A plan to give each adult American $1,000 is picking up steam in Congress after Sen. Mitt Romney (R-UT) supported the idea on Monday, along with Sen. Tom Cotton who says he's working on legislation that would include cash stipends.
The plan is also backed by several House Democrats, who believe putting cold, hard cash in the hands of American consumers will mitigate the ongoing collapse in consumption due to the Wuhan coronavirus epidemic, according to Bloomberg.
Among economists, the idea of across-the-board cash handouts as a response to the epidemic has been rapidly gaining support. That’s mainly because the scale of the shock has become much clearer, as swaths of the economy -- from air travel to bars and restaurants -- essentially shut down.
As a result, analysts worry that some of the virus-relief proposals already in the pipeline will be too narrow. -Bloomberg
Several prominent economists have backed the stimulus check plan, including President George W. Bush's economic adviser Gregory Mankiw and his Harvard coleague Jason Furman. In a Monday blog post, Mankiw wrote that many Americans have little to no savings, and it's hard to identify the "truly needy," which makes blanket handouts ideal in the current crisis.
"Sending every American a $1000 check asap would be a good start," he wrote.
The collapse in consumption was pointed out this week by Goldman Sachs, which cut US Q2 GDP expectations to -5%, down from its previous forecast of 0%.
Data from online restaurant reservations also points to a large drop in restaurant visits, especially in the worst affected cities such as Seattle.
While we are not assuming an Italy-style national shutdown in the US, the experience of countries like Italy, Spain and France offers some indications of the impact that extreme local-level quarantines could have. -Goldman Sachs
And as we've noted over the past week, there has been carnage across multiple industries, from airlines, casinos, hotels and cruises - to OpenTable reservations cratering.
That said, $1,000 isn't going to make people get on an airplane, go to a restaurant, gamble in a casino or stay in a hotel - though it's enough for a month or two of food for a small family, or help with rent or a mortgage. The idea is also supported by Treasury Secretary Steven Mnuchin, who brokered the House coronavirus bill wit Speaker Nancy Pelosi.
Democratic Representatives Tim Ryan of Ohio and Ro Khanna of California are proposing to send checks to Americans who earn less than $65,000, which would mean approximately two-thirds of households would qualify. Those checks would range from $1,000 to $6,000 depending on income.
Senate Democratic leader Chuck Schumer said Monday he will propose a $750 billion package that would would “mainline money into economy and directly into the hands of families that need it most.” -Bloomberg
President Trump, on the other hand, has advocated for a payroll tax cut.
Beyond the cash-handout, the Senate is now discussing a vote on a bill which would expand paid sick leave.