Analysis: 73 percent of Biden’s proposed stimulus checks would go to savings
Seventy-three percent of the funds that would be provided to Americans under President Biden’s proposal for $1,400 stimulus payments would be directed to household savings, according to an analysis released Wednesday by the Penn-Wharton Budget Model (PWBM).
The report estimates that the other 27 percent of the relief would go to increased consumption.
John Ricco, a senior analyst at PWBM, said that the group analyzed how people in various income groups would be likely to use the additional money, and the propensity for households to spend each additional dollar they receive.
“At this point in the pandemic, we find that there is a lot of additional money flowing into households that don’t necessarily have the ability to spend that on additional goods and services,” Ricco said in an interview with The Hill.
Ricco said that PWBM didn’t do a similar analysis for the first round of direct payments that the IRS largely issued last spring. However, he thinks that such an analysis would likely have shown that a lower share of those funds went to household savings because more people were out of work at that time.
“Now, household balance sheets are in a much better place than they were at that time,” he said.
Biden released a $1.9 trillion coronavirus relief package last month that includes direct payments of $1,400 per person.
The proposal didn’t specify income eligibility requirements, but under the two rounds of payments that have already been enacted, individuals making up to $75,000 and married couples making up to $150,000 received the full amounts. The amounts were then reduced by $5 for every $100 in income above those thresholds. PWBM analyzed Biden’s proposal using the same income thresholds and phase-out rate as the first two rounds of payments.
Many Republican lawmakers, and some moderate Democrats, have argued that additional stimulus payments should be targeted to lower-income households because they are the most in need of relief and are the most likely to spend the money quickly. But progressives argue that the payments should be broad-based in order to ensure that people receive relief quickly and that people whose incomes dropped significantly last year receive prompt payments.
Biden said last week that he’s open to discussing the income eligibility requirements.
The $1,400 direct payments aren’t the only portion of Biden’s plan that is aimed at providing direct aid to households. Two other provisions along those lines would expand the child tax credit and the earned income tax credit.
PWBM researchers estimated that the three provisions would in total cost $595 billion in 2021. The researchers estimated that 99 percent of households in the bottom 80 percent of income would receive direct aid, with those in the bottom 40 percent of income receiving an average benefit of more than $3,000.
PWBM estimated that Biden’s full $1.9 trillion proposal would increase gross domestic product by 0.6 percent in 2021.