We saw a couple of major developments yesterday regarding the stimulus checks.
First, we initially heard a statement from the White House that indicated Biden was NOT on board with decreasing the amount of the $1,400 stimulus checks.
According to Senate Majority Leader Chuck Schumer, Biden also reiterated the need for a large stimulus bill that will allow for extended relief.
“He was very strong in emphasizing the need for a big, bold package. He said that he told Senate Republicans that the $600 billion that they proposed was way too small. If we did a package that small, we’d be mired in the COVID crisis for years.”
As for what the Democrat-controlled Congress is thinking, they are open to bipartisan negotiations but are also preparing to move swiftly.
“We share President Biden’s desire to advance this legislation in a bipartisan way but the work must move forward,” Schumer said.
“We are not going to dilute, dither or delay because the needs of the American people are just too great.”
As many expected, Democrats are preparing for the budget reconciliation process which is a way for them to pass stimulus relief without needing votes from GOP members in the Senate.
It is sort of a workaround which is why it is somewhat controversial. It will likely have the opposite effect of “unifying” lawmakers.
But even though Democrats are preparing to go this route, they are still leaving open the possibility for other options.
“At any point in the process, a bipartisan bill can pass on the floor,” White House press secretary Jen Psaki said.
“So just creating the option for reconciliation with a budget resolution does not foreclose other legislative options.”
At this point, it sounds like Democrats have pretty much made up their minds that they are going to push through their agenda even if it means doing so aggressively with budget reconciliation.
While Democrats have voiced they are open to negotiations, I don’t think they are anticipating a balanced 50-50 approach to those talks.
It sounds more like they have a plan and are willing to budge a little bit on certain elements but that they are not willing to depart significantly from their current proposal.
So if you were hoping to take advantage of some of the new relief included in the latest Democrat proposal, I think you stand a good chance of seeing that aid come into existence.
The latest statement from the White House indicates that the Biden administration is open to narrowing the eligibility for the next round of stimulus checks but not lowering those payments below $1,400.
“The President remains committed to finishing the job on delivering $2,000 in direct relief to Americans who are struggling to make ends meet during this crisis,” Rosemary G. Boeglin, a White House spokeswoman said.
This sounds like a pretty good compromise from the White House’s perspective.
It allows them to go through with their promises of $2,000 stimulus checks (if you consider the second $600 check that went out a down payment).
It also allows them to better optimize the checks so that those who need them the most can receive them.
The question is how far down are they willing to go?
The current GOP proposal will cut off the stimulus checks if you make $50,000 or more and it would start to phase out if you make $40,000 or more.
Reportedly, Biden does not want to limit the income threshold too dramatically.
The current proposal would send checks out to 95% of the country while the GOP proposal would send them out to about 70%. That’s a difference of about 80 million people.
Perhaps the White House is thinking something like sending checks out to around 80% of the country for their proposal?
So it will be interesting to see if the White House agrees to those GOP limits or proposes something else.
I think it will be difficult for Democrats in the White House to not agree to some type of targeted threshold, though.
There just seems to be mounting evidence that a targeted approach is needed this round. By not going that route, I’m not sure 10 Republicans will get on board which is what will be needed for a traditional passage.
So unless Democrats are firmly committed to the budget reconciliation route, they will need to figure something out for the targeted income thresholds.
According to reports, negotiations are still ongoing so we still don’t know exactly what to expect.
We initially heard a lot about sending out more targeted stimulus checks when 10 Senate Republicans provided their proposal.
This did not come as a surprise given that Republicans have favored a smaller stimulus relief bill containing more targeted measures for quite a while.
But what is a bit surprising is that now two of President Biden’s top economic advisers, Heather Boushey and David Kamin, have expressed reservations about the size of the next round of stimulus checks.
These reservations have come privately but have been reported by at least three people familiar with the internal discussions.
These economic aids are apparently worried that the price tag on the checks is so high that it will not leave enough funds for other relief priorities such as supplemental unemployment benefits, the expanded child tax credit, and aid to states and local governments.
Having top advisers express reluctance to issue out the $1,400 checks as proposed is not a good sign for those expecting to receive these checks.
We fully expected Republicans to insist on smaller checks but now we are seeing doubt about these checks come from some Democrat lawmakers and now members inside the White House.
This has to be applying a lot of pressure on Biden considering how vocal he was that $2,000 stimulus checks were coming out as he campaigned before the Georgia runoff election.
“Their election will put an end to the block in Washington on that $2,000 stimulus check, that money that will go out the door immediately to people who are in real trouble,” he said.
First, there was the ambiguity about the $2,000 amount which actually consisted of the second $600 check and the potential third $1,400 check.
