COVID Economy

[pacearrow02]

Looking at charts this morning about the 1st and 2nd Stimulus checks ..

There's a constant drumbeat that "people are suffering" .. and that's true, millions are.  But the stats show that the checks .. didn't hit the mark.

💯

Firstly, amazingly, in 2020 incomes went way up due to government checks, spending went way down.  The estimate is that there's $1.6 *trillion* in excess cash in the consumer economy ("dry powder.")

Second .. saw a breakdown of "stimulus check spent" by incomes.  Even households under $46k, only 32% of them spent the 1st stimulus check .. 21% spent the 2nd check.  I knew it was low, but that's an eye opener.   -- The highest bracket in the chart, households over $78k, spent 39% on 1st, 8% on 2nd stim check.

All the rest of the stim dollars were saved / used to pay down debt. 

So here we're debating a 3rd stim check, bigger than the other two combined.    Yes, that money will be used for millions to buy food, but for far more millions, it'll just be used to pay down debt and saved. 

That's just nuts.   It seems like the best argument is that *maybe maybe* in 9-12-18 months there will be pent up spending from stimulus checks.  That's pretty weak for $450 billion.   

I'd rather make that $100b targeted to household incomes below $50k, and $350b on just about anything else, like infrastructure. 

Or .. fine, if you want to dole out $1400 pp, phase it where the under $50k crowd gets it immediately, the others receive the money in 9 months when the economy is open and they can spend it on travel, restaurants, etc.

[Billy Hoyle]

Second .. saw a breakdown of "stimulus check spent" by incomes.  Even households under $46k, only 32% of them spent the 1st stimulus check .. 21% spent the 2nd check.  I knew it was low, but that's an eye opener.   -- The highest bracket in the chart, households over $78k, spent 39% on 1st, 8% on 2nd stim chec

So here we're debating a 3rd stim check, bigger than the other two combined.    Yes, that money will be used for millions to buy food, but for far more millions, it'll just be used to pay down debt and saved. 

For your first point, the checks were significantly smaller and had reductions. The check my wife was reduced from the $1200 amount by 2/3rds.

As for the idea that using it to pay debt is bad, how many people would use it to pay off debt that was accumulated during COVID due to income reductions or other hardships? The biggest issue I have is those who suffered financially due to COVID may not receive it because they were doing "well" in 2019.

For example, one of my friends is a soccer coach. He still has his job but lost all of his camp income this past summer (his primary source of income), but 2019 tax returns meant no check. Another friend is a HS basketball coach - no season and no camps/lessons resulted in a significant loss in income. But, 2019 says he was doing well, so no stimulus check.  I had a 26% decrease due to cuts/furlough. But, I don't qualify for the new stimulus because of 2019 returns.

Also, setting an income ceiling of $50K or $75K isn't equitable. $75K in Manitowoc is a hell of a lot more than $75K in San Jose. My condo is 1/3 the size of my parents' house, but cost $20K more, due to location. Telling someone in San Diego "you made $76K in 2019, you're doing just fine and don't need any help" is ignoring reality.

[mu_hilltopper]

As for the idea that using it to pay debt is bad..

I didn't say that, there's nothing "bad" about paying debt -- but the point of the bill is to assist people who lost (some/all) of their income during the pandemic, and stimulate the economy .. not pay for debts accumulated prior to the pandemic.   

I'm happy to entertain various factors for income ceilings.    Yadda yadda, the income assistance and economic stimulus should be (better) targeted to the variety of people who need it.

[Hards Alumni]

I think generally, spending is down across the board.  People aren't 'doing things', they're just sitting at home and using the 'stuff' they already own.

In general, people save money during uncertain times.  If we'd have approached this differently, that money would probably be moving around the economy.  $500 per month starting in April or May and we'd be in a better place.

[4everwarriors]

Really? Who's gonna pay for all these give-a-ways, hey?

[The Hippie Satan of Hyperbole]

Really? Who's gonna pay for all these give-a-ways, hey?

From the same place we paid for the Trump tax cuts.

Seriously, if there is anything the last 12 years have taught is is that the deficit / debt doesn't really mean all that much.  It certainly isn't inflationary.

[MU Fan in Connecticut]

There has been some other economic impacts that I'm seeing in manufacturing (listed below) and it will effect the next several months probably longer for sure although I'm not sure what those effects will be?  My company is near the bottom of the food chain and these things work their way up.

* The COVID snowball rolling down hill is catching up to manufacturing.  With workers in and out of work due to COVID related reasons, lead times for making anything have doubled.  My domestic metal raw material suppliers have doubled their lead times from 2-5 weeks to 6-10 weeks.  The same for my packaging related items (wood for pallets, corrugated and plastic spools).  My company is backed up too as we've had people in and out.
* Copper and steel raw material has increased about 20-25% since October and aluminum about 10%.  We're passing on to our customers who I'm sure will pass on to theirs..........
* Anything coming from Asia one must add 6 weeks to normal best case and probably more.  There are no containers or enough ships for sea transport and Chinese New Year starting next week will ensure next to nothing is moving the next 2 weeks.   My contact at my parent company, Mitsubishi Materials, told me this morning that the transportation companies in Japan are telling everyone don't even call us until March to try and book sea transport. 
* Because of the above container issue, people will be using air transport which is 3 times more expensive just to keep the lines running.  That cost will get passed on too.
* We're seeing customers increase order sizes in an attempt to compensate for the longer lead times which just.........increases the lead times even further. 

[Hards Alumni]

Really? Who's gonna pay for all these give-a-ways, hey?

Everyone.  And all of them have net positive results for the economy as a whole.  As opposed to tax cuts for the super rich.

