The US has spent trillions of dollars on economic relief efforts in the wake of the pandemic. Although, some lawmakers say it’s not enough. A bill making its way through Congress would give a monthly payment of $2,000 to most Americans.
New Round of Stimulus
A growing number of Democratic law are pushing for an unprecedented expansion of the government’s role in the economy: $2,000+ per month to a majority of Americans until the unemployment rate recovers. House representatives Tim Ryan (D-Ohio), and Ro Khanna (D-Calif.) have spearheaded href=”https://www.congress.gov/bill/116th-congress/house-bill/6496″ target=”_blank” rel=”noopener noreferrer”>the bill called The Emergency Money for the People Act.
The bill, which currently has about twenty Democratic cosponsors, would provide monthly checks of $2,000 to all Americans making less than $130,000, or $260,000 for couples, with an extra $500 for each child (up to three children). The payments would last six months, with a congressional decision to extend them for another six months if necessary.
Possible Presidential Support
According to a press release, the Emergency Money for the People Act would mean $2000 monthly payments for those over the age of 16 who make less than $130,000 annually. https://t.co/EXmGWjkOao
— abc27 News (@abc27News) April 15, 2020
Donald Trump is not your typical conservative; he’s a big proponent of heavy federal participation in the US economy. Throughout his administration, he’s pushed for low-interest rates to keep the economy chugging along, and he was quick to push for massive economic stimulus in the form of corporate bailouts, loans, and direct cash payments to Americans to lessen the economic blow of the pandemic.
With this in mind, it should come as no surprise that the president is seriously considering another round of direct cash payments to Americans. When asked directly about the possibility of more payments, he recently indicated as much. However, with the federal government now moving toward reopening the economy, the White House has shifted its messaging toward optimism that such massive stimulus wouldn’t be necessary.
Guess How We’d Pay for it
The United States will see tax revenue drop tremendously in 2020. Some businesses will do well, but many businesses will report a loss or even declare bankruptcy. Citizens who lose their jobs naturally won’t be paying the same amount of taxes as when they were employed last year. The bottom line: all this added government spending means even an even bigger budget deficit than usual.
The United States already has more outstanding debt than any other country in the world. It’s set to be even larger than our GDP this year, which is a major red flag for economists.
With $130,000 as the cutoff ($260,000 for married couples), a minimum age of 16 years, and an extra $500 for every child a family has, the payments would cost the government around $600 billion a month, or seven trillion dollars if they last the whole year. That’s over ten times what we spend annually on defense. When added to the already massive fiscal stimulus, the federal budget would triple in 2020 while tax revenue falls.
The only possible consequences of such a move are difficult to predict. We’d likely see very high-interest rates on our debt if we choose to borrow on the free market. Alternatively, we'd also likely see massive deflation if we choose to borrow from the Federal Reserve (basically print money). Either way, the economic ripple effects could last decades.
While tempting to ask the government to simply bail Americans out of the current situation with a large monthly check, this bill could cause us way bigger headaches down the line.
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