Wisconsin Spotlight | Jan. 5, 2020
MADISON — How much are the federal stimulus payments really stimulating the pandemic-threatened U.S. economy?
U.S. Sen. Ron Johnson, among others, has questioned the value of much of the COVID-19 relief that is expected to add trillions of dollars in debt while failing to target those Americans who really could use the relief.
In March, Congress — flush with bipartisan cooperation — passed the $2 trillion CARES (Coronavirus Aid, Relief, and Economic Security) Act to salve the economic soars of the COVID-19 outbreak. The pain was badly exacerbated by governors and unelected health bureaucrats ordering lockdowns and restricting business, particularly in the hospitality trade.
The package included $1,200 in direct payments per adult and $500 per child for households making $75,000 or less. All told, about 166 million Americans received a cut of the “stimulus” money, funded, of course, by the American taxpayer.
So what did Americans do with their checks? Most either used the federal windfall to pay off debt or they squirrelled the money away, according to a report from the Federal Reserve Bank of New York.
On average, 36 percent of the stimulus funds went into savings, while another 35 percent was applied to debt.
Just 29 percent of the payments fell under the personal consumption category, according to The Fed. About 18 percent was marked for essential spending, such as groceries.
So more than 70 percent of the $275 billion in economic impact checks went to savings and debt payment, which is certainly prudent but not economically stimulating. It’s understandable, as thousands of small businesses racked up more debt trying to survive. U.S. household debt increased by $87 billion in the third quarter, according to the Federal Reserve Bank of New York.
“It was a shotgun approach,” Johnson said of the stimulus funding. “Hundreds of billions of dollars went out to people who didn’t need it. And now they’re proposing more.”
A new round of COVID-19 payments are going out this week, according to the Internal Revenue Service. Congress late last month passed a $900 billion relief package, including $600 checks for many Americans. There’s a call — from the Capitol to the White House to Main Street America — for more money. The $600 per eligible individual is a pittance, an insult, they say. President Trump and a raft of federal lawmakers are demanding $2,000 “stimulus” payments for every eligible recipient.
So a family of four making less than $150,000 would be looking at an $8,000 taxpayer-funded check. A family of six would receive $12,000.
Critics like Johnson say that’s a lot more in bad promises added to the massive $27.57 trillion U.S. debt left for subsequent generations of Americans to pay. There’s plenty of stimulus money going to households not economically hit by the pandemic, including the many government workers who continue to collect their paychecks.
“They’re all getting paid even though a lot of them aren’t going to work, particularly here in the Capitol,” the Wisconsin U.S. senator said. “So those individuals making $150,000, they get a $10,000 check. How does that make any sense whatsoever?”
“By the end of the fiscal year, we’ll be at $29 trillion in debt. People are spending money like it’s Monopoly money, and there’s no end in sight,” Johnson added.
At least Americans are using their stimulus checks to pay down personal debt, even if their government is adding to the national tally. The Fed report finds households expect to consume even smaller shares of the second round of stimulus payments, applying a higher share to debt payments.