How would a second stimulus check affect the economy?

After months of painstaking negotiations, Congress passed a $ 900 billion coronavirus relief bill on Monday that would send a second stimulus check to millions of Americans still reeling from the pandemic – likely increasing consumer spending and preventing an increase in poverty.

12 MILLION AMERICANS FACING THE LOSS OF UNEMPLOYMENT BENEFITS AFTER CHRISTMAS

The measure includes a cash payment of $ 600 for Americans who earned less than $ 75,000 in 2019, half the size of checks sent out earlier this year with the passage of the CARES law in March, as well as $ 600 per child. If President Trump agrees, payments would be reduced for high income earners (5% of the amount by which their adjusted gross income was above the initial threshold) and would disappear entirely for people earning over $ 87,000.

An October study published by the Peter G. Peterson Foundation, a non-partisan group, found that the economy had seen a “slight boost”, thanks to increased spending by less wealthy Americans. Check recipients were more likely to spend their money on basic necessities such as food, housewares, utilities, rent, mortgages and credit cards, which means these sectors saw the biggest advantage.

“Because the payments helped alleviate the loss of employment-related income for many low- and middle-income households, these families were more likely to use the funds to pay for their expenses rather than saving them or spending them. use to pay off existing debt, ”the study said.

BEST DEMOCRATS SEE $ 900B COVID RELIEF PACKAGE AS THE START

Overall, the study concluded that the payments increased the country’s economic output by 0.6% in 2020, far less than the increase provided by the $ 600 per week unemployment benefits and protection program. paychecks.

A separate study released by the National Bureau of Economic Research found that households responded quickly once they received the money, with spending increasing from $ 0.25 to $ 0.40 per stimulus dollar over the years. first few weeks.

Spending was higher among low-income households, with larger income declines and lower liquidity levels, according to the study, “highlighting the importance of targeting.”

“Liquidity plays the most important role, with no significant response in terms of spending for households with large current account balances,” the study said.

12 MILLION AMERICANS FACING THE LOSS OF UNEMPLOYMENT BENEFITS AFTER CHRISTMAS

An earlier analysis by the Center on Poverty and Social Policy at Columbia University showed that without the passage of the $ 2.2 trillion CARES law, the country’s sole measure of poverty would have climbed to 16.3 %, against 12.8% before the crisis. During the 2008 financial crisis, the level of poverty peaked at around 16%, according to the US Census Bureau.

But the government’s massive response to the virus outbreak and the economic lockdown that followed helped the poverty rate remain virtually unchanged at 12.7%, the researchers said.

Trump on Tuesday night demanded Congress increase the size of stimulus checks to $ 2,000, calling the $ 600 proposal “ridiculously low” and threatening to torpedo the relief deal.

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Democrats plan to force a vote this week on more than tripling the payment amount.

“Finally, the president agreed to pay $ 2,000,” House of Commons Speaker Nancy Pelosi wrote on Twitter. “Democrats are ready to raise this issue this week by unanimous consent. Let’s do it!”

A source told FOX Business Democrats will attempt to pass a stand-alone bill for direct payments of $ 2,000 on Thursday, although it is not clear whether he would receive the unanimous consent needed to move through the House or wipe out the Republican-controlled Senate.