Eleven months into the pandemic, Nina Scott is running through her savings “like crazy.” Scott is a longtime chef who recently lost her job at a Michigan country club. With ageism working against her — she is in her 60s — and few opportunities in an industry crushed by the pandemic, she’s not sure how much longer her safety net will hold.
“If I don’t have a job by April, I’ll be in real trouble,” she said.
A $1,400 check from the new stimulus bill being negotiated in Congress would help, but there’s a problem: The last time Scott filed her taxes, she earned $56,000, above the threshold at which a key group of lawmakers are considering reducing the next round of stimulus checks.
As Democrats race to flesh out President Joe Biden’s $1.9 trillion stimulus proposal, the question of which households truly “need” another stimulus check has dominated the negotiations. One proposal, from a group of senators who oppose sending checks to anyone they consider an “upper income taxpayer,” would scale back eligibility for the $1,400 payments, compared to who was eligible for previous rounds of stimulus checks. They want to eliminate checks for individuals making more than $75,000 and households earning more than $150,000. Their proposal would also gradually reduce the amount of money received by individuals earning more than $50,000 and couples earning more than $100,000.
Earlier this month, Sen. Joe Manchin (D-W.V.), whose vote is crucial in the split Senate for passing another stimulus package, proposed cutting off checks at an even lower threshold: to single earners who make more than $50,000 and households earning more than $100,000. Lately, he is endorsing the plan to begin phasing out payments at those thresholds.
Progressive Democrats are blasting these proposals as cruel and severely detached from the country’s widespread suffering. “It is shockingly out of touch to assert that $50k is ‘too wealthy’ to receive relief,” Rep. Alexandria Ocasio-Cortez (D-N.Y.) tweeted Friday. “Brutally means-testing a $1400 round is going to hurt so many people.”
But the austerity camp got a boost on Monday, thanks to an op-ed in The New York Times coauthored by Raj Chetty, one of the most influential economists in the country. Using a snapshot of spending data from right after the last round of stimulus checks in January, he and two co-authors argued that Americans earning more than $75,000 didn’t spend much of their payment — and therefore didn’t need another round.
House Democrats unveiled a more generous plan on Monday that would raise the income threshold for receiving any stimulus money to $100,000 for individuals and $200,000 for couples. People could qualify for relief checks based on their tax returns for 2020, meaning those who lost wages or income during the pandemic wouldn’t necessarily be left out if they earned above those cutoffs in 2019.
It is shockingly out of touch to assert that $50k is ‘too wealthy’ to receive relief. Rep. Alexandria Ocasio-Cortez
But it’s not clear if conservative Democrats in the Senate will accept the higher thresholds or how the final plan will determine eligibility. If the relief package passes before people file their 2020 tax returns, it’s not clear when those who lost income during the pandemic will receive their checks; millions are still waiting on their second stimulus check.
HuffPost heard from dozens of people who said they desperately need another stimulus check and are terrified that Congress’ moving standards will deem them “too rich” to receive assistance.
Before the pandemic hit, most of these folks were stable — able to pay their bills and housing costs, as well as save or pay off student loans. But those working in fields like hospitality or entertainment have spent months watching their savings evaporate after the pandemic vaporized their industries. Others described new costs, like supporting family members or paying for elder care. Still others are paying a fortune to live in or around a city where they once made a living wage. And some have health conditions that make potential COVID-19 exposure extremely dangerous, limiting their work options even further.
Julie O’Malley of Los Angeles was laid off from her job at a film and television lighting company in the spring, after the pandemic battered the entertainment industry. Her husband, who works for a homeowners association management company and made much of his income appearing in-person at meetings and court hearings, lost money as his company transitioned to working from home. The couple’s annual income is now less than half of the $165,000 they took home in 2019.
“I’m trying to hustle here, but we’ve had to make a lot of very serious changes to our lifestyle,” O’Malley said.
