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More stimulus packages are being discussed and proposed every week. The most talked about proposal, the “Monthly Economic Crisis Support Act,” has been from the Democrats and it’s one that offers $2,000 in monthly checks and even more for those with families.
Republicans are not necessarily on board with this proposal and from their side there have been a lot of talks about payroll tax cuts that would presumably allow companies to re-hire employees and perhaps pay them higher wages.
But there is a new proposal which would allow Americans to receive up to $5,000 instantly but it will come with a catch.
It’s also proving to be pretty controversial.
This new proposal is being discussed by senior economic officials at the White House and was initially introduced by conservative scholars at the American Enterprise Institute and Hoover Institution.
This new stimulus proposal is essentially a loan that Americans would be able to take out of their future Social Security payments.
In exchange for the up to $5,000 in direct payments, they would be giving up (or just delaying) the first three months of their Social Security payments and would also have to pay a nominal interest rate — perhaps somewhere around 1%.
This would be a way of avoiding more deficit spending by the government, as there is $38 trillion in currently accrued Social Security benefits that have not yet been received by households.
In addition, the interest rates would allow the government to recapture funds while allowing Americans to receive loans at much lower interest rates than they likely would otherwise.
But a lot of people are worried about the implications of this proposal.
First, there is concern that this initiative would just be a precursor to getting rid of Social Security altogether. People question the motives of those behind this proposal.
Also, many people depend on Social Security income for their primary income source. According to the Social Security Administration (SSA), 44% of all unmarried and widowed women get 90% or more of their total income from Social Security.
Many people are also in desperate financial situations where they would not hesitate to take up a $5,000 loan since it would provide instant relief.
Therefore, a lot of people see this as setting up Americans to face an extremely difficult financial situation down the road where they have no income for one quarter and will be forced to struggle to survive.
Consider the financial situation that many people are in right now and that the lockdowns have not even been going on for three months. 90 days can be a very long period without income.
If a proposal like this goes through, I would advise people to use a lot of caution before they opt in. This would not be a mandatory thing and choosing to opt in would need to be a major decision.
Would you take this $5,000 loan if you had the opportunity?
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Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. Since 2014, his content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.