A&M economist questions effectiveness of stimulus checks

“It’s 2021 now. It’s 9 months later and we’re planning much the same... the untargeted individual checks remain. And I think we should ask why.”
Published: Jan. 25, 2021 at 5:30 PM CST
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BRYAN, Texas (KBTX) -Texas A&M Private Enterprise Research Center Director Dennis Jansen wants to know why there are still economic stimulus checks included in President Biden’s proposed economic stimulus bill.

“We sorta have to decide what do we think is the purpose of this COVID relief bill,” Jansen says.

He explains that he believes the proposed bill should help those unemployed or who have lost income, supplement state unemployment benefits, aid businesses that have been affected by shutdowns and restrictions, aid those who have had unforeseen expenses because of the pandemic, and encourage spending.

According to the Corporate Finance Institute, “Stimulus checks are given to boost the economy by providing consumers with funds to spend. Consumer spending is an essential component of a healthy economy and, in times of economic uncertainty, it usually decreases. Therefore, the government will provide stimulus checks to keep the consumer outlook strong and encourage spending.”

Jansen says that didn’t happen the way the bill intended. He explains that it’s becoming increasingly clear that the original batch of stimulus checks didn’t have the necessary parameters to get the money only to those who needed it most. Instead, he says people who were unaffected or even did better in 2020 received those checks and put them into savings. He adds that additional unemployment benefits created by the bill actually gave a significant portion of low-income workers more money than they would have made working.

“We’re sending checks to folks that are not suffering large economic harm from the pandemic,” Jansen explains, “I mean there’s people that are retired that didn’t lose their job, they didn’t lose any income. There’s people who are working from home and earning every bit as much as they were earning before the pandemic. There’s people who are earning more money, working more hours.”

He says the broad nature of the stimulus checks means that money is being sent to people who not only don’t need the money but are actually saving the money.

“The savings rate in the U.S. has actually increased during this recession,” Jansen says.

He says that’s the opposite of what economists expect to happen in a recession. Jansen attributes the savings, in part, to the CARES act passed in the spring of 2020. He says at least some of the checks went to people who didn’t spend the money and he says that is evidence that the bill was poorly targeted.

But he’s not sour on the entire idea of economic relief. Jansen says expanding who qualifies for unemployment benefits and when they can collect those benefits is, “probably a good thing given the circumstances,” and adds that “supplementing the unemployment payments with federal supplements of some size is probably reasonable.”

He also reiterates that businesses affected by the shutdowns and restrictions should also be helped.

But Jansen says he’d like to see a more fiscally responsible idea than another broad round of stimulus checks.

“I think personally, it’s rather disappointing that after all this time the bill is still so poorly targeted,” Jansen says, “and with what I’d consider obvious bloat.”

Watch the full interview in the player above.

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