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Jun 06, 2020
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Over the past three months, the U.S. has experienced an unprecedented economic catastrophe brought on by the coronavirus disease 2019 (COVID-19) pandemic. With the U.S. becoming the epicenter of the outbreak, most states chose to shut down nonessential businesses to curb virus transmission. In doing so, we witnessed more than 41 million Americans get displaced from their jobs, as evidenced by initial unemployment benefit claims.

This never-before-seen level of disruption is what prompted Congress to pass and President Trump to sign the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27.

A messy pile of cash and a U.S. Treasury check next to the Capitol building.

The CARES Act was a record-breaker, in terms of relief legislation
At $2.2 trillion, the CARES Act is the single costliest piece of relief legislation ever passed by lawmakers. It was tasked with providing $100 billion to hospitals to help fight COVID-19, allocated $500 billion to aid distressed industries, funneled almost $350 billion into small-business loans, and gave $260 billion to expand the unemployment benefits program.

However, there's little question that the CARES Act will be best remembered for the $300 billion in direct aid set aside for working Americans and seniors. Through May 18, the Internal Revenue Service had sent out more than 140 million payments (most through direct deposit) totaling $239 billion.

In an ideal scenario, CARES Act recipients could receive up to $1,200 per individual or $2,400 for couples filing jointly. An additional $500 can be added to what a parent or household receives for each qualifying dependent aged 16 and under. To net this maximum payout, single, married, and head-of-household filers needed a respective adjusted gross income (AGI) of under $75,000, $150,000, and $112,500 in their most recent federal tax filing. Thus, a married couple with an AGI of under $150,000 and three young children could receive $3,900 under the CARES Act.

Given the uncertainties tied to the coronavirus pandemic, throwing a massive amount of money at the problem seemed like a prudent move at the time. Now, more than two months removed from the CARES Act's passage, the question is, what happens next?

A businessman placing crisp one hundred dollar bills into two outstretched hands.

Three reasons a second round of stimulus is more likely than you might realize
If lawmakers were to look toward polling and surveys for that answer, they'd see that a majority of Americans are banking on a second round of stimulus checks. A late April survey from OnePoll of approximately 2,000 people found that 82% want monthly stimulus payments. Meanwhile, a Fortune/SurveyMonkey poll from late May showed that 54% of adults support another round of stimulus payouts.

Though the prospect of additional stimulus has mostly been quashed at the congressional level in recent weeks, I believe the likelihood of a second stimulus measure putting money into the hands of Americans is a lot greater than most folks realize.

The first reason Americans are likely to get a second stimulus check is because the first one simply didn't do enough. According to an April 22 Money/Morning Consult survey, a whopping 74% of the 2,200 respondents noted that they had already spent their stimulus money, or intended to spend their stimulus payout in four weeks or less. That's a problem, considering that the U.S. economy has been struggling mightily for 2.5 months, and the U.S. unemployment rate is soaring.

Secondly, don't overlook the fact that it's an election year. Neither the Republicans nor the Democrats want to be the party that refused to go to bat for the American public during the worst economic downturn since perhaps the Great Depression. Although both parties are approaching the idea of a second round of stimulus from opposite ends of the spectrum, both are well-aware that their actions could have bearing on the November elections.

A man holding up a cardboard sign that reads, looking for a job.
IMAGE SOURCE: GETTY IMAGES.

Third and finally, things could actually get worse from an economic perspective before they get better. For instance, the expansion of the unemployment benefits program is putting an extra $600/week into the pockets of approved beneficiaries. However, this will end on July 31, 2020. Even though states are reopening in phases, it's not going to be business as usual for quite some time. That means we could be talking about extended periods of high unemployment; rising rental, mortgage, and loan delinquencies; and a host of other economic issues. A second round of stimulus might be needed to keep the financial sector from face-planting in a couple of months.


What might a second stimulus entail?
The big question is what might Americans and seniors -- yes, seniors receiving Social Security should expect to receive a second stimulus payout, if one is passed -- expect if another round of stimulus does head their way.

We've already received a glimpse of what Democrats would prefer to see happen. In mid-May, the Democrat-led House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which came with a whopping cost of $3 trillion. It would provide $1 trillion to states, $200 billion in hazard pay to essential workers, extended unemployment benefit protections (i.e., the extra $600 per week) through January 2021, and, of course, put money into the pockets of workers and seniors.

Although the HEROES Act utilizes the same AGI eligibility criteria as the CARES Act, the payouts can be notably higher for those with dependents. Individuals and couples could receive up to $1,200 and $2,400, respectively, but qualifying dependents can add up to $1,200 each (limit three dependents). This means a married couple with three children could receive up to $6,000.

Additionally, unlike the CARES Act, all dependents, not just children under the age of 17, would qualify their parent or household for an extra $1,200.

Two Social Security cards lying atop a W2 tax form.
IMAGE SOURCE: GETTY IMAGES.

Meanwhile, Republicans have been tinkering with the idea of some form of payroll tax cut. As a reminder, working Americans pay a 15.3% payroll tax on earned income, with 12.4% funding the Social Security program and 2.9% funding Medicare. Note that if you're employed by a company or someone else, your employer covers half of this 15.3% tax liability. By reducing the payroll tax, working Americans would be able to keep more of their income without the federal government having to pass trillions of dollars in added stimulus.

While both approaches have their positives and negatives, the key point is that lawmakers in Washington, D.C., are looking for ways to put more money into Americans' pockets. In my view, that makes a second stimulus check likelier than you might think.

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