[TSmith34, Inc.]

From the same place we paid for the Trump tax cuts.

Seriously, if there is anything the last 12 years have taught is is that the deficit / debt doesn't really mean all that much.  It certainly isn't inflationary.

Republicans are only fiscally concerned when there is a Democratic President. Now what could explain that?

[Billy Hoyle]

I didn't say that, there's nothing "bad" about paying debt -- but the point of the bill is to assist people who lost (some/all) of their income during the pandemic, and stimulate the economy .. not pay for debts accumulated prior to the pandemic.   

I'm happy to entertain various factors for income ceilings.    Yadda yadda, the income assistance and economic stimulus should be (better) targeted to the variety of people who need it.

how do you know if the debt was accumulated before the pandemic or not? What about someone who has run up credit card debt because they lost income? What about someone who hasn't been paying rent due to loss of income and the ability to take advantage of the rent freezes/eviction moratorium? How about someone like me so had ask for a deferment on student loan payments for the past five months?

Besides, using it to pay debt frees up more for individuals to spend.

[The Hippie Satan of Hyperbole]

how do you know if the debt was accumulated before the pandemic or not? What about someone who has run up credit card debt because they lost income? What about someone who hasn't been paying rent due to loss of income and the ability to take advantage of the rent freezes/eviction moratorium? How about someone like me so had ask for a deferment on student loan payments for the past five months?

Besides, using it to pay debt frees up more for individuals to spend.

But that's not what they are doing.  People whose income has largely not been touched are not spending the stimulus checks compared to those with less income.  They are either saving it or paying off previous debt.  The whole point of stimulus is that it is spent - like now. 

[Hards Alumni]

But that's not what they are doing.  People whose income has largely not been touched are not spending the stimulus checks compared to those with less income.  They are either saving it or paying off previous debt.  The whole point of stimulus is that it is spent - like now.

If you don't know when your next meal is coming, do you eat meager portions for a while, or go hog wild for a week?

There's your answer.

[jesmu84]

Looking at charts this morning about the 1st and 2nd Stimulus checks ..

There's a constant drumbeat that "people are suffering" .. and that's true, millions are.  But the stats show that the checks .. didn't hit the mark.

Firstly, amazingly, in 2020 incomes went way up due to government checks, spending went way down.  The estimate is that there's $1.6 *trillion* in excess cash in the consumer economy ("dry powder.")

Second .. saw a breakdown of "stimulus check spent" by incomes.  Even households under $46k, only 32% of them spent the 1st stimulus check .. 21% spent the 2nd check.  I knew it was low, but that's an eye opener.   -- The highest bracket in the chart, households over $78k, spent 39% on 1st, 8% on 2nd stim check.

All the rest of the stim dollars were saved / used to pay down debt. 

So here we're debating a 3rd stim check, bigger than the other two combined.    Yes, that money will be used for millions to buy food, but for far more millions, it'll just be used to pay down debt and saved. 

That's just nuts.   It seems like the best argument is that *maybe maybe* in 9-12-18 months there will be pent up spending from stimulus checks.  That's pretty weak for $450 billion.   

I'd rather make that $100b targeted to household incomes below $50k, and $350b on just about anything else, like infrastructure. 

Or .. fine, if you want to dole out $1400 pp, phase it where the under $50k crowd gets it immediately, the others receive the money in 9 months when the economy is open and they can spend it on travel, restaurants, etc.

1400<1200+600

[jesmu84]

Really? Who's gonna pay for all these give-a-ways, hey?

In the list of disingenuous posters here, you're 2nd - only to Pace.

[MU82]

Besides, using it to pay debt frees up more for individuals to spend.

This.

I think there is a difference between those who save the $$$ and those who use it to pay down debt.

The second group, with less debt, instantly has more $$$ freed up to put into the economy, so the paying down of debt definitely could stimulate the economy.

[SERocks]

... then I am glad I am not using your tax services.

Interesting how after one post you can presume to know my abilities in the tax field and how you presume that I would want you as a client.  The relationship works both ways.

[The Hippie Satan of Hyperbole]

This.

I think there is a difference between those who save the $$$ and those who use it to pay down debt.

The second group, with less debt, instantly has more $$$ freed up to put into the economy, so the paying down of debt definitely could stimulate the economy.

But...it doesn’t.

[Lennys Tap]

Hard to stimulate an economy that has been at least partially shut down, especially when half of the citizenry is uncomfortable leaving their homes.

[Frenns Liquor Depot]

Actually it isn’t that hard

The hard part is there are areas of the economy that are better than ever and others that are completely decimated.  Getting the help to the right place is very difficult. 

[Lennys Tap]

Actually it isn’t that hard

The hard part is there are areas of the economy that are better than ever and others that are completely decimated.  Getting the help to the right place is very difficult.

My point is when people are afraid to leave their homes and/or large segments of the economy are closed where are people going to spend the money Uncle Sam sends them?

[The Hippie Satan of Hyperbole]

My point is when people are afraid to leave their homes and/or large segments of the economy are closed where are people going to spend the money Uncle Sam sends them?

What large segments of the economy are closed? 

[Lennys Tap]

What large segments of the economy are closed?

I was talking about when the checks first started going out.

[The Hippie Satan of Hyperbole]

I was talking about when the checks first started going out.

Gotcha

[jesmu84]

I was talking about when the checks first started going out.

Even at that point - food delivery, Amazon, appliance/furniture stores, clothing, etc.

Tons was "open"

[Lennys Tap]

Even at that point - food delivery, Amazon, appliance/furniture stores, clothing, etc.

Tons was "open"

Sure, it wasn’t impossible to spend money. But it was a lot more difficult.