O’Malley now strings together freelance work, like writing closed captions for videos. But the loss of her job and the cuts to her husband’s income have left the couple without a way to afford her health care premiums. O’Malley is a former cancer patient with one kidney and Hashimoto’s disease, a type of autoimmune disorder. An insurance plan that covers just one of her oncologists would cost at least $700 a month; the cheapest plan that covers multiple specialists would cost $1,100.
“Because I lost my health insurance when I lost my job, do we cover me? Or do we pay the rent? That was really a decision we had to make,” she said. O’Malley has gone for months without coverage, praying she doesn’t get sick.
All of this speaks to an argument against Chetty’s Times op-ed: Income is a sloppy way to get checks to those who “need” them.
Lowering the income threshold would miss millions who are suffering and who need that big check. Claudia Sahm, former federal reserve economist
One prominent critic is Claudia Sahm, a former federal reserve economist who has studied how Americans spent rebate checks in 2008 and has closely followed the research on how people spend “extra” cash.
Sahm argued that the data Chetty looked at — just three weeks of spending — is incomplete. There’s a good deal of research that shows most people do wind up spending rebate or stimulus checks, typically within a couple of months. Typically half or 60% of the dollars get spent, she said, with richer people saving more.
“Money in the bank, not family income, is the most reliable predictor of who will spend and who will save. But we don’t know people’s bank account balances,” she wrote. Nor does the government know who lost income between 2019 and 2020, which is the best measure of who needs a check, “since it’s the shortfall that makes it hard for families to pay their bills.”
“I have no idea exactly who are the Americans who lost income last year,” she continued. “No one does. We must base policy on what we know, not what we wish we knew. Lowering the income threshold would miss millions who are suffering and who need that big check.”
HuffPost also heard from parents with fears of being caught above whatever Congress chooses as the income cutoff. Under the relief plan taking shape in the House, families with children would also receive a tax credit on top of their relief check, worth $3,600 per child under 6 and $3,000 per child age 6 to 17. Those benefits would start to taper off for individuals earning more than $75,000 and households earning more than $150,000.
Ilisa Noble of New Jersey and her husband are teachers and have three children. Before the pandemic, they stayed afloat by working a total of six jobs for a combined income of $168,000. But the pandemic eliminated about half their work: after-school clubs, coaching, DJing and summer camp. “We live paycheck to paycheck,” she said, and run on credit card debt at the end of every month.
I would rather see a millionaire get a check for $2,000 than to see anyone in a situation like mine or worse get nothing. Julie O’Malley, who was laid off due to the pandemic
Roxanne Caple, a registered nurse near Seattle, and her husband are overwhelmed with unexpected childcare payments because of the closure of in-person school. She picked up a second job at a COVID-19 testing center to make ends meet. Under the very stingiest proposal on the table (Manchin’s), she and her husband, who make about $140,000 combined, would not receive a check.
“I am devastated to hear that Democrats are going back on their word,” she said. “We absolutely needed the help.”
Like many whom HuffPost spoke to — and like most Americans — these families live in or near a city, which drives up their cost of living. The $50,000 threshold that Manchin proposed is above his state’s median wage of about $48,000, but below the 2019 median wage for the country: $65,712.
Cutting off families who received two stimulus checks from receiving a third would have obvious political consequences. Individuals making less than $75,000 and couples earning less than $150,000 received the full amount of the $1,200 checks sent out last spring and the $600 sent out starting in late December.
The promise of a third, larger check was likely a driving force behind the victories of Democrats Raphael Warnock and Jon Osoff in the Georgia runoffs in January, which allowed Democrats to gain control of the Senate.
Progressive senators have said they would not agree to drastically lowering the income cutoffs for the next round of checks, with Sen. Bernie Sanders (I-Vt.) blasting centrist proposals on Twitter: “Unbelievable … working class people who got checks from Trump would not get them from Biden. Brilliant!”
“I can understand why they don’t want to give money to people like me — who made a very livable living — a stimulus check. But when you get down to it, they’re throwing crumbs,” O’Malley said. Her first stimulus payment was around $225. “I would rather see a millionaire get a check for $2,000 than to see anyone in a situation like mine or worse get nothing.”