Most Americans are likely to save $600 virus relief check
Galen Gilbert knows just what he will do with the check he gets from Washington as part of the pandemic relief package, whatever the amount: put it in the bank.
“I’ve got more clients than I can handle right now and I’ve made more money than I usually do,” said Gilbert, a 71-year-old lawyer who lives in a Boston suburb. “So I’m not really suffering financially.”
Cheryl Smith, an author and editor who lives in Low Pass, Oregon, isn’t in a rush to spend the money, either. She plans to save a portion, too, while donating the rest to a local food bank. “I’m actually saving money right now,” Smith said.
President Donald Trump’s demand to increase the already-approved $600 individual payment to $2,000, with backing from congressional Democrats and some Republicans, has dominated events in Washington this week and redefined the debate for more stimulus during the pandemic. Mitch McConnell, the Senate majority leader, said Wednesday he would not allow a vote on a standalone bill increasing the checks to $2,000, dooming the effort, at least for now.
Whatever the amount, the reality is that most Americans right now are much more likely to save the money they receive.
Of course, the money will be a lifesaver for the roughly 20 million people collecting unemployment benefits and others who are working reduced hours or earning less than they used to. Yet, for the majority of the estimated 160 million individuals and families who will receive it, spending the money is expected not to be a high priority.
After an earlier round of $1,200 stimulus checks went out in the spring, the saving rate skyrocketed and remains at a nearly 40-year high. That largely reflects the lopsided nature of the pandemic recession that has put some Americans in dire straits while leaving manyothers untouched.
Economists on the right and left of the political spectrum said that when otherwise financially secure people receive an unexpected windfall, they almost invariably save it. The free-market economist Milton Friedman highlighted this phenomenon decades ago.
Many experts said a truly stimulative package would have earmarked the payments for those who need it most — the unemployed.
“We know where the pockets of need are,” said Greg Daco, chief economist at Oxford Economics. “Putting it there would be a much more efficient use of the stimulus.”
In essence, each dollar given to a person in need is likely to benefit the economy more because it would be used to pay for, say, groceries or rent.
“Providing $2,400 to a family of four in the same financial situation as they were at the end of 2019 doesn’t do much to boost the overall economy right now,” Daco said. “It’s not whether it’s a positive or not. It’s their potency that’s in question .” Individuals with an adjusted gross income in 2019 of upto $75,000 will receive the $600 payment, and couples earning upto$150,000 a year will get twice that amount.
A more effective approach, experts say, would have raised unemployment insurance benefits to the jobless by $600aweek, matching the supplement under the stimulus package Congress passed last spring, rather than the $300weekly subsidy the new legislation provides. Democrats had pushed for larger payments to the jobless and included it in legislation that passed the House, which they control. But the measure met stiff resistance from Republicans, who control the Senate, and was not included in the final compromise bill.