Daily Money - Issue #46: Stimulus checks — the sequel

Hi y’all —

Like many Americans, I got my CARES Act stimulus check a couple weeks ago and promptly spent it. No, I didn’t buy the $500 leather jacket or $300 Nintendo Switch I’ve been coveting. Instead, I used the money to pay off an ER bill I had left over from when a plate of macaroni and cheese tried to kill me last fall. (True story.)

I’m lucky enough to have a job right now, so I didn’t need to put my $1,200 toward basic necessities. Others did. As a nation, we were pretty responsible with our stimulus checks — we didn’t really blow our payments on outlandish things. According to a MONEY poll from April, most people used the cash for bills, groceries and rent/mortgage payments. Others put them into checking and/or savings accounts.

But 60% of those respondents said the money fell short of meeting all their needs, and that’s only become a bigger issue as the coronavirus crisis has worn on. We’re now approaching what experts are calling “the cliff” — when all of the temporary measures the government put in place back in March run out this summer — and things are nowhere near back to normal. 

It seems to me that more relief money would help people out. But is it likely? Are we going to get a second stimulus check? What’s involved in the decision? 

Erica Groshen, a senior extension faculty member at Cornell University’s School of Industrial and Labor Relations, compared the spring shutdowns to a hospital patient who’s been put into a medically induced coma. Back in March, the doctors (in this case, the lawmakers) needed to knock out the patient (the economy) so they could get the infection (the coronavirus) under control.

“We were not trying to wake ourselves up,” Groshen, a former commissioner for the U.S. Bureau of Labor Statistics, says. “We needed to keep ourselves in that coma. However, we did need life support.”

Some life support came in the form of stimulus checks, which Groshen said should actually be classified as disaster relief. That’s because the payments weren’t intended to stimulate the economy — just keep it from dying immediately. 

Now that we know a little bit more about what’s happening, the government has to figure out the next step in recovery.

“The question is, do we need more disaster relief? And then, when should we start the stimulus, the actual fiscal policy to try and revive the sleeping economy?” she says. “The answer to the first question is quite clear. We will absolutely need more life support when this runs out, because we’re probably not ready to fully wake the patient up again.”