That was already enough to create a good amount of criticism and backlash but if these checks drop even more, then those promises certainly look very empty in retrospect.
Despite this conflict, according to Biden’s chief of staff, negotiations are still moving along for the overall package.
“It’s hardly dead in the water,” he said.
“It’s gaining a lot of momentum on Capitol Hill. We’ve been here seven days and I think we’ve done more to advance a bill in seven days than any administration in history.”
Be on the lookout this week to see if Democrats push for a stimulus relief bill via budget reconciliation. That action will tell us much more about where things stand than any statement or leaked conversation from the White House can.
According to reports, we now have a more exact picture of what the stimulus checks would look like that Republicans are proposing.
The new stimulus checks would top out at $1,000 as previously reported.
But we just found out that the full payments would top out for individuals making up to $40,000 per year and $80,000 for couples.
They would begin to phase out at that point and then be completely phased out for those individuals earning more than $50,000 or $100,000 for couples.
This is a pretty significant drop from the current income levels that allow for full payments to individuals earning up to $75,000.
It is possible that the House and the Senate could both vote as soon as this week on resolution but it is not clear what route they would be taking to get that done.
At the moment, Biden is going to be under a lot of pressure from both sides to choose the correct path.
If he refuses to budge on negotiations with Republicans and resorts to the budget reconciliation route, this could make his presidency difficult because Republicans will be less likely to work with him on other major bills.
At the same time, Biden is already taking some heat for the $1,400 stimulus checks in the proposal and that heat will only intensify if the checks drop in amount and eligibility becomes tighter.
What makes things even more difficult is that the Republican counter proposal is not unreasonable. It’s largely based on data regarding consumer habits and contains a lot of priorities of the Biden administration.
“In the spirit of bipartisanship and unity, we have developed a COVID-19 relief framework that builds on prior COVID assistance laws, all of which passed with bipartisan support,” the Republicans wrote.
“Our proposal reflects many of your stated priorities, and with your support, we believe that this plan could be approved quickly by Congress with bipartisan support.”
So this is going to be a very tough call for President Biden. We should know more about the situation in the coming days.
Today kicks off the negotiations between Republicans and Democrats for the next stimulus package.
Yesterday, we got wind of the $600 billion counterproposal that Republicans are presenting as a response to the $1.9 trillion proposal made by Democrats.
We don’t know all of the details yet (we should learn those today) but we do know that they are proposing cutting down stimulus checks.
They want the checks to go down to $1,000 per check and they also want to decrease the income eligibility to $50,000 for individuals and $100,000 for married couples.
There is data suggesting that households making around $75,000 or more are not injecting their funds back into the economy. Instead, they are saving the funds which is not what the stimulus checks are designed for.
This is very different from the first round of payments that went out back in April which the vast majority of people put back into the economy by spending them.
Recent consumer spending data also shows that consumer spending declined in December, further suggesting that the stimulus checks may not be as effective as we had hoped this round.
This has led a group of Republican senators to push for checks going out “for those families who need assistance the most, including their dependent children and adults.”
It’s a logical and pretty reasonable approach to the third round of stimulus checks but it’s not a perfect approach.
There still is reasoning for not going with a targeted approach.
For one, implementing a targeted approach requires more administrative work and logistical hurdles which will slow down the process and inevitably lead to problems and errors.
Also, there are a lot of people who have had their income drop since they filed their 2018 and 2019 taxes. On paper they may not qualify but in reality their current income levels would allow them to qualify.
“I’m willing to address senators’ concerns, but it’s important to remember that the relief payments phase out and they are based on your income from before the pandemic,” Sen. Ron Wyden said.
There’s a lot of folks out there who don’t qualify for unemployment or don’t take advantage of other social safety net programs and could use the checks.
And then there is the cost of living situation.
Trimming eligibility down to $50,000 could have a vastly different impact on someone living in an area like the Bay Area in California versus somewhere else where $50,000 could lead to a comfortable lifestyle.
This was already an issue with the current income thresholds but I feel that it gets amplified the further down you go in income.
And that’s where it gets difficult.
It’s pretty clear that some targeting is needed to optimize distribution of the stimulus checks but finding the right balance for that targeting is tricky.
This is exactly what Progressive Caucus Chairwoman Pramila Jayapal said: “if you target too much, it becomes harder to get relief out quickly.”
While Democrats could probably push their legislation through via the budget reconciliation route which would require basically no GOP votes, that could come at the cost of the unity they have been talking about.
It could make things significantly more difficult later on down the line when they want to pass other forms of legislation.
So there is a lot of strategic thinking that needs to happen here for both parties. We’ll see how it plays out this week.
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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.