The government is sending up to $300 monthly checks to families with kids starting today. Democrats want to make it permanent as a new form of Social Security.

Joe Biden Chuck Schumer
President Joe Biden and Senate Majority Leader Chuck Schumer.

  • The US government is poised to send the first batch of child tax credit payments on Thursday.
  • Policymakers estimate 35.2 million families could see cash deposited into their bank accounts.
  • The success of the program will determine whether Democrats can extend it as another form of Social Security.
  • See more stories on Insider’s business page.

America’s neglected social safety net could be getting its largest patch in a generation on Thursday, when the US begins a year-long experiment providing a guaranteed income for families with children. Its success will determine whether it becomes a permanent fixture.

The Internal Revenue Service is poised to send the first batch of monthly child tax credit payments stemming from President Joe Biden’s stimulus law, which was approved in March over united Republican opposition. For six months, families can get a $300 monthly benefit per child age 5 and under, amounting to $3,600 this year. The measure provides $250 each month per kid age 6 and 17, totaling $3,000. Half of the benefit will come as a tax refund.

If all goes to plan, the federal government will deposit cash directly into the bank accounts of 36.2 million families, according to projections from administration officials shared with reporters on Wednesday evening. That represents the bulk of the 39 million families the IRS has identified as being eligible for the child allowance.

Experts say the one-year child tax credit payments could shift public attitudes on cash benefits given its wide reach and mark a big step forward in slashing child poverty – some estimate it could be cut by up to half.

“It’s hard to understate the significance of this expansion for child poverty in America,” Samuel Hammond, a welfare policy expert at the center-right Niskanen Center, told Insider. “Most countries have some form of child or family allowance – and the US has been an outlier in excluding the lowest income households from our version of a child benefit,” he said, adding “once you start on this path, it’s hard to turn back.”

Some Democrats are already drawing comparisons between the program and the birth of Social Security in 1935, a milestone that set up a critical source of income for retired and disabled Americans.

“It’s the most transformative policy coming out of Washington since the days of FDR,” Sen. Cory Booker of New Jersey recently told The New York Times.

‘Some bumps in the road’

Michael Bennet Capitol Hill
Sen. Michael Bennet (D-CO), arrives for a vote in the Capitol.

Democratic lawmakers and Congressional aides have labored behind the scenes to ensure a smooth rollout of the payments. The child tax credit was revamped to include low-income families not required to file taxes, a group previously shut out from tapping into the benefit.

There were some signs of problems early on. Some experts and community groups raised concern that an IRS portal to sign up the poorest families was too complex and inaccessible for people who lacked desktop computers.

Sen. Michael Bennet of Colorado, an architect of the measure, said on Monday the IRS has given the child tax credit “100% of their attention” and said he’s regularly communicated with the agency.

Still, he cautioned there could still be some snags. The pandemic has added to the IRS’s responsibilities over the past year and strained its depleted staff. It has gone from being a tax-collecting agency to a benefit distributor on par with the Social Security Administration.

“I’m sure there will be some bumps in the road as there always are when rolling out something new like this,” he told reporters. “But it’s important as bumps arise to iron them out.”

Some of those potential problems, Bennet told Insider, include “people not getting the benefit they were supposed to receive and accounting issues that might arise. I hope they won’t be systemic issues, I don’t think they will be.”

The IRS has struggled sorting through a massive backlog of tax returns in recent months, delaying tax refunds in at least some cases. Hammond said it was unclear whether distributing monthly child benefits via the IRS is “sustainable in the long run.”

“We’ve increasingly asked the IRS to do an awful lot of social policy beyond taxing and collecting revenues, and the IRS is just not equipped to be a benefits administrator,” he said.

The future of Biden’s child allowance

joe biden
President Joe Biden makes brief remarks at the White House.

The bulked-up child tax credit is a rare measure that enjoys deep support among both House and Senate Democrats. Bennet, Sen. Sherrod Brown of Ohio, and Reps. Rosa DeLauro of Connecticut and Suzan DelBene of Washington, are among the lawmakers spearheading efforts to make it permanent.

Biden proposed in his spending plans to extend the bulked-up benefit until 2025, the same year that Trump-era tax cuts for individuals end. It’s possible Republicans could trade support to renew the pair of benefits, given the GOP is generally opposed to cash aid as a standalone measure.

“I think we should embrace allowing people to keep more of their own money, if we’re applying it towards their payroll tax,” Sen. Marco Rubio of Florida told Insider last month. Rubio and Sen. Mike Lee of Utah led efforts to double the size of the child tax credit in the 2017 Republican tax law. The pair favor boosting the benefit amount for workers.

