(CBS Baltimore) — The pandemic continues, long after COVID first shut down the economy in early 2020. The Delta variant is still causing positive cases, albeit at a reduced rate, and the Omicron variant is now starting to show up across the country. President Biden has more strongly pushed to encourage vaccines. The economy as a whole has surpassed where it was before the pandemic. Still, shortages and inflation persist, and some people haven’t caught up to where they were early last year, even as unemployment nears pre-pandemic levels, with jobs widely available in certain sectors. Many people are even choosing not to return to the workforce for the time being. But many others still struggle to find suitable work. The federal unemployment bonus ended over two months ago, but millions of people remain short of food and behind on bills. A fourth stimulus check would help. A few places, including California, have recognized the need for more help and provided additional payments. But will the Internal Revenue Service (IRS) be sending out another stimulus check in 2021?
That hasn’t been explicitly decided. But many clues point to where things are heading.
Economic Recovery For Some
Relief payments were intended to ease COVID’s economic impact and support the economy in the process. The third round of relief payments started back in March, courtesy of the American Rescue Plan (ARP). Over the following months, about 169 million people received up to $1,400 each. That accounted for nearly all of the $422 billion set aside. The ARP checks closely followed the $600 payments from January, which came nine months after the $1,200 payments from the pandemic’s early days. They seem to have worked, but have also helped many who didn’t actually need the money.
In the third quarter of 2021, the U.S. economy grew at an annualized rate of 2.0 percent, according to the most recent estimate from the Bureau of Economic Analysis. (Supply chain issues may have prevented faster growth.) That’s a major slowdown from the torrid pace in the second quarter, which saw 6.7 percent growth. The Conference Board forecasts continued though slower growth through the rest of the year. The country’s gross domestic product (GDP), an estimate of economic activity across the U.S., has surpassed pre-pandemic levels. By that general measure, the economy has fully recovered.
Broad segments of the workforce have endured little economic hardship during the pandemic. Many jobs performed at a desk in an office are just as easily performed at a desk in someone’s home. And with fewer places to spend money during much of the pandemic, plus three stimulus checks, many Americans saved more than they might have otherwise. The personal saving rate ballooned to 33.7 percent in April of 2020 and remained well above pre-pandemic levels until September of 2021. In September, it finally dropped to 7.5 percent, below the 8.3 percent from February of 2020, the month before the pandemic started. On Face the Nation back in June, Bank of America CEO Brian Moynihan estimated that its customers had not spent 65-70 percent of their last two stimulus checks at that point. That extra savings, combined with pent-up demand, likely helped drive the broader economy during the rebound.
The housing market has also surged, thanks to low interest rates and people stuck at home realizing the limitations of their living space. The National Association of Realtors recently reported that the national median sales price for an existing home hit $353,900 in October, up 13.1 percent from October of 2020. Much of that rise was helped along by houses priced above the median. Housing inventory decreased over September, and was down 12 percent year over year. And of the homes that sold in October, 82 percent were for sale for less than a month.
The stock market continues to perform well too. Despite bumpy weeks here and there, the Dow Jones remains far above where it was at this time last year. It has regularly approached record territory. The market opened Monday morning at 34,633 as compared to 30,069 at this time a year ago. Concerns about the Delta variant and slow vaccination rates in parts of the world still linger. Overall COVID case numbers continue to fall in many parts of the country and rise in others. Mask guidelines remain in place in some places and have been reinstituted in others. The Food and Drug Administration’s (FDA) full approval of the Pfizer vaccine, along with the approval of booster shots for all adults, has been good news for the market. Individual investors who saved their stimulus cash remain invested. Bigger investors continue to bet on a strong economy in the months ahead.
While certain experts foresee some of the strongest economic growth in decades, many are also concerned about higher inflation. November projections indicated that prices will rise about 6.6 percent in 2021. That’s compared to the 2.3 percent rate in 2019 and 1.7 percent rate in 2020. But the latest data shows prices rising 6.2 percent year over year, the highest rate in three decades. Prices moved up 0.9 percent in October, surpassing early-summer highs. Core consumer prices — excluding food and energy, which tend to be volatile — rose 0.6 percent. Rising prices continue for many products that require semiconductors, including new cars, computers, and TVs. Oil prices are also skyrocketing.
Price hikes and product shortages stem, in part, from the economy opening up all at once. Prices depressed by the pandemic have had to normalize. But companies couldn’t keep pace with a year’s worth of pent-up consumer demand. They also have had to revive and retool their supply chains in the midst of drastic changes in consumer demand patterns. And this has all happened as shipping issues and other constraints continue to slow production and delivery.
COVID has altered how and what people consume. The way these changes continue to play out isn’t necessarily predictable. However, companies have had to guess where demand for their product will be when all the dust settles. Predicting the future is hard enough in a normal economy. It became much harder in an economy trying to move past a pandemic then forced to deal with a resurgence. Price changes and shortages across a whole range of products will likely continue to plague consumers well into 2022. But economists think they should improve with time.
