Here’s the New Democratic Plan for $1,400 Stimulus Checks

WASHINGTON (The Washington Post) —
coronavirus stimulus

President Joe Biden vowed to get more relief to Americans quickly to help people survive financially until the pandemic is under control. A key part of Biden’s proposal is to send another round of cash payments directly to U.S. households.

Some economists, Republicans and moderate Democrats have argued that this third round of “economic impact payments” – more commonly referred to as “stimulus checks” or “relief payments” – should only go to the hardest-hit families. Some say the payments are a waste of taxpayer dollars.

Biden and Democratic leaders in Congress say a third round of stimulus checks is necessary to ensure that people who have lost their jobs or taken a pay cut still have enough money to buy food, pay rent and get the medical care they need during a pandemic. But the White House has signaled the president is narrow who gets them, sending checks only to low and moderate income families this time around.

The latest proposal Democrats are coalescing around would send $1,400 payments to individuals earning $50,000 or less and $2,800 to married couples earning $100,000 or less. Below are more details on the latest plan, which has not been publicly released yet and could still change.

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Who would get a $1,400 payment?

Individuals earning up to $50,000 would get the full $1,400 payment. Heads of household earning up to $75,000 would also qualify, and married couples earning up to $100,000 would get a $2,800 payment.

Similar to the prior rounds of stimulus checks, people who earn slightly above those thresholds would qualify for a partial payment.

About 85% of Americans would get the full benefits, and another 3.5% would get the partial benefit, according to Kyle Pomerleau, a fellow at the American Enterprise Institute who specializes in tax policy. This is slightly less than Biden’s initial proposal for the payments to go to individuals earning up to $75,000 and married couples earning up to $150,000.

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How big would per-child payments be?

Under the Democratic plan, parents of children would receive an additional $1,400 per child. That means a family of four would receive $5,600.

Democrats are separately pushing a child tax benefit that would provide over the course of a year $3,600 per children under 6 and $3,000 per child age 6 to 17. A version of that plan is expected in the final agreement.

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When could payments start going out?

The new round of $1,400 payments would not go out until after Congress passes its broad relief package. The timing on that effort remains unclear, but White House officials have said they are determined to pass the legislation before mid-March – when millions of jobless Americans would begin losing unemployment benefits if Congress does not act to prevent it.

Once the legislation is signed, payments should starting going out in a matter of days. The bulk of the second round of payments worth $600 each went out within three weeks through direct deposit. Mailed checks take slightly longer.

The potential hitch is that the Internal Revenue Service typically sends out the payments, and that the IRS will be in the midst of a busy tax-filing season from mid-February through mid-April. The IRS staff is stretched thin, meaning there could be delays as the agency juggles tax filings and stimulus payments.

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How much would this third round of stimulus cost?

This latest Democratic proposal for $1,400 payments to singles earning up to $50,000 and married couples earning up to $100,000 would cost around $420 billion, according to Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget. That’s down slightly from Biden’s initial proposal for the checks, which would have cost about $465 billion and gone to singles earning up to $75,000 and couples earning up to $150,000, according to CRFB.

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Will the payments be based on 2019 income or 2020 income?

While no final proposal has been released, Democrats have explored basing eligibility for the stimulus payments on prior-year income, meaning people would have to qualify for the checks based on what they earned in 2019 or in 2020, according to a person who spoke on the condition of anonymity because the person was not authorize to discuss the planning.

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Would ‘adult dependents’ get a payment this time?

Adult dependents are eligible for stimulus payments under the Democrats’ current plan, according to multiple people with knowledge of the matter.

In the two prior rounds of stimulus payments, people over age 17 who could be claimed as a dependent on someone else’s tax return – such as college students or disabled adults – were not eligible for stimulus money. About 13.5 million adult dependents were excluded, according to the People’s Policy Project, a left-leaning think tank.

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Will these checks help the economy?

There’s debate about the effectiveness of the direct payments. Most economists support giving more relief to Americans who are struggling to put food on the table or keep their small business from closing. But there’s concern that a lot of families are saving their stimulus money. When people save the money, it does not boost the economy. Economists see such savings as a sign that the family did not need the money for basic necessities.

A New York Federal Reserve survey found that 36% of the first round stimulus payments was saved. Another 35% was used to pay down debt. About 18% was spent on essentials such as food and rent. The remaining 11% was donated or spent on nonessential items such as video games.

An estimate of Biden’s proposed stimulus checks by the University of Pennsylvania’s Penn Wharton Budget Model predicted that 73% of the $1,400 relief payments “will go directly into household savings and produce limited stimulus effects.” The White House pushed back against that forecast, saying there would be a large, positive effect from the payments.

The best argument in favor of the checks is that they have kept many Americans out of poverty during the crisis. An analysis by the left-leaning Institute on Taxation and Economic Policy found that the bottom 20% of Americans – those earning less than $21,300 – would see their income rise nearly 30%, helping keep them out of poverty.

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What happened to the $600 stimulus payments that recently went out?

Americans started to receive the $600 stimulus payments in their bank accounts on Jan. 4. Economists at Opportunity Insights, a research center, tracked how many of the payments were saved versus spent. They found that in January, people with incomes under $46,000 were quick to spend the money, while people with incomes over $78,000 were likely to save it.

Opportunity Insights Directors Raj Chetty and John Friedman have argued for limiting a third round of stimulus payments to individuals earning under $50,000 and couples earning less than $75,000. They say that the need is by far the greatest among these modest-income families and that the economic boost will be much larger if the money goes to lower-income families because they probably will spend it right away. The latest Democratic proposal moves in that direction, though it is more generous to couples.

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Are Democrats unified on the check proposal?

Senior Democratic officials have disagreed over the past several months on the need and structure of the stimulus payments.

Initially, during the 2020 presidential campaign, Biden gave measured support for the idea, saying he would back another round of payments if economic conditions required. However, Biden enthusiastically endorsed the checks during the Georgia runoff elections, vowing that Americans would receive $2,000 stimulus payments if Democrats won those races.

Biden has since insisted on sending stimulus payments worth $1,400, to supplement the $600 December payments (for a total of $2,000), while expressing openness to tightening eligibility. Several centrist Democrats, including Sen. Joe Manchin, D-W.Va., have expressed concern over the efficacy of the payments as a form of fiscal stimulus and whether they are adequately targeted for those in need.

More-liberal senators have called for the stimulus payments to be more generous. Sens. Ed Markey, D-Mass., and Bernie Sanders, I-Vt., helped lead legislation, co-sponsored by then-Sen. Kamala Harris, D-Calif., that called for providing monthly checks worth $2,000 to Americans until the pandemic ends. Rep. Alexandria Ocasio-Cortez, D-N.Y., and others on the left have also said Democrats should provide a new round of $2,000 payments.

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What have Republicans said about the checks?

Republican policymakers have offered conflicting views about the stimulus payments.

Trump was a forceful advocate for the payments, which included his name on the earlier round of checks. Sen. Josh Hawley, R-Mo., and several other Senate Republicans also expressed support for $2,000 payments, but other GOP lawmakers panned them as wasteful government spending.

A group of 10 GOP Senators seeking a bipartisan deal with Biden pitched $1,000 stimulus payments. That group suggested significantly lower income thresholds of $40,000 per year for singles and $80,000 for couples. Many of the Republican lawmakers in the group – led by Sen. Susan Collins, R-Maine – are skeptical of the merits of the payments but included them as a good-faith effort to show Biden they were serious about negotiating, according to one person familiar with the group’s discussions granted anonymity to describe internal dynamics.

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