On Wednesday, Rubio released a statement tearing into the child allowance. “The way President Biden tells it, the handout is part of his administration’s ‘pro-family’ plan,” he said. In reality, he has transformed the pro-worker, pro-family Child Tax Credit into an anti-work welfare check.”

Senate Democrats are kicking off a flurry of negotiations to finalize what measures will ultimately be included in a $3.5 trillion budget deal that would mostly be paid for with tax increases. They’ll advance it in a pathway known as reconciliation, which allows them to approve certain bills with a simple majority instead of a filibuster-proof 60 votes. Every Democrat must stick together for the budget package to clear the Senate.

Brown, the Banking Committee chairman, said talks were in their early stages so no child allowance expiration date was set. “Not clear what year yet, but it’s going to be a popular program like Social Security,” he told Insider on Wednesday. “Republicans will not only be afraid to take it away, they’ll start taking credit for it.”

He also suggested its hefty price tag could keep a permanent extension out: “I think its so costly it may not [be included], but I’m still fighting for permanence,” he said.

Brown also rejected the notion of changing the income thresholds. “I think that’s pretty locked in. We’ve all been talking about how important that is, 90% of the public getting this is really consequential and key to its popularity,” he told Insider.

Some Democratic moderates may balk at renewing the child tax credit in its current state. Sen. Joe Manchin of West Virginia, a swing vote, told Insider he was open to a permanent extension last month. Others are undecided on the program’s fate.

“I consider it not an easy issue,” Sen. Angus King of Maine, an independent who caucuses with Democrats, said in an interview. “It is a major expansion of what amounts to an entitlement program. I certainly supported it as part of the pandemic relief package. But supporting it on a permanent basis is something that I have to have more data on and understand how it’ll be paid for.”

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Biden fired the Trump-appointed Social Security head amid complaints of stimulus check delays and union-busting tactics

Andrew Saul, Social Security Administration commissioner
New York businessman Andrew Saul testifies before the Senate Finance Committee during his confirmation hearing to be commissioner of the Social Security Administration on October 02, 2018 in Washington, DC.

  • The White House fired Andrew Saul, the Social Security head, on Friday evening.
  • Democrats and advocates charged the agency with gumming up stimulus checks for disabled people.
  • Democrats cheered the firings while Republicans said Biden was injecting politics into the agency.
  • See more stories on Insider’s business page.

President Joe Biden fired Social Security Commissioner Andrew Saul and his top deputy on Friday afternoon, sparking a face-off as Saul says he doesn’t intend to step down from his post.

Saul, a Trump appointee, had triggered fierce criticism from Democrats and advocates, who said he gummed up the speedy distribution of $1,400 stimulus checks to disabled Americans and applied union-busting tactics with labor unions representing federal employees.

The Washington Post first reported Saul, 74, was fired after refusing to step down. His deputy David Black turned in his resignation upon request, The Post reported.

Saul disputed the White House’s ability to remove him. “I consider myself the term-protected Commissioner of Social Security,” he told The Post, adding he plans to sign in remotely and work on Monday.

His six-year tenure was supposed to end in 2025, and Social Security heads aren’t typically switched out when a new administration takes power. But the White House appeared to draw from a recent Supreme Court ruling for the authority to replace him amid mounting calls from Democrats to replace him.

The White House did not immediately respond to comment.

Saul is a former GOP donor who served on the board of a conservative think-tank that advocated for cuts to Social Security benefits. Advocates said the Social Security Administration delayed releasing information to the IRS for stimulus checks earlier this year.

They also argued the SSA under Saul made it much more burdensome for disabled people to reestablish their eligibility for benefits.

Congressional Democrats and activists cheered Friday’s firings. Alex Lawson, president of Social Security Works, told Insider it was “great news” Saul and Black are no longer in charge of the agency.

“They were put in place by former President Trump to sabotage Social Security and no one but Wall Street is sad to see them go,” he said. “Their attacks on seniors and people with disabilities will be their shameful legacy.”

Sen. Sherrod Brown of Ohio also praised the move. The Banking committee chair said in a statement Saul “tried to systematically dismantle Social Security as we know it from within.”

“Social Security is the bedrock of our middle class that Americans earn and count on, and they need a Social Security Commissioner who will honor that promise to seniors, survivors, and people with disabilities now and for decades to come,” Brown said.

