The third round of $1,400 stimulus checks is already beginning to hit US bank accounts. While today’s direct payments are much more focused than the previous ones, they have catalyzed the economy with initial data showing a 23 percent increase in credit and debit card spending compared to two years ago. After three rounds of stimulus checks, many Americans are curious about whether a fourth stimulus check is possible. In a previous column, I laid out the bear case for why a fourth stimulus check is unlikely to occur. Here I will argue the bull case of why a fourth stimulus may still come to fruition later in 2021 or in 2022. To be clear, President Joe Biden has not yet broached the subject and a fourth audit remains purely a matter of speculation at this point.
Vaccination efforts in the US are advancing, with the seven-day average of vaccines administered rising to more than 2.7 million on Monday. According to Andy Slavitt, who serves as senior White House pandemic adviser, 3.3 million people were vaccinated on Sunday. However, vaccinations are not a panacea and while the pace has picked up, coronavirus cases remain stubbornly high and are even increasing in some parts of the country.
A New York Times database shows that the seven-day average of new cases on Sunday was 63,000, up 16 percent from two weeks earlier and similar to the level in the US in the fall of 2020. This is alarming considering the fact that similar trends were seen in Europe before major spikes in coronavirus cases, Dr. Rochelle Walensky, the director of the Centers for Disease Control and Prevention. “We know the travel is over, and I’m just concerned that we’ll see the peaks we’ve seen in summer and winter again,” she said. Walensky warned of “impending doom” of a possible fourth wave of the pandemic, imploring states and Americans to hold the course for a while longer by social distancing and continuing to wear masks.
Nine states have recently seen worrisome spikes in Covid-19, with Michigan cases up 133 percent, Connecticut up 62 percent and both New York and Pennsylvania seeing 40 percent more cases in the past two weeks. The rise comes amid fears that new variants will continue to appear and ripple across the country.
‘The virus is driving the economy’
The US is therefore still a long way from achieving herd immunity and overcoming Covid-19. Herd immunity, described in a recent article in the Journal of the American Medical Association (JAMA) as occurring “when a significant portion of a population becomes immune to an infectious disease and the risk of spreading it from person to person decreases,” is absolutely crucial for economic recovery. “The virus is driving the economy,” said Betsey Stevenson, who served on President Obama’s Council of Economic Advisers and is now a professor at the University of Michigan. If Covid cases continue to rise, “we won’t have people going back to work,” she added.
There are clear signs that the economy has improved in recent months, with 379,000 jobs added in the US in February and unemployment falling one-tenth of a percentage point to 6.2 percent. At the same time, “the jobs report showed how much work remains for the Biden administration and lawmakers across the country as the economy continues to soar from the employment shortage created by the pandemic,” it noted. The Washington Post.
The US still lost nearly 10 million pre-pandemic jobs; that figure is potentially closer to 12 million jobs if you factor in lost job growth. Similarly, while the official unemployment rate is just above 6 percent, Federal Reserve Chairman Jerome Powell said last month that the true unemployment rate is likely closer to 10 percent when taking into account people who have left the workforce. “It’s great, of course, that the job gains are exceeding expectations and they are faster than the average monthly gains before Covid,” said Julia Pollak, a labor economist at ZipRecruiter. the mail. “That said, we’re still in a really, really deep hole, and these aren’t the numbers you’d hope to see in a robust recovery.”
The topline numbers also hide the disproportionate effect the pandemic has had on different segments of the population. Women have suffered a much higher share of job losses due to occupational segregation and caring responsibilities, notes Elise Gould of the unbiased Institute of Economic Policy. Overall, women have left the workforce at a significantly higher rate than men, with 2.5 million exits compared to 1.5 million men. Likewise, black and Hispanic workers have been disproportionately affected and are seeing much higher unemployment rates.
Summarizing the state of the economy, Chairman Powell said that while the recovery is progressing rapidly, it is “far from complete.”
Health and economic stagnation could lead to a fourth stimulus check
If coronavirus cases continue to stabilize or even rise despite vaccinations, we could see the economy stagnate instead of rebound. These circumstances may lend themselves to considering a fourth stimulus check.
There is already ongoing pressure from progressive lawmakers to prioritize recurring stimulus checks. More than 50 members of the House sent a letter to President Biden in late February advocating this approach rather than one-off payments. “An extra check is not enough,” progressives wrote in their letter. “Recurring direct payments until the economy recovers will ensure that people can meet their basic needs, provide racially just solutions and shorten the duration of the recession,” it continues.
Lawmakers again lobbied Biden in early March with 11 senators including Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont) leading the attack. “Families should not be at the mercy of constantly changing legislative timelines and ad hoc solutions,” they wrote.
While recurring checks are highly unlikely given the current divisions in Congress, they could help Biden and Democrats compromise on one more single payment. Biden has consistently favored a focused approach since becoming president, one that balances many competing priorities within his base. If a fourth check occurs, expect it to follow a similar path and be just as focused, if not more so, as the third round, which has a steep cliff-earnings cliff.
The political angle: stimulus controls are popular
While Biden and Democrats have shifted to other priorities, such as infrastructure, the immense popularity of direct aid may prompt lawmakers to adopt a fourth stimulus. A Quinnipiac University poll in February found that 78 percent of Americans supported the third round of stimulus checks, including nearly two-thirds of Republicans. With a closely divided Congress and the 2022 midterm elections looming, a fourth stimulus check could be both a political and economic move.
Ultimately, the likelihood of a fourth stimulus check will depend on how successful the US is in reducing the spread of the coronavirus through vaccinations and continued commitment, which could allow the economy to reopen sooner. If the US falters in these efforts, a fourth stimulus check could occur. While some Americans would benefit from and therefore celebrate a fourth stimulus check, it would be a Pyrrhic victory, indicating the country has lost ground in its overall fight against Covid-19.