Consumer spending remains strong, with the rate up 1.7 percent in October, as compared to a 0.8 percent rise in September. Auto sales also show signs of returning, as production increases to fill the need. The increase, in general, is a positive sign for what’s ahead in the holiday shopping season. Overall, goods spending remains above pre-pandemic levels.
No Economic Recovery For Others
The pandemic has further highlighted the growing imbalance across the broader economy. While many households have financially flourished during COVID, many others have fallen behind where they were in early 2020. Much of the gap depends on whether wage earners could work remotely during the shutdown or had public-facing jobs that required them to be on-site.
Financial insecurity is still widespread, and the loss of a job and the loss of hours were some of the main reasons over the course of the pandemic. Nine percent of American adults (approximately 20 million people) reported a shortage of food in their household over the previous week, according to a Center on Budget and Policy Priorities analysis of U.S. Census survey data from late September and early October. Approximately 16 percent of renters (12 million people) have fallen behind on their rent, including 23 percent of renters with children in their household. The federal eviction moratorium, which ended October 3, didn’t forgive rent that was owed, it pushed the debt into the future. And evictions continued in some parts of the country regardless. Meanwhile, only a fraction of the $46 billion Congress allocated for rental assistance has actually made it to tenants and landlords. As of late September, over a quarter of American adults (63 million people) reported some difficulty keeping up with expenses in the prior week.
Employment also remains below pre-pandemic levels. The unemployment rate fell to 4.2 percent in November, with some workers returning to the workforce. But job growth failed to meet expectations. Forecasters expected roughly 535,000 new jobs in November, but employers added only 210,000. (October saw about 530,000 new jobs.) Some fear the rise of the Omicron variant is hindering growth. Low-wage jobs made up the bulk of those lost during the pandemic, and while plenty of openings have returned, many remain unfilled. Approximately 222,000 people initially applied for unemployment insurance in the week ending November 27, slightly more than the prior week. (A typical pre-pandemic week saw about 250,000 new unemployment applications.) As of the week ending November 13, almost 2.3 million workers were receiving some form of unemployment aid. (The approximately 4.9 million people previously collecting PUA lost benefits on September 6, when the program ended.) Many jobless Americans never received unemployment insurance and other government benefits, because of long waits, perceived ineligibility and other issues.
Job growth still faces some headwinds, aside from the Delta and Omicron variant. Some have argued that overly generous benefits made unemployment more attractive than working. Some workers were also able to save enough to delay an immediate return to work. But other considerations factor into one’s ability to work too. Remote schooling created childcare issues for many parents, though the resumption of in-person learning could free up some parents to return to work. The full vaccination rate is 59.4 percent for the country. But state percentages range from 73 percent in Vermont to 41.5 percent in West Virginia. Many counties across the country have vaccination rates lower than that.
The threat of COVID, particularly the now-dominant Delta variant, is still real in places. Another strain, known as the Omicron variant, is also raising concerns, as it continues to show up in states across the country. Many people are uncomfortable working in public around strangers. A gap between labor force skills and job requirements can make hiring more difficult, not to mention the rising standards of what workers will accept in a job. Many people are holding out for something better, rather than accepting whatever comes along. And then there’s the general friction that inevitably arises when an entire economy slams its foot on the gas.
As before the pandemic, many who are willing to work cannot find jobs with the wages and benefits they need to survive. According to Marie Newman, a U.S. Representative from Illinois, “there is not a shortage of Americans looking for work, there is a shortage of Americans willing to work for starvation wages with no benefits, no health care, and no protections during a pandemic.”
About half of all states tried to force the issue and push people back into the job market. These states, most led by Republicans, discontinued the $300 federal unemployment benefit bonus for their citizens ahead of the official Labor Day end date, or at least attempted to. Analysis from a payroll services company called Gusto showed that cutting off federal benefits didn’t lead to more hiring.
The federal unemployment bonus and the previous round of stimulus checks helped Americans still awaiting their recovery to pay bills and put food on the table. The advance Child Tax Credit provides some additional support to families. But this money only goes so far. And some politicians feel that the payments haven’t been enough.
Support For A Fourth Stimulus Check
A group of Democratic Senators, including Ron Wyden of Oregon, Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, sent a letter to President Joe Biden at the end of March requesting “recurring direct payments and automatic unemployment insurance extensions tied to economic conditions.”
As the Senators reasoned in their letter, “this crisis is far from over, and families deserve certainty that they can put food on the table and keep a roof over their heads. Families should not be at the mercy of constantly-shifting legislative timelines and ad hoc solutions.”
