By Liz Hay
Elm Staff Writer
On Feb. 1, 2021, Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi announced they filed a joint budget resolution for Fiscal Year 2021 to deliver additional COVID-19 relief legislation. This would be the third round of economic relief following the passage of the Coronavirus Aid, Relief, and Economic Security Act on March 27, 2020 and the second COVID-19 relief package in late December 2020.
Unlike the first two economic relief efforts, this third package is being conducted through a process known as budget reconciliation. Each fiscal year, Congress has the ability to augment the year’s federal budget through the reconciliation process which, according to the Brookings Institute, also serves as “a way for Congress to enact legislation on taxes, spending, and the debt limit with only a majority… in the Senate.”
This move is very indicative of the current political polarization; Democratic leaders likely do not believe they could find Republican support for this wave of relief for hard-hit American families.
According to an analysis of the CARES Act stimulus checks conducted by the New York Federal Reserve in October 2020, “a relatively small share of stimulus payments — 29 percent — was used for consumption, with 36 percent saved and 35 percent used to pay down debt.”
If the relief payments are saved or spent on debt, they do not contribute to the consumer economy in the way they were intended. Despite the gridlock necessitating this process, the new COVID-19 relief package has the potential to lessen the impacts of the pandemic for the most vulnerable segments of the American population if it is more targeted than its predecessors.
The significant proportion of households that put their stimulus payments into savings demonstrates the need to lower the threshold for stimulus eligibility in this package. As adjustments to the relief package are made in coming weeks, legislators should aim to deliver more aid per low-income household or individual.
On Feb. 5, White House press secretary Jen Psaki indicated in a briefing that the Biden Administration is open to lowering the income threshold on the payments but remains firm on the $1,400 amount per check. However, sending more money to those that desperately need funding for basic necessities — and who will therefore inject their stimulus into the national economy rather than a savings account —would be a more targeted and equitable strategy than simply providing additional savings to families less impacted by the recession.
Similarly, if households are spending their stimulus money on their increasingly insurmountable debt, they are also not putting that money back into the consumer economy as intended. The December relief package did include $25 billion for renters and landlords and the new resolution has similar measures, but the spiral of debt is out of control for many renters even with this help.
A January 2021 report from Moody’s Analytics projected that there will be 10 million delinquent renters in the U.S. who, on average, “will be almost four months and $5,600 behind on their monthly rent and utilities, with another $50 per month of late-payment penalties.” The newest COVID-19 relief package should take unprecedented steps to alleviate this debt to meet the urgent need of the American people and enhance the efficacy of other economic tools aimed at boosting consumer spending.
Even if changes are made to the economic aid, there are still limits to what this economic relief can do for Americans; a good stimulus package is not necessarily a good way to address the conditions that made it necessary.
Stimulus checks are generally useful for maintaining the economic status quo on two levels: by supporting specific populations experiencing pandemic-related economic hardships, and boosting consumer spending in the national economy.
However, the status quo was never enough for many Americans before the pandemic. Underlying disparities in the U.S. have been exposed and exacerbated in the pandemic, but this economic relief package is not, and should not be, a tool suited to address these larger divides.
Crisis-oriented relief can be sufficient to address crisis-related hardship, but there must be a simultaneous push from legislators to address the urgent areas of need that made this pandemic so devastating in the first place. To uplift all people in this pandemic and after, we need a holistic, thoughtful policy package crafted with bipartisan support that recognizes and mitigates the rampant disparities at all levels of the economy.
Featured Photo caption: Vulnerable American families are counting on the recently filed CARES Act to provide relief for financial turmoil experienced during the pandemic. Photo Courtesy of Pixabay.