Congressional Republicans swung in the opposite direction. Rep. Kevin Brady, the ranking Republican on the House Ways and Means Committee, and Sen. Mike Crapo, ranking Republican on the Senate Finance Committee, released a statement scolding the Biden administration for ousting Saul.

“Social Security beneficiaries stand the most to lose from President Biden’s partisan decision to remove Commissioner Andrew Saul from leadership of the Social Security Administration,” Brady and Crapo said.

Senate Minority Leader Mitch McConnell also weighed in earlier on the prospect of Saul’s firing. He wrote on Twitter Saul’s removal would be “an unprecedented and dangerous politicization of the Social Security Administration.”

The Social Security Administration is in charge of dispensing benefits for nearly 64 million seniors, disabled and low-income Americans, or one in six people in the US.

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2 professionals who made more on unemployment than their pre-pandemic salaries on life now: ‘If I could go back and do it again, I would have stayed laid off’

Emily McGill
Emily McGill.

  • The US is facing a labor shortage as workers are inclined to stay on unemployment.
  • New Yorker Emily McGill made over $500 a week on benefits, slightly more than her contractor income.
  • Abby Danis went from making $24 an hour to stay home to $17 an hour as an assistant manager.
  • See more stories on Insider’s business page.

As the United States tiptoes into a post-pandemic world where at least 40% of Americans have been fully vaccinated, a new problem is emerging: labor shortages.

It’s a problem many companies, government officials, and experts blame on increased federal and state unemployment benefits, as well as the series of stimulus checks. The argument is that people simply no longer want to work while enjoying these benefits – or at least work for the wages they did before the pandemic.

“Now that businesses are beginning to open, the challenge employers are experiencing is finding people willing to return to a regular work schedule, contribute to society as a whole, and return to caring for our families,” Charles Jackson, president of the Association for Entrepreneurship USA, told Insider. “While [the] government continues to incentivize families to stay home, the small-business owner will be challenged again by not finding adequate labor to operate their business.”

According to Goldman Sachs, the amount low-income workers will accept for a new job has risen more than 20% since the fall, putting pressure on employers – like McDonald’s and Chipotle – to raise wages and increase benefits in order to attract job candidates. The bank anticipates these demands will push wage growth to 3.3% before the labor market ultimately finds a new balance.

Two professionals who found themselves raking in more money on unemployment than in their previous jobs shared with Insider their experience.

Unemployment helped NYC-based Emily McGill, 35, stay afloat and find clarity amidst career pivots

The contract Broadway publicist – who boasts past clients like Disney on Broadway and actor George Takei – turned communications consultant and part-time tarot card reader never stopped working during the pandemic. Instead, with one consistent client and unemployment insurance, she spent her time re-evaluating her situation.

“I think the biggest thing that happened was that I was really on this precipice of, ‘Am I even going to stay in theater?’ But the pandemic afforded me this opportunity to see there are so many other facets to me beyond theater kid, or Broadway girl, or Broadway publicist,” McGill told Insider.

In New York City where she lives, unemployment typically maxes out at $504 per week, but due to the pandemic she was able to receive an additional $600 per week from April 5 to July 26, 2020 – then an additional $300 from January 3 through early September 2021. After taxes, Emily was making an average of just over $500 per week, which she said was slightly more than she was making before but provided more consistency and stability than she’d experienced as an independent contractor.

“Pre-pandemic, I was scraping by with clients, and as a result, my credit-card debt grew,” she said. “Unemployment and the stimuli have allowed me to pay bills and not continue to rack up debt. I can’t wait to get back to work full time, but there are also a lot of systemic issues in my industry, so it is a nuanced and difficult conversation from both a moral and logistic point of view.”

Though not all states will accept the federal unemployment insurance funding, the boost in benefits will now extend until September 6 for many Americans – just in time for McGill’s next contracted role.

“Fortunately, my next contract should come through and begin in September, so the timeline for me if that works out is going to be ideal,” she said. “If that doesn’t work out, then it’s back to the grind and the hustle and time to get creative.”

Abby Danis, 24, based in Arizona, wishes she’d taken advantage of unemployment for longer

At the beginning of the pandemic, Danis was laid off from her retail position, where she was making $15 an hour as an assistant manager. Her employer warned her that applying for unemployment insurance would mean she wouldn’t be offered her position back, but that the company would instead pay her a flat rate of a couple hundred dollars every two weeks.

“The majority of us had to file for unemployment because we were underpaid as it was and none of us could survive and get through that,” Danis told Insider. “They immediately sent us an email laying us all off and said, ‘You no longer work for this company. When we re-open we will consider inviting you back, but as of right now you are not employed by us.'”