An earlier letter to President Biden and Vice President Kamala Harris from 53 Representatives, led by Ilhan Omar of Minnesota, carved out a similar position. “Recurring direct payments until the economy recovers will help ensure that people can meet their basic needs, provide racially equitable solutions, and shorten the length of the recession.”
Additional co-signers included New York’s Alexandria Ocasio-Cortez and Michigan’s Rashida Tlaib, two other notable names among House Progressives. The letter didn’t place a number on the requested stimulus payments. But a tweet soon after put it at $2,000 per month for the length of the pandemic.
$2,000 monthly payments until the pandemic is over. https://t.co/6tuia6prFJ
— Ilhan Omar (@IlhanMN) January 28, 2021
A May 17 letter from members of the House Ways and Means Committee renewed the push for additional stimulus. “The ARP’s $1,400 checks alone will keep 11 million people out of poverty this year, with UI (unemployment insurance) expansion and other provisions in the bill accounting for the another five million. A fourth and fifth check could keep an additional 12 million out of poverty. Combined with the effects of the ARP, direct payments could reduce the number in poverty in 2021 from 44 million to 16 million.”
There’s also been talk about automatic payments that could be sent when specific economic metrics reach certain thresholds (for example, if unemployment rises to 6 percent). These triggers would make stimulus checks a reactive force in countering economic dips, sparing struggling Americans from Congressional delays.
A majority of Americans also favor recurring relief payments. According to a January poll from Data For Progress, nearly two-thirds of all voters support $2,000 monthly payments to all Americans for the length of the pandemic. Supporters include a majority of Independents and Republicans. A struggling restaurant owner’s online petition calling for $2,000 monthly payments for every American adult is approaching 3.0 million signatures.
The Urban Institute estimated that another stimulus payment could reduce poverty by at least 6.4 percent in 2021. Many economists are also onboard. A 2020 open letter from experts in the field argued “direct cash payments are an essential tool that will boost economic security, drive consumer spending, hasten the recovery, and promote certainty at all levels of government and the economy – for as long as necessary.”
California Governor Gavin Newsom signed a budget into law in July, which includes a stimulus check for about two-thirds of the state’s residents. The $100 billion California Comeback Plan, as part of their $262.2 billion budget, is paying $600 to residents earning between $30,000 and $75,000 per year. Residents in that income range who have kids are receiving $1,100. Those checks started going out the last Friday in August The state’s previous stimulus went to those with an annual income under $30,000.
Other states have also authorized payments. Maryland handed out $300 or $500 checks to those who claimed the Earned Income Tax Credit (EITC) on their tax returns. Florida gave $1,000 bonuses to teachers, which started showing up in August. Denton and Irving school districts in north Texas were scheduled to give retention bonuses of $500 and $2,000 respectively at the start of the school year.
The Biden administration also planned to give a one-time $600 payment to farm workers and meatpacking workers. Agriculture Secretary Tom Vilsack announced the plan in early September. The U.S. Department of Agriculture allocated up to $700 million for the limited-scope stimulus check. The aid will be handed out through state agencies and include a pilot program giving extra money to grocery store workers.
The Biden administration, which authored the third round of stimulus checks, isn’t against a fourth round. But the president recognizes their high price tag. He also has other priorities, specifically infrastructure, global warming, and help for families. The Infrastructure Investment and Jobs Act, signed into law in November, does not include another relief payment. The human infrastructure package currently bouncing around Congress doesn’t either.
A Fourth Stimulus Check Is Unlikely
All of the tacit and explicit support for stimulus checks keeps the possibility alive. The support doesn’t make a fourth payment likely, however. And there are many reasons why.
Vaccinations are progressing steadily, albeit not as quickly as in the spring. Adults and those at least 12 years old were already eligible to be inoculated in all 50 states. Emergency approval of the Pfizer vaccine for children ages 5-11 happened in early November. Three different options are available to the public, depending on one’s age, with the Pfizer vaccine fully approved by the FDA. Booster shots of the Pfizer vaccine have also been approved and rolled out for adults. Actually putting needles in arms is taking time, even with supply readily available. Americans have received over 462 million doses, with 70.4 percent of the population having received at least one dose and 59.4 percent completely vaccinated. Vaccination numbers continue to increase at a rate of about one million doses per day, with booster shots and shots for children accounting for much of the recent increase.
With vaccinations rising, the nation’s economy surges ahead. Looser restrictions have helped businesses, and jobs are available in many sectors. Many industries are even complaining of worker shortages, which are leading to wage increases. The number of new unemployment claims is close to pre-pandemic levels. In November, consumer confidence slipped slightly, with ongoing concerns over the Delta variant and rising prices. Consumer sentiment also dropped a bit, with the Delta variant, supply chain questions, and ongoing labor force issues. Confidence remains higher than it’s been for much of the pandemic, however.
