A nonpartisan nonprofit is recommending the federal government consider sending fewer stimulus checks out in a pending round of CCP virus relief because wealthy Americans were less likely to spend the money than poorer ones.
Congress approved and then-President Donald Trump late last year approved and signed a bill that included $600 checks for most Americans. The nonpartisan nonprofit Opportunity Insights found that households earning more than $78,000 were likely to spend just $45 from the checks over the first month after receiving them.
People with lower incomes spent at least $90 from the checks, the analysis found.
“Based on these results, we estimate that households earning more than $78,000 will spend only $105 of the $1,400 stimulus check they receive—implying that $200 billion of additional government expenditure will lead to only $15 billion of additional spending,” Opportunity Insights, located at Harvard University, stated (pdf).
“Targeting the next round of stimulus payments toward lower-income households would save substantial resources that could be used to support other programs, with minimal impact on economic activity.”
President Joe Biden and many Democrats in Congress are pushing for a fresh stimulus package that would include $1,400 checks. Lawmakers tried amending the checks last year to $2,000 but were blocked by Senate Republicans.
Senate Republican Leader Mitch McConnell (R-Ky.) and others said they didn’t support sending checks to so many people, including those who hadn’t lost their jobs during the pandemic.
Mark Zandi, chief economist at Moody’s Analytics, said in a Jan. 15 research note that the most costly part of Biden’s $1.9 trillion stimulus proposal was sending more checks out.
“Though there is considerable political momentum for this, it is not the most effective type of support,” he wrote. “Much of the money goes to households that do not need the funds and will save a lot of it, at least initially.”
Biden told reporters on Monday that the details of his proposal might be altered during negotiations with Congress.
“For example, you know I proposed that we—because it was bipartisan, I thought it would increase the prospects of passage—the additional $1,400 in direct cash payment to folks. Well, there’s legitimate reason for people to say: ‘Do you have the lines drawn the exact right way? Should it go to anybody making over X-number of dollars or why?’ I’m open to negotiate those things,” Biden said.
Republicans this week said the amount of the proposal was too high.
“A bill to provide $900 billion of relief was signed just in late December. President Biden now wants to double that amount of funding,” Sen. John Barrasso (R-Wyo.) said on the Senate floor.