She felt she had to collect the unemployment insurance in order to pay her bills, but due to difficulties in finding new staff members, she shared that she was still offered her prior position back despite receiving unemployment, and even offered a $2-an-hour raise.

Due to the uncertainty around the extension of unemployment benefits, she returned to her workplace in the summer of 2020, going from making approximately $24 an hour to stay at home to $17 an hour for her assistant-manager role.

She left the company in October 2020 and started working as a server, where she makes more than she did in her assistant-manager role. However, she’s now seeing firsthand the staffing shortages facing the hospitality industry.

In Arizona, the labor shortages are so dire that Governor Doug Ducey has announced he will end the state’s additional $300 in weekly unemployment benefits in July, instead offering those on unemployment a $2,000 bonus for returning to work along with childcare support and rental assistance.

“The only reason I did go back is because I didn’t know what was going to happen at the time. I didn’t know what was going to happen or how long this was going to last,” she said.

“Looking back on it now, if I could go back and do it again, I would have stayed laid off and gotten unemployment, just because we went back pretty early,” Danis added.

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Only half of rural voters know that Democrats voted to send them stimulus checks, new poll finds

biden stimulus hurdles
President Joe Biden.

  • A poll conducted by a rural super PAC found only half of rural voters credit Democrats with stimulus checks.
  • This is notable given that not a single Republican voted for Biden’s $1.9 trillion stimulus.
  • A persistent feature of American politics is voters’ failure to understand government’s role in their lives.
  • See more stories on Insider’s business page.

Americans have so far received three stimulus checks. The first two were distributed under President Donald Trump’s watch and not a single Republican voted for the third round, and yet, only half of rural voters are giving Democrats the credit.

A poll conducted by Rural Objective PAC – a super PAC that works to build support for Democrats in rural areas – found that 50% of voters in rural areas associate providing COVID-19 stimulus checks directly to American families with the Democratic Party, while 32% associated the payments with Republicans, 11% with neither party, and 7% weren’t sure.

“We’re not connecting with these voters, even if we have great policy,” JD Scholten, the executive director of the Rural Objective PAC, told Greg Sargent and Paul Waldman of The Washington Post, which previously reported on the poll’s findings.

The poll surveyed 2,149 voters in nine battleground states – Arizona, Georgia, Iowa, Kansas, North Carolina, Ohio, Pennsylvania, South Carolina, and Wisconsin – and while 68% of those voters support stimulus checks, it’s clear that Democrats aren’t getting credit for a cornerstone of President Joe Biden’s American Rescue Plan.

The majority of rural voters did associate Democrats with extended unemployment benefits and state aid, though, and even as Democrats are calling for recurring stimulus aid, voters are not associating the already provided aid with Democrats. Biden’s $1.9 trillion stimulus plan passed using budget reconciliation without a single Republican voting for the plan, which included $1,200 checks.

It’s true that the first two checks occurred under Trump, since he signed a $1,400 check and a $600 check into law as part of his pandemic aid efforts, although he signed both of those while Democrats controlled the House under Speaker Nancy Pelosi.

Some Democratic lawmakers are also calling to make stimulus checks permanent – something that has received broad support from both Republican and Democratic voters given that it would cut the number of Americans in poverty in 2021 from 44 million to 16 million.

Twenty-one Democratic senators urged Biden in a letter to include recurring direct payments in his $4 trillion infrastructure plan and said that “a single direct payment will not last long for most families, and we are worried about the cliff facing unemployed workers when the unemployment insurance extensions expire on September 6.”

But voters not knowing who to credit for certain policies is nothing new. When former President Barack Obama was attempting to reform the healthcare system over a decade ago, many voters don’t want the government to interfere with their Medicare when Medicare is, in fact, a government-run program.

“I got a letter the other day from a woman. She said, ‘I don’t want government-run health care. I don’t want socialized medicine. And don’t touch my Medicare,'” President Barack Obama said at an AARP-hosted town hall on healthcare in 2009. “I wanted to say, you know, that’s what Medicare is: a government-run health care plan that people are very happy with.”

The Washington Post separately reported in 2009 that a rural voter told South Carolina Rep. Robert Inglis to “keep your government hands off my Medicare,” to which Inglis had to explain to the voter that his healthcare was provided by the government.

As Scholten told the Post, if there’s one thing that Democrats could use to win support of rural America, it would be direct payments.