Consumer spending drives two-thirds of the country’s economy. And excess pandemic savings, along with three stimulus checks, has boosted people’s spending power in recent months. That spending power has increased even more since monthly Child Tax Credit payments started on July 15. The most recent payment went out November 15. An improved financial position generally also raises optimism for the future, though that’s been tempered by inflation somewhat. The ongoing vaccinations, which have allowed the economy to reopen to a large degree, certainly help. All that additional spending, along with the release of pent-up demand, has led to the availability of more jobs as companies try to hire to address consumer needs. It has also contributed to the economy’s current inflation issues. With the economy growing, a fourth round of stimulus checks seems less urgent.
Aside from the generally improving economy, the political machinations of Washington make a fourth stimulus check a longshot. The American Rescue Plan, which included the third stimulus check, passed along party lines. Republicans were not interested in spending anywhere close to $1.9 trillion, though some did support the third relief payment. They termed the package a “blue state bailout,” claiming it went well beyond the scope of COVID and would increase the deficit, leading to inflation.
The Democrats used a process called reconciliation to pass the bill in the Senate without Republican support. That allows budget-related matters to proceed with a simple majority rather than the filibuster-proof 60 votes. Generally only one reconciliation bill can pass per fiscal year. But a subsequent ruling by the Senate parliamentarian, who interprets the legislative body’s rules, opened up a path for additional spending legislation. Without reconciliation, any bill would need at least 10 Republican votes, along with every Democratic vote.
But the Biden administration has other priorities, and one of the biggest is addressing infrastructure. A bipartisan bill called the Infrastructure Investment and Jobs Act, resulting from the proposed American Jobs Plan, was signed into law in mid-November. The $1.2 billion bill aims to rebuild roads and bridges, help with maintenance on rail service, extend internet access, and address other infrastructure-related needs. It does not include a fourth stimulus check.
The Democrats had also been pushing forward a $3.5 trillion budget blueprint that focused on their various “human infrastructure” initiatives, such as Medicare expansion, child care, and climate change. An approximately $2.0 trillion proposal, called the Build Back Better Act, could see a Senate vote in late December. A fourth stimulus check is not included, though one could theoretically still be added. The Democrats’ latest plan is a better fit for a fourth stimulus check than a traditional infrastructure plan. More negotiating seems inevitable before the human infrastructure bill gets passed into law. Funding these plans will almost certainly involve tax increases on corporations and wealthy individuals, which Republicans would oppose.
Democrats have laid the groundwork to use reconciliation again to push through this legislation. Joe Manchin of West Virginia, among the most centrist Democratic Senators, has warned against overusing reconciliation. He is also apparently unwilling to do away with the filibuster, which would lower the number of votes needed to pass legislation to 51. Arizona Senator Kyrsten Sinema doesn’t want to abandon the filibuster either. Manchin also wants to see the human infrastructure bill shrink. With bipartisanship still hard to come by, the recently signed infrastructure act notwithstanding, the Biden administration is in a tough spot. They’re unlikely to add a fourth stimulus check to any plan, driving up the price tag by hundreds of billions of dollars. They’re also unlikely to use reconciliation to pass another stimulus check on its own.
What Other Aid Is Out There?
While a fourth stimulus check is improbable, more direct payments to Americans have already been signed into law. Up until Labor Day, the jobless received extended unemployment benefits. The American Rescue Plan also includes an advance Child Tax Credit.
Under the revised Child Tax Credit, the Internal Revenue Service (IRS) is paying out $3,600 per year for each child up to five years old and $3,000 per year for each child ages six through 17. Monthly payments of up to $300 per child started July 15 and will continue through December of 2021. The remainder is to be issued when the recipient files their 2021 taxes. The benefit does not depend on the recipient’s current tax burden. In other words, qualifying families will receive the full amount, regardless of how much — or little — they owe in taxes. Payments start to phase out beyond a $75,000 annual income for individuals and beyond $150,000 for married couples. The more generous credit will apply only for 2021, though Biden has stated his interest in extending it through 2025.
The ARP added $21.6 billion to the Emergency Rental Assistance Program, which is being distributed to state and local governments, who then assist households. Most of the $46 billion total has yet to reach tenants and landlords.
The infrastructure act and human infrastructure plan also have the potential to create many jobs across a wide swath of the economy. How that plays our remains to be seen. The American Families Plan boosted the Child and Dependent Care Tax Credit and placed a ceiling on the cost of childcare for many families. The plan set aside $200 billion for universal preschool. In addition to helping working parents pay for childcare, the plan sought to allow more parents to return to the workforce. Look for similar programs and more when the specifics of the human infrastructure plan are worked out.
Additional money in people’s pockets from any bill or proposed plan is still hypothetical, of course. Nothing has found its way through Congress yet. And when (or if) it does, months could pass before the aid reaches those it would benefit.
Originally published on Monday, April 5 @ 4:45 p.m. ET.