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The U.S. government has sent some 159 million stimulus checks to individuals and families as a result of the $2 trillion CARES Act, which was passed in March. An additional 35 million people are still waiting for their checks to arrive. These payments—which averaged $1,809 per household—provided some temporary relief to address the economic fallout from the Covid-19 pandemic. Yet there’s no question that more is needed.
The $3 trillion HEROES Act, passed by the House and under scrutiny in the Senate, remains an option. This would send a second direct payment of up to $1,200 per qualifying individual, including children, capped at $6,000 for a family of five. Like the last stimulus package, individuals would qualify if their adjusted gross income, or AGI, from their 2019 or 2018 federal tax filing, whichever was most recent, was less than $75,000 for single taxpayers and $150,000 for married taxpayers. Payments would incrementally decrease as AGI goes up, as long as it doesn’t exceed $99,000 for individual taxpayers or $198,000 for joint taxpayers.
As a recession unlike any other in history takes hold, Americans are holding out hope for more relief. More than 20 million Americans are unemployed and many others are enduring pay cuts and business shutdowns. While it remains unknown whether the HEROES Act or another stimulus package will be passed, there are several signs that point in favor of a second stimulus ending up in your bank account, should you meet the income requirements. Here are five factors that suggest this.
1. Economic recovery is expected to be slow
This recession is unlike any other in history, since it was, in a sense, man-made, with economic activity intentionally halted to help curb the spread of coronavirus. It remains unknown whether the economy will pick up as states reopen with social distancing, but there will certainly be hurdles along the way. The International Monetary Fund forecasts that this global recession will become the worst downturn since the Great Depression.
Given fleeting dreams of a V-shaped recovery, economists are working to decode the so-called alphabet soup of this recession. “Forecasts range from a U-shape, a prolonged recession ahead of a steep rebound; to a W-shape, which is defined by a second downturn following a brief recovery; to an L-shape for no recovery after the collapse,” writes CNN’s Anneken Tappe. The shape of the recovery is largely correlated with how much time is needed for the economy to heal. Simply put, the longer a recovery takes, the greater the need for more stimulus money to keep Americans afloat.
The Fed warns that the economy can’t fully recover until the labor market gains momentum. Others are confident that economic activity won’t fully pick up until a vaccine is here. “For the economy to fully recover, people will have to be fully confident, and that may have to await the arrival of a vaccine,” said Fed Chair Jerome H. Powell during a 60 Minutes Interview. He believes the economic recovery may extend through the end of 2021.
It’s important not to confuse the current reopening of states with economic recovery. “Just because economies are reopening doesn’t mean the financial need has disappeared,” says Greg McBride, chief financial analyst for Bankrate. State economies are opening slowly, but demand could lag behind. “Restaurants are running at 50 percent capacity, and many Americans may be reluctant to be around other people,” McBride says. “This persistent weakness in demand could turn temporary layoffs into permanent layoffs.”
2. The unemployment benefit is expiring soon
Right now, Americans who filed for unemployment benefits are receiving an extra $600 per week on top of their regular unemployment benefits, but that is set to expire on July 31. The HEROES Act proposes that the additional $600 weekly payment is extended until January 2021, but some policy makers have made it clear that it must be adjusted. The White House is considering reducing this to $250 or $300 a week. That’s in part due to the fact that many Americans are currently making more in unemployment benefits than they did working, and they aren’t looking for work as a result. Whether this benefit expires or is extended but cut to a lesser amount remains unknown as of now. However, it’s clear that when this benefit runs dry, unemployed Americans will have less cash on hand and will need more help. All of this points to the likelihood that another stimulus payment will be passed.
3. President Trump says he’s asking for additional stimulus money
Last week, President Trump announced in the White House Rose Garden: “We’ll be asking for additional stimulus money. Because once we get this going, it’ll be far bigger and far better than we’ve ever seen in this country—and that includes as of three of four months ago, when everyone thought it was great and it was great.”
Treasury Secretary Steven Mnuchin says the Trump administration will “seriously look at whether we want to do more direct money to stimulate the economy,” as mentioned by MarketWatch.
4. White House economic adviser: the odds of another stimulus package “are very, very high”
Economic advisor Kevin Hassett told the Wall Street Journal that the odds of another stimulus package “are very, very high.” He said this will continue to hold true even if data on output and jobs continue to exceed expectations.
“There are a lot of things that really are necessary to make sure that once we open up that we actually lift off,” Hassett told the Journal. “The odds of a Phase Four deal is something we talked with the president about last week. We even had a small group meeting this morning to talk about it. The odds of a Phase Four deal are very, very high.”
Mitch McConnell, Senate majority leader, has mentioned that any further stimulus would be smaller than the CARES Act—and that it would likely be the last, according to The Motley Fool.
5. Many fear a big second wave of coronavirus cases
Concerns about a second wave of coronavirus cases continue to mount as states open up. Recently, cases have increased in Texas, Arizona, Florida and California. While the magnitude of a spike still remains unknown, a second wave would cause further setback to the economy, prompting a stronger argument for why more stimulus relief is needed.
When can we expect another stimulus check?
The Wall Street Journal reported that the administration is working on a plan, and Senate Majority Leader Mitch McConnell has mentioned that Congress may decide in the next several weeks. White House officials anticipate that the executive branch will work on its own proposal at the end of July when Congress returns from recess, according to CNBC. Hassett predicts we’ll see another stimulus bill before August recess, says the Journal.