“This was one of the biggest investments we’ve seen in rural America since the New Deal,” Scholten told Sargent and Waldman. “It’s good policy. It should be good politics, too, but right now Democrats aren’t taking advantage of it.”

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California is expanding its stimulus check program to send checks to two-thirds of its residents, Newsom announces

Gavin Newsom
In this Monday Feb. 11, 2019 file photo Calif. Gov. Gavin Newsom answers questions at a Capitol news conference, in Sacramento, Calif. Newsom is expected to sign a moratorium on the death penalty in California Wednesday, March 13, 2019. (AP Photo/Rich Pedroncelli, File)

  • Gov. Gavin Newsom announced new stimulus checks for California residents on Monday.
  • He said anyone earning under $75,000 would receive a check of at least $600.
  • He said two-thirds of Californians will benefit from the stimulus package.
  • See more stories on Insider’s business page.

California Gov. Gavin Newsom says the state will be sending out stimulus checks to two-thirds of its residents in a new expansion of its plan to support communities during the COVID-19 pandemic.

Newsom said on Monday that those who qualify will receive a one-time stimulus payment of $600 or $1,200, and families will kids would receive another $500.

The “Golden State Stimulus” plan was announced earlier this year, but Newsom said on Monday that he would be expanding its range.

The stimulus payments will now include middle-income residents.

“We’re announcing a $12 billion tax rebate to the people of the state of California earning up to $75,000,” Newsom said at a press conference on Monday. “That tax rebate will impact just shy of 80% of all tax filers, [they] will get a direct stimulus check, will get a direct relief payment because of this announcement. Two-thirds of all Californians will benefit from this stimulus. That’s roughly $12 billion.”

This is a developing story. Please check back for more updates.

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How April’s dismal jobs report is setting the stage for Biden’s $4 trillion economic fight with the GOP

Joe Biden sad
President Joe Biden speaks about the April jobs report in the White House on Friday.

  • Republicans and Democrats drew sharply different conclusions about the April jobs report.
  • Democrats used it to bolster a case for massive infrastructure spending on issues like childcare.
  • The GOP wants to slam on the spending brakes, saying stimulus benefits are setting back job growth.
  • See more stories on Insider’s business page.

In some ways, the April jobs report resembled an optical illusion, with people making differing observations from a dataset that didn’t fit into a clean narrative.

In this case, Democrats and Republicans came to opposite conclusions about the report and what it means for the way forward in healing an economy battered by the pandemic.

The Friday report showed the economy recovered 266,000 jobs, a smaller amount defying expectations of a massive job surge on the back of government stimulus dollars, increased vaccinations, and easing restrictions. Economists had forecasted at least 1 million regained jobs.

In response, the GOP is demanding to end parts of President Joe Biden’s stimulus and calling for the government to slam the brakes on its spending. Democrats instead urged the passage of Biden’s $4 trillion infrastructure plans, viewing the lackluster report as another pillar in their argument that more spending, in part on childcare, would accelerate the recovery.

It sets the stage between the parties for a multitrillion-dollar fight on infrastructure, jobs, and families that will take up much of the White House’s time over the next few months.

The president argued for patience with his economic agenda on Friday. He said “more help is needed” and mounted a robust defense of his $1.9 trillion stimulus, which provided $1,400 direct payments and a $300-per-week federal unemployment benefit.

“When we passed the American Rescue Plan, I want to remind everybody, it was designed to help us over the course of a year – not 60 days – a year,” Biden said. “We never thought that after the first 50 or 60 days, everything would be fine.”

He flatly rejected the argument from Republicans and business groups that federal jobless aid has been sidelining people from the workforce, saying that was “nothing measurable.”

“We’re still digging out of an economic collapse that cost us 22 million jobs,” Biden said. “Let’s keep our eye on the ball.”

Kevin Brady
Rep. Kevin Brady, the ranking Republican on the House Ways and Means Committee.

Democrats double down, Republicans pounce

House Speaker Nancy Pelosi urged Congress to move immediately on Biden’s plans, and pointed to “women and working parents” being hit hardest in the pandemic. The number of women who held jobs fell in April, as reported by Insider’s Juliana Kaplan and Madison Hoff.

“The evidence is clear that the economy demands urgent action, and Congress will not be deterred or delayed from delivering transformational investments,” she said in a statement.

Republicans had already lined up against Biden’s plans, criticizing the proposed tax hikes on large firms and wealthy Americans as a future anchor on the economy. They pounced on the report in a fresh sign of their hardening resistance.

