SETH MICHAEL MEYER
Staff Writer
If you are like me and about 70 million other Americans, by the Treasury Department’s estimates, you may have, or will be receiving a check from the Federal Government in a compensatory consolation for the world being on shutdown. The direct payment to the people, the majority of which will be receiving $1200, is only a fraction of the bipartisan bill to provide the United States with $2 trillion of economic relief.
President Trump hopes that these payments will serve as the defib that will shock the American economy back into rhythm- or at least something that isn’t a flatline. For that to work Americans will have to spend it, not save it.
That is easier said than done. A popular point in household economics discourse has been circulating recently saying that 4 in 10 Americans couldn’t afford an emergency expense over $400. This point, drawn from the annual “Report on the Economic Well-Being of U.S. Households” published by the Federal Reserve, is misleading (the report explains that 3 in 10 would take on debt to cover the expense and only 10 percent wouldn’t be able to afford it).
Nevertheless, with 17 million Americans filing for unemployment in the past month, we all have savings on the brain- and why wouldn’t we? Bars and restaurants across the country are shut down so no one is going out for a beer and boneless wings. With millions of Americans working and schooling from home, we won’t be buying much of that immaculately cheap gas, and vacations- forget about it.
Not only have we thrown consumption out the window, investment has also declined as stockholders pull out of shaky markets altogether. The Bear killed the Bull in February and March as the Dow dropped harder than in 2008. Cynics laugh at the losses of billionaires, but middle class investors took a hit too.
Ironically, essential workers- who have been putting their health on the line for the sake of feeding and healing the country (and not to mention receiving a check for it)- will benefit from the stimulus package. Most are likely to receive that $1200 check on top of their income, which, depending on the employer, may consist of additional hours and ‘plague pay’.
With extra cash in their pocket, the millions essential workers, deemed ‘heroes’ in the eyes of the media, will have another role to play in saving America- spending. With some disposable income in hand compared to those furloughed, essential workers can keep the economic blood flowing through consumption and some meager amounts of investing- if (and that’s a big if) they so choose.
For those not so lucky to be working, stimulus checks will hopefully keep heads under roofs and food on tables. Landlords will continue to seek rent payments despite a large online movement to freeze rent. If landlords continue to receive payment, it is on them to spend and help keep a pulse. Grocery stores remain open with ever-changing social-distancing policies which makes check-out feel like a customs desk. Grocery shoppers, with check-in-hand, help to pay the millions of employees, including suppliers and farmers. Lastly, any payment to debt a person can make will ease the stress on banks to give out loans to small businesses- widely crippled by the economic inactivity.
In these pseudo-apocalyptic times things are strange. Economists’ heads are spinning and the average American feels vulnerable due to such an uncertain future. Any other year I would generally advise anyone to save, save, save; but if we want to get over this mountain of a mess we need to survive and then spend (in that order).