Are Stimulus Checks Delaying a 2nd Federal Relief Package?

By Stefano Tromba
December 8, 2020

Washington is close to agreeing on a desperately needed federal relief package.   However, any relief package aimed at this goal is likely not to include stimulus checks.

Some Democrats threatened Friday to oppose the legislation, arguing it’s “wrong morally” not to provide $1,200 payments to working-class families at a time when hunger in America is exploding.

“The American people need help and they need help now,” wrote Vermont Senator, Bernie Sanders in a statement that echoed concerns from other progressives.

Peter Navarro, the White House economic adviser, also expressed displeasure about the lack of stimulus checks. He stated the $908 billion package is “about two months late and a trillion dollars short.” It’s clear the $200 billion in stimulus checks sent out this spring were crucial, in keeping millions from poverty. However, some economists don’t believe stimulus checks make sense right now. Some warn against delaying this package over this single issue.

“Don’t vote against it. A lot of people need these benefits. Leaving out stimulus checks is a sensible compromise,” said Bruce Meyer, an economist at the University of Chicago who studied the impact of the first round of stimulus checks.

Stimulus checks – not so stimulating?

Some worry that another round of stimulus checks may not be that helpful. “People will just save it and not spend it,” says Gus Faucher, chief economist at PNC. Unlike the first stimulus checks, which saw an American spending spree of sorts – a second one would likely not have the same effect on the economy. Faucher said that more targeted stimulus checks to lower-income Americans could be helpful, though it would also slow down negotiations. The package, currently negotiated in Congress, would help in other ways because it includes:

  • Forgivable loans to small businesses.
  • Extra funding to state & local governments for the distribution of COVID-19 vaccines.
  • Extension of moratoriums on evictions.

Equally vital is $300 per week of enhanced federal unemployment benefits. Add to that the extension expiring unemployment programs for gig workers and those out of work for more than 6 months. As it stands, stimulus checks (if included) would increase the federal relief package price tag to over $1.2 trillion. This price is of major concern and a major sticking point amongst both, Republicans and Democrats. So, as negotiations press on, we must take a wait and see approach on whether or not a “check will be in the mail”.

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