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Can stimulus checks that go directly into savings accounts or to pay down debt still boost the economy? That is one of the key questions behind the $1.9 trillion Covid-19 emergency relief bill currently being debated by lawmakers as they consider capping eligibility requirements for direct payments of up to $1,400 for low- and middle-income families.

In recent days, President Joe Biden and Congressional Democrats’ left wing have been facing resistance from Republicans and some centrist Democrats who argue that the proposed payments should have a lower income eligibility cap than previous iterations.

But dollars diverted to savings accounts or to pay off debt still contribute to the strengthening of household balance sheets and broader economic stability, economists say.

A recent working paper from the National Bureau of Economic Research examined what people did with the $1,200 per-person stimulus payments distributed last April. It found that only about 15 percent of recipients said they mostly spent it. One in three said they saved it and the remainder said the money went to pay off debt. On average, people said they had spent or planned to spend about 40 percent of the total dollar amount they received, with the remaining 60 percent of the money split roughly equally between saving and paying down debt.

“This is the short view versus the long view. In the short term, stimulus money put in savings or used to pay down debt may not give an immediate boost to the economy, but households that have more savings and less debt are in a better position to spend on a consistent basis going forward,” said Greg McBride, chief financial analyst at Bankrate.

Wendy Edelberg, director of The Hamilton Project and a senior economics fellow at the Brookings Institution, argued that the sweeping nature of the direct stimulus payments is its greatest benefit because it provides a baseline of financial stability for families who might not otherwise meet the criteria for, say, unemployment insurance or food stamps but are still financially struggling as a result of the pandemic.

The sweeping nature of the stimulus checks is its greatest benefit because it can help families who don’t meet the criteria for unemployment insurance or food stamps.

“A lot of people are feeling economic pain but are working — maybe they’ve seen cuts in hours, maybe they normally got financial help from family,” she said. “A lot of the other fiscal support we have can be pretty complicated for people to access,” Edelberg said, such as SNAP, and she noted that many unemployed workers have faced hurdles getting their claims processed in a timely manner because of backups at state unemployment offices.

Bankrate data shows that only about six in 10 Americans could pay for a $1,000 emergency expense wholly using their existing savings. Many would be forced to borrow, and the costs of servicing that debt would detract from other future spending, McBride said. “Even among people who don’t have immediate plans to spend that money, that doesn’t mean it’s not going to get spent,” he said. “That’s what’s there to absorb the next time an unplanned expense arises. That’s a better bet for households than incurring high-interest debt,” he said.

And if people use their stimulus dollars to pay off high-interest debt such as revolving credit card balances, they free up the cash they previously allocated to servicing that debt, McBride pointed out. With the average credit card interest rate at about 16 percent, this money adds up: A person making minimum payments towards a $1,200 credit card balance at the average APR would pay roughly $500 in interest over the more than six years it would take them to pay that debt off.

Some of the propensity to save or reduce debt early in the pandemic could also be a function of the high degree of anxiety and uncertainty facing the American public last spring, with lockdown orders in some areas being repeatedly extended and no sense of what a new normal might look like — or when it would arrive. Even many people who still had jobs were fearful about what the future might hold and were motivated to shore up their finances.

“During a downturn, households prefer to hold more cash as a precaution against an uncertain future and falling incomes,” economists at Germany’s Berenberg Economics noted in a recent analysis.

Those Americans whose jobs were unaffected and might have been willing to spend, on the other hand, were held back by a lack of places to spend. With the service sector and nonessential retailers shut down, even people willing and financially able to spend were limited by the shuttered economy, which Berenberg characterized as “involuntary” savings activity. Data from the first nine months of last year show aggregate household savings up by just over 100 percent.

If people use their stimulus dollars to pay off high-interest credit card balances, they free up the cash they previously allocated to servicing that debt.

The authors of the NBER paper acknowledged that the pandemic constraining people’s ability to spend might have been a key factor holding down the percentage of stimulus dollars spent within the first few months after distribution. “To the extent that the pandemic will ultimately end, it suggests that future stimulus payments to households may be more effective in future crises,” they wrote.

The externally imposed limitations on people’s spending suggest that pent-up demand could surge later this year. The savings consumers have accumulated over the previous months could potentially serve as economic rocket fuel once vaccine deployment becomes widespread and herd immunity is closer to being achieved, economists suggested. “It’s not so much what it’s able to finance, it’s that it reflects a bunch of postponed consumer spending. It reflects a massive amount of pent-up demand, just sitting there and waiting to finance that spending,” Edelberg said.

Berenberg analysts also noted increased retail spending in the second half of the year, especially in the e-commerce space, along with strong activity in the housing sector. Both factors, they said, pointed to the likelihood of strong consumer demand just waiting to be tapped. “Despite weaker confidence, underlying fundamentals are positive,” they wrote.