Several Senate Republicans, along with President Trump, support a proposal to increase the pandemic recovery rebates, colloquially known as “stimulus checks,” to $2,000 per individual. Forty-four House Republicans voted for the increase on Monday, which passed 275-134.
Meanwhile, Senate Majority Leader Mitch McConnell and some other Republicans have withheld their support for an increase, and for good reason. The increase doesn’t meet the standard of a good idea, all things considered.
In September, Democratic Senate Minority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren put forward a plan to forgive up to $50,000 in federal student loan debt. Once it became clear that Joe Biden won the election, their plan began to gain steam as its chance of success ostensibly improved.
Republicans and conservatives, including the Washington Examiner editorial board, pushed back on the profligate plan, arguing that it would reward the already well-to-do. The editorial quoted an analysis by the Brookings Institution: “The highest-income 40% of households (those with incomes above $74,000) owe almost 60% of the outstanding education debt and make almost three-quarters of the payments. The lowest-income 40% of households hold just under 20 percent of the outstanding debt and make only 10% of the payments.”
The situation at hand is much the same, as Congress considers doling out money with little discrimination as to a person’s current financial or work status. Under the law, a couple that made $130,000 in 2019 is generally eligible for the same rebate as one that made $30,000, even though the $130,000 couple may have experienced no economic disruption in the last nine months and may even be doing better than last year.
Obviously, that same hypothetical couple might have experienced a loss of income, though there are other modes of assistance enacted by Congress to specifically address that kind of disruption. If the wife owns a business and can’t get anyone into the store, she could access the Payroll Protection Program. If the husband was laid off, he could rely on unemployment insurance and its federal supplement as he looks for work.
The point is, there are enough people in the unaffected category that make the rebate increase unjustifiable. Many who would be eligible will get along just fine without another cash infusion.
Where not stated outright, it was implicit in Congress’s action of creating different categories of funding — unemployment, PPP, recovery rebates — that the money served different functions. The function of rebates, or stimulus payments, quickly came to be considered as a way of encouraging people to spend money and energize the economy.
It didn’t quite happen that way. The National Bureau of Economic Research found that nearly 60% of the stimulus money sent out through the CARES Act was either saved or went toward debt payments. Federal Reserve data bears that out, too: Savings accounts went way up. For the most part, the money wasn’t used to help people get by or to stimulate the economy. It made them richer.
Republican Maine Sen. Susan Collins suggested that it would be better to tailor increased rebates to those with low incomes, a fine idea, though the House-passed increase does not do it. And it actually expands eligibility for payments for all dependents rather than for only qualifying children.
The $2,000 push will likely die in the Senate but not before setting up some surprising coalitions, putting some congressional Republicans at odds with most others. It’s something the party would probably rather not have happen as it tries to hold two majority-dependent Senate seats.