The GOP swung at Biden’s handling of the economy, arguing that the jobless aid was disincentivizing people from searching for a new job.

“This is a stunning economic setback, and unequivocal proof that President Biden is sabotaging our jobs recovery with promises of higher taxes and regulation on local businesses that discourage hiring and drive jobs overseas,” Rep. Kevin Brady, ranking Republican on the House Ways and Means Committee, said in a statement.

He also contended that jobless aid was disincentivizing people from returning to work. The argument mirrored one made by the Chamber of Commerce, an influential business group which on Friday called for an end to the $300 federal unemployment benefit.

Many economists have long disputed that federal jobless aid has kept people from returning to work. Unemployment claims has steadily fallen over the past month. They tend to cite other factors like the lack of available childcare and school closures.

Those burdens have fallen more on women, causing 2 million women to leave the workforce in the past year. Still, experts say the US will regain its economic footing eventually, though the nation faces a rocky path ahead.

“We’re gonna see pockets of strength, pockets of weakness, areas of overheating, areas where it is uncool – it’s going to be complicated and messy,” Jason Furman, a former top economist to President Barack Obama, told Insider in an interview. “But I think hopefully all moving in the right direction.”

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Mitch McConnell draws a red line at $600 billion for infrastructure and jobs – and says Trump tax cuts are off-limits

Senate Minority Leader Mitch McConnell (R-KY).

  • McConnell said the GOP won’t cut a deal with Biden above $600 billion on a jobs package.
  • He said there would be “zero” Republican support for Biden’s $4 trillion pair of spending packages.
  • Biden has proposed two packages with trillions of spending on physical and social infrastructure.
  • See more stories on Insider’s business page.

Senate Minority Leader Mitch McConnell drew a $600 billion red line for an infrastructure and jobs plan on Monday, an amount less than a fifth of the $4 trillion in economic spending plans that President Joe Biden has unveiled.

“We’re open to doing a roughly $600 billion package, which deals with what all of us agree is infrastructure and to talk about how to pay for that in any way other than reopening the 2017 tax reform bill,” he said at a press conference at Louisville, Kentucky.

The Senate’s top Republican flatly rejected going above the $600 billion price tag, saying “if it’s going to be about infrastructure, let’s make it about infrastructure.”

“I don’t think there will be any Republican support – none, zero – for the $4.1 trillion grab-bag, which has infrastructure in it but a whole lot of other stuff,” McConnell said. He also ruled out adjusting President Donald Trump’s tax law, a measure Biden wants to roll back to pay for his plans.

“We’re not going to revisit the 2017 tax bill,” he said. “We’re happy to look for traditional infrastructure pay-fors, which means the users participate.”

McConnell’s comments underscore the wide bridge between Republicans and Democrats on their economic priorities. Their ability to cut a deal will depend whether they can agree on methods to finance a package as well as its overall scope. Democrats are calling for aggressive spending while Republicans insist on narrowing a package’s focus.

Biden has rolled out $4 trillion in a pair of economic plans to shore up physical infrastructure such as roads and bridges, as well as manufacturing and broadband. His latest $1.8 trillion plan unveiled Wednesday would establish paid family and medical leave, universal Pre-K, tuition-free community college, and monthly cash payments for parents.

Biden has proposed lifting the corporate tax rate to 28% from 21% to cover part of the spending, a step that has strong backing among many Democrats.

A group of Senate Republicans led by Sen. Shelley Moore Capito of West Virginia unveiled a $568 billion infrastructure plan late last month. Much of that spending would directed towards areas Republicans strongly favor, such as roads and bridges, ports, waterways, and expanded broadband.

Capito and Biden spoke on Thursday in what she described as a “constructive and substantive call” on Twitter.

“We’re working with the White House, and I think it’s been very open-door, we’ve been very encouraged to keep moving forward, and that’s what we’re going to do,” she told Fox News on Sunday. Capito floated user-fees and repurposing unspent stimulus aid provided to state and local governments as a means of paying for the plan.

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Americans have saved $1.6 trillion since the pandemic started and it poses little inflation risk, the Fed says

Capital One ATM
A man uses the ATM at a Capital One bank in Midtown Manhattan on July 30, 2019 in New York City.

  • Americans’ savings rose by $1.6 trillion during the pandemic thanks to stimulus and weak spending.
  • Some experts fear households will quickly spend their savings and fuel runaway inflation.
  • Studies suggest most will hold onto the cash even after the US reopens, Fed researchers said.
  • See more stories on Insider’s business page.

