- Here’s a stimulus update with a finding that most people might not be aware of: Forget the $1,400 stimulus checks you’ve been reading so much about, because the real amount of federal aid coming to families in 2021 is much higher.
- When you add up the benefits included in President Biden’s $1.9 trillion economic rescue legislation, some families will actually be getting more than $14,000 in 2021.
- That’s through a mix of direct stimulus payments, plus an expanded child tax credit, and more.
Here’s the latest stimulus update, for anyone wondering what the effect will be of the federal government’s latest infusion of money into the economy in response to the coronavirus pandemic.
Basically, everyone is focused on the wrong number. Yes, $1,400 is generally the amount of the millions of new stimulus checks about to be sent out, but the outsized attention that figure and those checks have been getting in the press really misses the forest for the trees. Because when you step back and look at all of the COVID-related relief that families will have gotten from Uncle Sam by the time 2021 winds down, it will actually be around $14,000 in some cases, and maybe even higher — enough that Ed Mills, Washington policy analyst at Raymond James, thinks a kind of shadow universal basic income (UBI) has arrived in the US as a result of all this.
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Where does that $14,000 come from? Here’s how you get there, using Mills’ math that he shared recently in an analyst note:
“A family of four with household income below $150,000 received a stimulus check for $2,400 in January ($600 per person) and is set to receive another $5,600 ($1,400 per person) following the passage of the current bill,” Mills writes. “This brings direct stimulus payments to $8,000 for the household.”
From there, a new provision in Biden’s $1.9 trillion economic relief plan that increases the child tax credit takes that same family’s stimulus benefits in 2021 even higher.
According to Mills, there’s a child tax credit of $3,600 for children up to age 6 and $3,000 for children ages 6 to 17, which means this new tax credit would provide an extra $6,000 to $7,200 per family — compared to a $2,000 tax credit per child provided by the existing tax code. Where all this starts to look a little like UBI is in the fact that the new child tax credit would be paid in installments each month starting in July.
Meanwhile, this only scratches the surface of all the ways that families will benefit financially this year from the Biden stimulus effort. Add in an increased benefit for unemployed workers, plus forbearance of student loan debt and for mortgage and rental relief. According to Mills, jobless benefits vary by state and income level, but they average around $320 a week. When you add in the extra $400/week made possible thanks to the stimulus legislation, if all that jobless relief was received for a full year it would equal an annualized salary of $37,440.
This is all, needless to say, pretty dramatic and sweeping financial intervention into the economy of a sort we’ve perhaps never seen from the federal government before, certainly not to this degree. What will be the effect on markets and the economy? Mills hazards a guess:
“This unprecedented fiscal support is a bit like recapitalizing the US consumer, so the US consumer will largely be in the best financial position they have been in, on average, for at least 40 years (likely ever). Logically, this increases the chances of a strong recovery as the economy reopens, and increases the chances of inflation, especially in services, initially, as an excess of demand meets limited supply.”
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