Recession, when many businesses were hurt as liquidity in the commercial paper markets dried up.
While it had no set limit on the amount it purchased, the CPFF stopped purchasing debt on March 31, 2021, and the SPV continued to be funded until its assets matured. The Treasury Department made a $10 billion equity investment in the CPFF from its exchange stabilization fund .
Stimulus Spending A Factor But Far From Whole Story On Inflation
Posted on June 30, 2022
Economists cite several reasons for high inflation in the United States, starting with the unprecedented circumstances created by the COVID-19 pandemic. But TV ads in midterm races across the country blame one culprit: stimulus spending by President Joe Bidens administration.
That spending the American Rescue Plan, enacted in March 2021 has been a factor and not an unimportant one,George Selgin, senior fellow and director emeritus of the Center for Monetary and Financial Alternatives at the Cato Institute, told us, echoing the view of other economists. But it certainly has not been the whole story.
Meanwhile, Democrats arent shy about picking favorites in the inflation blame game, either. Biden, as weve written before, focuses on the pandemic and Russias invasion of Ukraine, saying, its not because of spending.
Asked whether both sides were oversimplifying the issue, Alex Arnon, associate director of policy analysis for the Penn Wharton Budget Model, told us: Thats an easy yes. Arnon went on to say it was hard to disentangle all of the elements affecting inflation.
Well go through the causes of inflation and what role the American Rescue Plan has played.
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The Math Doesnt Add Up
The numbers here really are quite damning.
For the same $6 trillion in expenditure, the government could have given every federal taxpayer a $41,870 check. Or, to think about it a bit differently, it could have written every American roughly an $18,181 check.
Lets compare this to what most Americans actually received.
Only someone who fully collected expanded unemployment benefits throughout the pandemic and received all $3,200 in total of the stimulus payments likely received more than $18,181 in direct benefit from this spending package. And thats a relatively small fraction of the public.
Because of the way the government used outdated income data to determine eligibility, many more taxpayers saw nothing or little in exchange for their $41,870 share of the cost, perhaps just the initial $1,200 stimulus or none at all. .
So, for almost all Americans, the actual benefits of the multiple pieces of lengthy stimulus legislation come in far, far below the figure that they would have received if the entire pile of money was just even split up and sent out.
How can that possibly be considered a success? In fact, its actually a net negative.
Stimulus And Relief Package 35
A supplementary stimulus package, nicknamed Phase 3.5, was signed into law on April 24, 2020. It appropriated $484 billion, mostly to replenish the PPP and the EIDL, and contained additional funding for hospitals and COVID-19 testing.
Another supplementary measure, the Paycheck Protection Program Flexibility Act of 2020, which modified the PPP, was signed into law on June 5, 2020. It made the following changes to the program:
- It allowed businesses 24 weeks to spend the money, up from the initial eight-week period
- It lowered the requirements for loan forgiveness. Businesses now had to spend only 60% of their PPP funds on payroll, instead of the 75% previously required.
- The payment deferment period was extended from six months to when the borrower finds out the amount of their loan forgiveness
- It allowed businesses that received PPP loans to delay paying payroll taxes
- It allowed businesses loan forgiveness if they didnât rehire workers who refused good-faith offers of reemployment or were unable to restore operations to levels before the COVID-19 pandemic
- It gave businesses until the end of 2020 to restore their payrolls to precrisis levels
- It increased the loan maturity of PPP loans taken out after June 5, 2020, to five years
- It extended the time that borrowers have to pay back unforgiven parts of the loan
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Maine: $850 Direct Relief Payments
Gov. Janet Mills signed a supplemental budget on April 20 to authorize direct relief payments of $850 for Maine taxpayers.
Full-time residents with a federal adjusted gross income of less than $100,000 were eligible. Couples filing jointly received one relief check per taxpayer for a total of $1,700.
Taxpayers were eligible for the payment regardless of whether they owe income tax to the state.
Residents who didnt file a state tax return for 2021 could file through October 31 to claim their payment.
The one-time payments, which are being funded by the states surplus, started rolling out via mail in June to the address on your 2021 Maine tax return.
The supplemental budget also includes an increased benefit for Maines earned income tax credit recipients.
Making Sense Of Big Numbers
In the Spring 2020 issue of Behavioral Research in Accounting, we published a study investigating whether individuals comprehend the large numbers involved in government spending.
The federal government routinely spends amounts in the millions, billions and, more recently, trillions, yet these numbers are far beyond what individuals encounter on a daily basis, making it hard for most people and probably lawmakers to wrap their heads around them.
We hypothesized that presenting the cost of government spending in per-household terms would make these amounts easier for individuals to understand and evaluate.
In our study, we conducted an experiment in which people evaluated a hypothetical federal spending proposal that included provisions like job training, unemployment benefits and infrastructure spending. Half the participants were presented with a plan that would cost $718 million, while the other half saw the same proposal at a cost of $718 billion. Participants were randomly told either the full cost of the proposal or the tally in per-household terms. That is, $5,744 for the $718 billion version and $5.74 for the $718 million one.
Thus, we concluded that the per-household presentation made individuals cost sensitive to government spending.
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Where $5 Trillion In Pandemic Stimulus Money Went
Workers received nearly $700 billion in unemployment benefits, including an extra $600 per week from March to July 2020.
State and local aid
Roughly $80 billion went to airlines to help pay pilots, flight attendants and other staffers who were furloughed as travel dried up.
Almost $70 billion went to struggling transit agencies that rely on commuters for income.
Individuals and families
Stimulus bills approved by Congress beginning in 2020 unleashed the largest flood of federal money into the United States economy in recorded history. Roughly $5 trillion went to households, mom-and-pop shops, restaurants, airlines, hospitals, local governments, schools and other institutions around the country grappling with the blow inflicted by Covid-19.
Economists largely credit these financial jolts with helping the U.S. economy recover more quickly than it otherwise would have from the largest downturn since the Great Depression: The pandemic recession was the shortest on record, lasting only three months.
Most Stimulus Payments Were Saved Or Applied To Debt
US households report spending approximately 40 percent of theirstimulus checks, on average, with about 30 percent saved and another30 percent used to pay down debt.
The Coronavirus Aid, Relief, and Economic Security Act, enacted on March 27, 2020, was designed to bolster household incomes and support consumer spending. It achieved the first goal, but had only a modest impact on consumer spending. Survey data on household behavior suggest that nearly 60 percent of the stimulus spending went to pay off debt or was saved. Of the roughly 40 percent that was spent on goods and services, consumers favored food and beauty products rather than large durables like cars or appliances. The averages mask considerable variation among households. Some 20 percent saved virtually all of their stimulus check another 40 percent spent nearly all of it. Roughly 20 percent used most of their federal payment to reduce their debts.
These findings inHow Did US Consumers Use Their Stimulus Payments? reflect general patterns seen in 2001 and 2008, when the federal government also countered economic downturns with direct transfer payments. The 2020 payments, however, were much larger and the recipients were somewhat less likely to spend than in the past.
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