Gradual reopening and widespread vaccination have economists wondering how Americans will spend in a post-pandemic economy. Researchers at the Federal Reserve Bank of New York see little cause for concern.

Americans enjoyed a savings surge during the pandemic as government stimulus hit households and lockdown measures cut down on spending. Estimates suggest people held on to roughly $1.6 trillion in savings since last March, when the health crisis first slammed the economy.

The sum highlights the scale of the government’s support throughout the coronavirus recession. Yet some experts fear that, if too much of these savings are spent too quickly, the recovery will be disrupted as rampant inflation takes hold.

Such a demand bounce is unlikely, professors and economists at the New York Fed said in a Monday blog post. For one, Americans who kept their jobs still haven’t spent nearly as much as they would in a pre-pandemic economy.

“Increased purchases of furniture, electronics, and other goods have compensated only in part for this reduced spending on services,” the economists said. “As a result, overall consumption has fallen for many households, even if their income is more or less intact.”

The roughly $5 trillion in stimulus passed by President Donald Trump and President Joe Biden over the last year also contributed to the savings boom. Relief doled out in direct payments and expanded unemployment benefits was used to pay down debts and cover living costs, but some was tucked away as savings.

It’s also possible that some households increased their saving habits as a precautionary measure due to uncertainty around how the economy would fare, the researchers said.

Source: Federal Reserve Bank of New York.

The very nature of excess savings suggests they won’t be unwound too quickly. Stimulus recipients spent roughly one-third of the government support, according to Fed estimates. The rest was mostly saved, likely by households that already enjoy a financial buffer. It’s possible that circumstances change and force Americans to tap their savings sooner than expected, but the economy’s steady recovery should lead habitual savers to keep holding on to their funds, the team said.

Even when the economy fully reopens and Americans have more ways to deploy their cash, the researchers don’t expect a sudden rise in spending. Many are sure to dine out more often or take a vacation that wouldn’t have been taken otherwise, but there’s a limit to how much a household can boost its discretionary spending, the team said.

“It is certainly possible that some of these savings will pay for extra travel and entertainment once the COVID-19 nightmare is behind us, but our conclusion is that the resulting boost to expenditures will be limited,” the economists said.

This conclusion – and likely outcome – is a key reason why, as Insider’s Hillary Hoffower reported, a full economic recovery depends on the wealthiest Americans spending much more than they did over the last 12 months of the pandemic.

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Millions of Americans have struggled to get access to their stimulus checks. The government needs a better system so getting cash to people isn’t so painfully slow.

Biden stimulus
President Joe Biden speaks about the COVID-19 relief package in the State Dining Room of the White House, Monday, March 15, 2021, in Washington

With President Biden’s signature now sealing the $1.9 trillion American Rescue Plan, most households nationwide are set to receive their third stimulus check in a year. This relief is urgently needed as new unemployment insurance filings continue to surpass one million on a weekly basis a year into the pandemic. However, for the third time, policymakers will rely on an inefficient, patchwork system to deliver this relief – a system that previously excluded millions, and left others waiting months for support.

The lesson is clear: our policies are only as good as the plumbing that delivers them. To better respond to this crisis and those to come, Congress needs to scrap the current fragmented system and build a direct and seamless infrastructure capable of sending cash quickly and automatically when families – and the economy – need it. In short, Congress needs to create a “cash button.”

Cash flow

Direct cash payments are a time-tested economic relief and recovery strategy. In the 2001 and 2008 recessions, and as economic stimulus tax credits in 2009 and 2011, cash was a standard feature. But despite their demonstrated value as a countercyclical measure, the government has not invested in the infrastructure to ensure that cash payments can be efficiently and equitably distributed. A strong foundation for cash relief will also be necessary for the new income support program provided within the expanded child tax credit.

This first attempt last year to get aid to struggling families suffered a number of setbacks. Despite the CARES Act passing in late March, by October, around 12 million people, disproportionately Black and Latinx households, had yet to receive their Economic Impact Payments. Even state unemployment insurance systems, a longstanding source of income support, were unable to distribute cash quickly. The Century Foundation estimated that by the end of May 2020 less than 60 percent of the 33 million UI claims made since the start of the pandemic had been paid – leaving millions of families experiencing or on the brink of financial hardship.

To be sure, the federal and state governments patched up issues throughout the months-long rollout of CARES Act checks, as well as the December stimulus. They included the creation of systems for low-income families who do not file taxes to receive the payments, and used the federal Direct Express debit cards and state EBT systems to speed disbursement. Yet problems remain: due to the inefficient and incomplete infrastructure, many people in need still haven’t received their benefits.

