Two things about the coronavirus relief checks the government will soon start sending out: First, it looks like they’ll take a while to arrive:
About 90% of households — approximately 165 million — will benefit from direct payments, according to the Tax Policy Center.
The $2.2 trillion coronavirus relief package marks the largest rescue package in American history. President Trump announced Wednesday that it includes $300 million in direct payments to individuals to alleviate at least a little of the financial pain caused by the deliberate near-standstill of the U.S. economy.
But despite promises that the one-time funds will be distributed “within the next three weeks,” it will likely be months before the stimulus checks hit bank accounts according to experts.
That’s because the infusion of cash will be distributed by the IRS, so those who have previously received tax refunds via direct deposit will be first in line for the rebate checks. Officials estimate the earliest those payments will go out is three to four weeks after the package is approved.
Alternatively, people who receive tax refunds through the mail will have to hold out much longer.
“I don’t think physical checks will be in the mail for another three to four months,” said Kyle Pomerleau, a resident fellow at the American Enterprise Institute, citing delays in the system in 2008 when the government last issued national stimulus payments under the George W. Bush administration.
Second, $1,200 per adult will cover maybe two weeks of the average family’s living costs. If someone is in trouble, this won’t save them.
So unless the economy goes back to “normal” in the next month or two (highly unlikely according to generally-reliable economist Nouriel Roubini), America’s waiters, bartenders, flight attendants, small business owners, etc., will be in even worse shape when they cash their checks than they are today.
The result? Massive, perhaps irresistible pressure to make the one-time payments a regular monthly thing. Which means the emergency deficit spending now baked into the 2020 cake will become “structural,” i.e., ongoing, for the foreseeable future.
At that point the calls for some version of a debt jubilee will become equally irresistible. For years now, people have been suggesting that the Fed, which owns trillions of dollars of US government paper, can simply eliminate that debt. More recently, presidential candidates have been promising to forgive the $1.5 trillion of outstanding student loan debt. It goes on from there through small business loans, mortgages, state and local debt and who knows, maybe even credit cards.
Just a few steps into debt-jubilee land takes us to Modern Monetary Theory, where governments realize that the whole tax, borrow, pay interest thing is wasted motion when a central bank can just create as much money as the government needs.
This is a very bad place to be (see here for some of the reasons) but it appears that, barring a medical miracle, we’re headed that way fast.