What is the motivation behind the fourth stimulus?

In the third round, the IRS made more than 169,000,000 payments, with $1,400 checks reaching the majority of American households. Some lawmakers and advocates are calling for a fourth round to provide recurring payments to households until the pandemic is over.

Millions of Americans are still in financial distress despite the financial assistance. The Omicron variant spreading is also creating economic headwinds. According to new Census data, more than 25% of Americans struggled to pay household expenses the week before, compared to 3.5% in the pre-pandemic period. Even though businesses are hiring, there are still approximately 2.3 million less people on payrolls than before the pandemic. Economists are expressing concern over the Omicron variant spreading to colleges, which has resulted in the closure of college campuses and the cancellation of high-profile events such as Broadway shows.

According to a JPMorgan Funds research note, David Kelly, chief global strategist, said that the increase in COVID-19 cases “hits demand in leisure, entertainment and travel industries, as indicated high-frequency data.” It will also cause widespread absenteism in the early 2022. This will be a major drag on the economy in the first quarter after a strong fourth quarter.

Fiscal support for over 30 million families in America ended last month. The final payment from Child Tax Credit landed in bank accounts on December 15. Those checks, which offered $300 per child eligible, won’t be extended in 2022. The Build Back Better Act, which included a one year extension, was defeated by Senator Joe Manchin, a West Virginia Democrat.

Many people think that stimulus aid is long gone. This is a problem that many Americans are still thinking about as they struggle with unemployment and a weak labor force. A Change.org petition that requested lawmakers to approve $2,000 monthly recurring payments has been signed by almost 3 million people.

Advocates are asking lawmakers to support new stimulus efforts for one group that has been particularly hard hit by the rising inflation and pandemic. More than 95,000 people signed a petition by the Senior Citizens League to give a $1,400 check to seniors.

Inflation rose in 2021 faster than the 1.3% benefit boost that Social Security beneficiaries received at the beginning of the year. Many seniors will continue to fall behind inflation, even with the 5.9% cost of living increase in January 2022.

Mary Johnson, Senior Citizens League policy analyst on Social Security and Medicare, stated that it would allow people to buy groceries for an additional week. “A stimulus payment would assist them in managing these rising costs.”

Recurring payments

Some legislators have taken up the idea for recurring payments. One hundred and one senators, all Democrats, signed a March 30, 2010 letter to President Biden supporting recurring stimulus payments. They pointed out that the IRS’s $1,400 payments wouldn’t be enough to last long.

The senators wrote that nearly 6/10 people believe the $1,400 payments included in the rescue package won’t last them for more than three months.

Some states have their own forms of stimulus checks. A new initiative by Governor Gavin Newsom will allow for about two-thirds California residents to be eligible for the “Golden State Stimulus” check. This effort will provide $600 to low- and medium-income residents who have submitted their 2020 tax returns. Florida and Texas have given bonuses to teachers in order to offset the effects of the pandemic.

The U.S. senators’ letter doesn’t indicate how much they want in recurring payments. In January 2021, Democratic lawmakers also proposed $2,000 monthly checks to end the pandemic. Instead, the American Rescue Plan provided one-time payments up to $1,400 per eligible adult and dependent.

Child Tax Credit: December end

The IRS in July made six cash payments monthly to parents who are eligible for the Child Tax Credit (CTC) and some families were able to receive another form of stimulus assistance. According to Economic Security Project, a study of Census data shows that families received an average $423 their first CTC payment.

Families that were eligible received cash up to $1800 from July through December. The money was divided in equal installments and distributed over six months, starting in July and ending in December. This aid was made possible by the expanded CTC, part of President Joe Biden’s American Rescue Plan.

Family members who meet the criteria receive $300 per month for each child aged 6-12 years and $250 per month for children aged 6-17 years. CBS MoneyWatch spoke with several families who said that the extra money would be used to pay for child care, back school supplies, and other necessities.

Although progressives and some Democrats called for the continuation of the enhanced CTC, the legislation appears to be stuck at the moment. This means that families will not receive a CTC payment in January and beyond.

Savings and emergency funds

According to the Federal Reserve Bank of New York, most people who received three rounds of stimulus payments have said that they are using the funds to either pay down their debts or save the money. This could mean that people are using the money not only to pay down the debt they incurred during pandemic, but also to create an emergency fund in the event of another shock.

Researchers have discovered that millions of Americans were spared hardship by the three rounds in stimulus payments.

However, when stimulus fails, as was the case last fall, when Congress was stuck on a new round of aid, hardship has increased “markedly” between November and December according to a May analysis of Census data by the University of Michigan.

Kelly, JPMorgan Funds, stated that the CTC’s curtailment could cause more economic headwinds for families.

Kelly stated that the IRS reported that these payments were approximately $15 billion per month. Kelly also noted that their abrupt cessation could reduce recently high-volume household spending on food and other essentials.

Living paycheck to paycheck

The Child Tax Credit and the stimulus checks, which were now expired, provided families with direct assistance, but “most federal aid programs fail to meet the mark and only reach a fraction” Greg Nasif, political director at Humanity Forward, stated.

He said, “They barely functioned even prior to the pandemic and leave parents with a full time job navigating bureaucratic obstacles.” He believes that providing direct cash support to struggling families is the best way to help them.

Many people have never applied for unemployment benefits as they don’t believe they are eligible. Others may not be eligible due to long waits or other reasons.

Even those who were eligible for assistance didn’t always get it. According to Eliza Forsythe, economist, only 4 out 10 jobless people actually received unemployment assistance.

Is a fourth stimulus check possible?

According to Wall Street analysts, don’t be surprised.

One, the Biden administration has emphasized infrastructure spending to stimulate economic growth. They believe that investments in roads, trains, and other direct investments can help people get back to work and support the ongoing recovery.

Second, economists point fingers at relief measures such as the three rounds stimulus checks for contributing towards inflation. Americans were able to spend more on furniture, cars, and electronics because they had money. Economists say that when you combine this with the supply-chain crisis, the result was dramatically higher inflation.

According to Brad McMillan (chief investment officer at Commonwealth Financial Network), it is likely that inflation will moderate in 2022 if there are no new stimulus measures. In a December report, McMillan noted that one of the causes of inflation was an increase in demand due to federal stimulus. But that stimulus is now over.

He said, “Yes. We will continue to face inflation, supply problems, but they’re moderating, and will continue doing so.”