How to get cash in hands

A more responsive and efficient payment system will require three major steps, as outlined in a recent report by Jain Family Institute experts.

First, using records maintained by the Social Security Administration (SSA) and the IRS, the government can build an integrated database of individuals who would receive cash, similar to what was proposed by Rep. Rashida Tlaib in her BOOST Act, to ensure minimal coverage gaps. The SSA could then administer payments automatically to those in need, in particular because the SSA is already tasked with sending out tens of millions of payments through direct deposit and Direct Express debit cards each month.

Second, to reach those not covered by federal records, the government can allow individuals to apply for cash support and qualify through any existing state-administered benefits systems, such as the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps.

Lastly, the federal government should establish public bank accounts to provide a secure endpoint for cash assistance and ensure that the millions of households currently unbanked and underbanked could receive aid without having to rely on check cashers or paid tax preparers as they currently do. Two options for public banking are postal banking and private federal reserve accounts. A no-cost checking account through the USPS would allow anyone with an address to receive electronic transfers, from the Treasury, the Social Security Administration or the Federal Reserve.

Fed accounts, free, personal, no-cost bank accounts set up through the Federal Reserve system, would allow instantaneous cash transfers to account holders and could be linked to existing accounts at commercial banks or set up as part of postal banking, creating a seamless pipeline for disbursement. Since the USPS operates ubiquitous local branches, including in rural and low-income areas where commercial banks do not maintain a presence, postal banking could serve as a platform for a host of other financial services and help foster financial inclusion.

These three steps will create a safety net for the 21st century. As we saw with the CARES Act, poverty rates decreased nationwide and an estimated 12 million people were saved from falling into poverty. While delays and missteps blunted its impact, we have an opportunity to do better and we must take it.

There is extensive evidence that cash works, and with the federal government now tasked with distributing the American Rescue Plan’s child allowance (which is likely to become a permanent part of the safety net), it is time for policymakers to establish the plumbing required to provide cash relief nimbly and efficiently when crises occur. We need to build a cash button, and legislators have the options at hand to make that a reality.

Stephen Nuñez has over a decade of experience in research and program evaluation related to welfare policies and economic inequality. He holds a PhD in sociology from Stanford University, and in his current role, leads JFI’s research on guaranteed income in the US and internationally.

Rachel Black is an Associate Director of the Aspen Institute’s Financial Security Program (FSP). She previously served as Director of New America’s Family-Centered Policy program. Her work has been featured in a diverse set of outlets, including The Washington Post, The New York Times, The Atlantic, Slate, and Essence.

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The IRS is moving to issue refunds for Americans who paid taxes on $10,200 in unemployment benefits last year

Charles Rettig
IRS Commissioner Charles Rettig.

  • The IRS is aiming to issue refunds to people who already paid taxes on some unemployment insurance.
  • “We believe we will be able to automatically issue refunds associated with the $10,200,” Rettig told Congress.
  • The IRS recently extended the tax filing deadline from April 15 to May 17 for individuals.
  • See more stories on Insider’s business page.

The IRS chief said during a congressional hearing on Thursday that the agency is taking steps to issue refunds for people who paid taxes on the first $10,200 in jobless aid.

IRS Commissioner Charles Rettig urged taxpayers to refrain from filing an amended return. Instead, the organization is aiming to distribute refunds soon.

“We believe we will be able to automatically issue refunds associated with the $10,200,” Rettig told the House Ways and Means Committee. He added he expected a formal announcement “in the near future.”

The commissioner is referring to a part of President Joe Biden’s stimulus law that provides tax relief for unemployed workers. The first $10,200 in jobless aid is tax-free for Americans earning below $150,000, but some people may have filed taxes without claiming – or even knowing about – this exemption.

“We’re sensitive to the situation,” Rettig said.

The IRS recently extended the tax filing deadline by a month from April 15 to May 17 for individuals filing 1040 forms, providing some people with additional time to submit their returns. The extension doesn’t apply to corporate or nonprofit tax filings.

The agency is struggling to get through a massive backlog of 24 million unprocessed returns from businesses and individuals stretching back to the 2019 tax filing season – and it’s piling up as Americans continue turning in their taxes. Many stimulus checks from past relief laws have not gone out as a result.

“We would hope to be through this backlog by the summer,” Rettig said.

H&R Block and TurboTax customers, meanwhile, are grappling with other delays as neither company has updated software to apply the new stimulus law’s changes on taxing jobless benefits.

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