As Americans wait to hear whether there will be a second round of COVID-19 stimulus checks, a new study says the first round of checks reduced poverty but that additional support will likely be needed to deal with shortcomings in the first package.
The stimulus checks were passed by Congress as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, “which included nearly $500 billion in direct income transfers for families across the country,” according to the Center on Poverty & Social Policy at Columbia University.
“In the absence of the CARES Act, we project that poverty rates would rise to 16.3 percent given the composition of April 2020,” the study found, the Center announced on June 21, 2020. “With the CARES Act, however, we project that poverty rates may return to pre-crisis levels if access to the benefits is adequate. However, the CARES Act also features many shortcomings that threaten to weaken its poverty reduction potential.”
The study found:
The ongoing COVID-19 (‘novel coronavirus’) pandemic has led to historic turbulence in the United States labor market. Unemployment rates spiked to nearly 20 percent in April 2020, the highest rate of unemployment since the Great Depression. To mitigate the economic consequences of the pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in late March 2020. Included in the CARES Act were two major expansions to income transfer programs: Recovery Rebates, a one-time cash payment to a large share of the U.S. population, and expansions to unemployment benefits…Unemployment rates are particularly high for Hispanic and Black workers, suggesting that an end to the CARES Act’s income support after July 2020 may exacerbate racial and ethnic differences in poverty
Many Americans are hoping for a second COVID-19 stimulus check to help them get through the continuing pandemic. However, there’s one big roadblock standing between them and another check: The Republican-controlled Senate.
Democrats have already passed the bill for another check, called the HEROES Act, but the plan needs to make it through the Senate. However, there have been indications from some top Republicans and President Donald Trump that a second round of checks could happen, although the form they would take is unclear.
According to CNBC, the second round of stimulus checks could get families as much as $6,000, and they’d also include people who were left out the last time, like adult dependents (many of whom are college students.) Unemployment insurance would also be extended. However, that’s the Democratic plan, and it’s likely that a GOP plan would take a different form.
Here’s what the new study found about the effect of such a governmental approach:
The Study Argues ‘Additional Income Support’ May Be Necessary to Reduce Poverty
The new study argues that “additional income support” will be needed to keep poverty down if high employment rates don’t change.
“First, many eligible families have struggled to actually receive their CARES Act benefits,” the study found.
As a result, the CARES Act’s effect on annual poverty rates likely understates the immediate hardship that many families are experiencing, especially those waiting to receive their CARES Act benefits. Second, key components of the CARES Act are scheduled to expire after July 2020, leaving many families with little to no income support in the second half of the year. Third, many families, such as those with undocumented immigrants, are explicitly left out of the CARES Act.
The study argues, “We conclude that if high unemployment rates persist beyond July 2020, additional income support will be needed to prevent subsequent increases in economic insecurity and hardship.”
According to the study, “…the CARES Act would actually contribute to a reduction in annual poverty rates, though more than 36 million individuals would still live in poverty. However, this strong effect on poverty rates is primarily due to high levels of income transfers concentrated in the first half of the year, potentially leaving families with little to no benefits in the second half of the year.”
The study underscores the importance of the stimulus checks to diverse populations.
For White, Black, and Hispanic individuals, the crisis contributes to higher pre-CARES poverty rates (10.9 percent and 25.3 percent, respectively), but with potential to return to close to precrisis levels after transfers from the CARES Act. In all scenarios, however, Black and Hispanic individuals remain more than twice as likely as White individuals to experience poverty. We project that poverty rates will remain around 20.2 for Black individuals, 20.3 percent for Hispanic individuals, and around 14.5 percent for Asian individuals even after taking the CARES Act into account. The smaller poverty reduction effect for Hispanic individuals, is partly due to the CARES Act’s exclusion of undocumented immigrants. This may apply to many Asian individuals, as well.
The study documented these weaknesses in the CARES Act approach:
The CARES Act explicitly leaves out many individuals from receiving income transfers: approximately 30 million income-eligible individuals from the Recovery Rebates (stimulus checks) and those without work authorization from unemployment benefit expansions.
• The CARES Act’s effect on annual poverty understates the immediate hardship that many families are experiencing, especially those waiting to receive their CARES Act benefits.
• Moreover, the CARES Act benefits are concentrated in the first half of 2020, leaving many families with little or no income support after July 2020 unless they ration their benefits from the early part of the year.
• If the crisis and its effects on the labor market are prolonged, the regular provision of income support to low-income families will likely be needed throughout the crisis to prevent future increases in poverty and/or material hardship.
President Trump Says Another Stimulus Package Will Happen & It Will Be ‘Very Generous’
Let’s start at the top. President Donald Trump is now on the record in support of a second stimulus package for the American people.
Trump said recently, “We will be doing another stimulus package, it will be very good, very generous.” Asked if there would be a second check, Trump also said, “We are, we are” and said it would be “very dramatic, very good.”
The Washington Post reported: “President Trump has told aides he is largely supportive of sending Americans another round of stimulus checks, expressing the belief that the payments will boost the economy and help his chances at reelection in November.”
Senate Majority Leader Mitch McConnell has been cautious on the notion of another stimulus package. “You could anticipate the decision being made on whether to go forward in about a month,” McConnell said in early June. “And it will be narrowly crafted, designed to help us where we are a month from now, not where we were three months ago.”
McConnell has indicated a second package will “come soon” and said it will prioritize investing in “future generations,” but he didn’t explain exactly what that meant. He has advocated for COVID-19 liability shields for universities and corporations, according to Forbes.
It’s likely the package won’t take the exact form of the Democratic House HEROES Act, which McConnell pronounced “dead on arrival” back in May. “What you’ve seen in the House [from] Nancy is not something designed to deal with reality, but designed to deal with aspirations. This is not a time for aspirational legislation, this is a time for practical response to the coronavirus pandemic,” McConnell said at that time.
Some Top Republicans Have Also Advocated for Back-to-Work Bonuses
At least one top Republican has floated making the second round of COVID-19 stimulus checks “back-to-work” bonuses instead. Back in May, Senator Rob Portman, D-Ohio, raised that idea instead of extending the federal unemployment insurance checks of $600 a week.
He told CNBC he was “talking to Republicans and Democrats about” giving people back-to-work bonuses instead.
“Why not provide a bonus to people to say, ‘If you go back to work, you can take some of this unemployment insurance with you.’ If you take $450, as an example, per week, remember this is per week, that would mean that in every state for minimum [wage] workers it would be more advantageous go back to work than to stay on unemployment insurance,” he said to the network then. “If you did a $450 bonus to workers, good for workers, they’re going to get their salary plus that.”
According to the Hill, a prominent GOP congressman introduced a similar plan for a “return to work bonus.” According to the Hill, the idea is “gaining traction among Republicans.”
Rep. Kevin Brady, R-Texas, introduced a proposal to give people who return to work after getting unemployment benefits up to $1,200.
“Through a Return To Work Bonus — which would allow workers to keep up to two weeks of unemployment benefits if they accept a job offer — we can make sure these temporary job losses don’t turn into permanent ones,” Brady said in a statement.
Both of their plans call for the checks to stop July 31.