The promised $1,400 stimulus checks by the Biden administration have been tipped by financial experts to give the economy a positive nudge in 2021. However the newly tightened eligibility announced this week could lessen the forecasted positive economical impact.
The original individual earner’s cap for the payment was $100,000 annually in the House Bill, but sources say that cap has now been brought down to $80,000. The head of household qualifying earnings cap has reportedly been brought down from $150,000 to $120,000 and the combined couples cap has fallen from $100,000 to $160,000.
Biden Agrees Faster Phase Out
President Joe Biden has agreed to phasing out the $1,400 faster as part of the next relief package, with moderate Democrats seeking the further targeting of direct payments. In addition, moderate Democrats in the Senate have been pushing for the President to lower unemployment benefits from $400 per week to $300. The Senate Bill is expected to extend the $400 weekly rate, which was introduced due to the pandemic, through until August 29. At the other end of the scale, some progressive Democrats are pushing for an extension until September.
What Does this Mean for The Economy and Investors?
Most likely, it will have a very slightly less-positive-than-first-projected short term impact, as it will cut the number of people and households gaining extra disposable spending income compared to the first two stimulus check rollouts. While holiday sales were still down for most, US retail giants, including Macy’s, have stated that stimulus checks and online shopping have helped to cushion the blow that the Covid-19 pandemic has delivered.
Retailers Still Tipped to Benefit from Stimulus Rollout
Despite the tightening of eligibility this time around, US retailers are still expected to benefit from the payment of stimulus checks. The overall short-term economic impact will therefore still be a positive one, just mildly less so than the first two stimulus rollouts in 2020.
To put a few numbers out there, Macy’s is projecting sales totalling between $19.75 billion and $20.75 billion for the whole of 2021, with the top end of that exceeding the $20.13 billion analysts’ estimate. Despite the holiday season, Macy’s total sales in the fourth quarter of last year fell from $8.34 billion to $6.78 billion, however that did beat the analyst estimates of $6.50 billion.
Cushioned Blow Rather than Positive Surge
As has been the case with most things economically since the Covid-19 pandemic began, positive measures such as stimulus checks, or consumer behaviors such as online shopping, are best described as having “cushioned the blow”, rather than being out-and-out positive influences. As the numbers above dictate, previous stimulus checks and an upsurge in online shopping have merely made things not as bad as expected, as opposed to better than expected.
The end of the pandemic as we’ve known it up until looks to be in site thanks to the vaccine rollout. And while a long recovery period is on the horizon, things do look like getting better, rather than worse, from here on out.
