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As Congress debates the publication of a third round of Federal “stimulus checks” For millions of Americans, economists are trying to gauge how effective these payments are in helping to heal the economy during the coronavirus pandemic. The results have been mixed, with new research findings.
While helping to keep some families afloat, households earning over $ 78,000 largely avoided the $ 600 check the United States began sending in December, according to a study by Opportunity Insights Economic Tracker, a nonprofit research group led by Raj Chetty, professor of economics at Harvard. In contrast, families below this income tend to spend the money quickly.
Perhaps not surprisingly, these findings suggest that low-income households need the stimulus money to pay their bills and other necessities, while high-income households generally do not. More revealing, the analysis highlights the disproportionate impact of the pandemic on the poorest Americans.
“We’re seeing this huge gap,” said Michael Stepner, economist at Opportunity Insights. “Since mid-June, the employment recession for high-income households is overemployment – it’s like before the pandemic” because their work can be done remotely.
The results come as lawmakers debate President Joe Biden’s $ 1.9 trillion stimulus bill, which is said to include a $ 1,400 check for eligible people. That’s more than the two checks that have so far reached most US households, with $ 1,200 per adult mailed last spring and $ 600 per person mailed in early January.
But the pandemic has changed a lot since the spring of 2020, when the crisis shut down the economy and affected a wide range of workers. Since then, high-income workers have largely recovered, with low-income workers much more likely to experience further job or income loss.
Meanwhile, Stepner said, jobs for low-income Americans are still down about 20% from pre-pandemic levels due to strikes in sectors more likely to employ low-income workers. salary, such as restaurants or retailers.
“Millions of jobs are being lost, and millions at the bottom of the income distribution are still out of work,” he said.
The research may provide ammunition for lawmakers who have criticized stimulus checks for failing to provide targeted relief, such as Senate Minority Leader Mitch McConnell, who described an earlier effort to send stimulus checks of 2,000 $ as “socialism for the rich”. The Biden administration says two-thirds of the checks went to families with incomes below $ 90,000.
Analyzing data on credit and debit card spending, Stepner and his co-researchers Chetty and John Friedman found that households with annual incomes below $ 78,000 quickly increased their spending in January, jumping sharply. 8 percentage points within two weeks of payment of the $ 600 checks.
But spending barely budged among households with incomes above this level. Their analysis estimates that families earning more than $ 78,000 will only spend $ 45 of the $ 600 they received.
“Better value for money”
These findings raise questions for Stepner and his co-researchers about whether sending a third stimulus check to low-income and high-income families is an effective use of government humanitarian aid. .
Providing a check for $ 1,400 to households that earn more than $ 78,000 would cost the government $ 200 billion, but economists estimate that only $ 15 billion would be spent and recycled back into the economy.
“If we send money to people, we want it to stimulate the economy,” Stepner said. “Targeting payments to low-income households gives you better value for money.”
To be sure, this analysis is unlikely to be popular with families earning over $ 78,000 who might be lining up to receive a check for $ 1,400 per person in the next few months. The first stimulus check was sent to more than 30 million households earning more than $ 75,000 – including 400,000 households with incomes over $ 200,000, according to recently released data from the IRS.
These higher-income households may be more likely to spend their $ 600 checks once the pandemic is over – on postponed vacations, going out to eat out, enjoying theater, music, or other activities that have been postponed. during the pandemic, for example. Meanwhile, many families as well as the economy are now suffering, which, according to Stepner, is an argument to focus the next round of emergency relief on providing immediate support.
Better ways to stimulate growth
Other economists have also argued that stimulus checks, while popular, are not the most effective form of economic stimulus, including Mark Zandi, chief economist at Moody’s Analytics. In a Jan. 15 research note, he wrote: “A lot of the money goes to households that don’t need it and will save a lot of it, at least initially.”
The stimulation of economic growth is weaker for stimulus controls than for other types of public spending, with food stamps and supplementary unemployment assistance both being more effective, Zandi noted.
But many high-income Americans say they need the stimulus money, too. Nearly half of households with incomes over $ 150,000 said they needed stimulus checks to ensure financial stability, according to a recent Credit Karma survey.
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