Americans could get a cheque for US$1000 ($1680) or more in the coming weeks, as political leaders coalesce around a dramatic plan to try to prevent a worse recession and protect people from going bankrupt.
The idea originated with Senator Mitt Romney, R, Utah, who called yesterday for every American adult to receive US$1000 "immediately" to help tide people over, until other government aid can arrive.
By today, there was bipartisan support for the idea, including from US President Donald Trump. The White House even suggested that the amount could be more than what Romney suggested, an acknowledgment of how big the economic crisis is becoming.
"We're looking at sending cheques to Americans immediately," Treasury Secretary Steven Mnuchin said, adding that the President wants the money to go out "in the next two weeks."
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The US has done this twice before. During the Great Recession, the federal government sent every adult US$300 to US$600 (plus US$300 per child). People earning less than US$75,000 got the full amount, while wealthier people got less. The same thing happened in 2001, when the majority of Americans received US$300.
Most economists across the political spectrum like this idea because it's simple and relatively fast. Unlike other government aid - unemployment insurance, welfare or food stamps, people do not have to apply for the money and there are no restrictions on how to use it.
As the US economy comes to a standstill, job losses are mounting and could reach the millions, economists say. A US$1000 payment won't fully compensate people, but experts and politicians say it's a good first step to helping people buy groceries and pay rent. It works out to the equivalent of one week of pay for the typical American, according to the latest Labour Department data, which shows median weekly earnings of US$936 for full-time workers in the US.
In past downturns, wealthier Americans tended to save the money, which blunted the economic aid, but lower-income Americans used it immediately to pay bills, a lifeline for their families and a boost to the economy.
In the past, about two-thirds of the money was spent within the first six months of the money going out, according to economic studies of the 2001 and 2008 stimulus efforts. Many studies have shown that bumping up food stamps, welfare and unemployment insurance during downturns provides an even larger economic boost for the same reason: These Americans are the most cash-strapped, and they tend to spend the money quickly.
There are lots of questions about doling out money so freely. Some ask whether it's wise to send money at a time when most Americans are supposed to stay home to prevent the spread of the virus.
Some argue that rich people shouldn't get money, since they do not need it.
Mnuchin said that millionaires would not be getting the money. A Democratic proposal from Representatives Tim Ryan, Ohio, and Ro Khanna, California, would give at least US$1000 to everyone making less than US$65,000. They point out that about 75 per cent of Americans would qualify for it.
A plan from Democratic Senators Michael Bennet, Colorado, Cory Booker, New Jersey, and Sherrod Brown, Ohio, would go further. It would give US$2000 for every American adult and child plus, if the public health emergency continues.
The highest income earners would not get money under the Democratic plan.
"We will need multiple rounds of money for everyone," said Claudia Sahm, a former Federal Reserve economist who is one of the leading experts on recessions. "This recession is going to be more severe than the Great Recession."
Sahm is now forecasting a deeper recession than what happened in 2007-2009, but she said it might not last as long if policymakers act boldly. She has been talking to lawmakers about a US$1.5 trillion stimulus that would include these cheques along with aid for states and help for companies on the verge of bankruptcy.
Economists across the political spectrum have been urging Congress to send these cheques, including Greg Mankiw, President George W. Bush's chief economist, and Jason Furman, President Barack Obama's chief economist. They say the money could probably be delivered faster today than it was in 2008, partly because direct depositing is so widespread now. Sending to everyone - regardless of their income - could also speed up the process, because the Government would not have to check income records.
"Considering the difficulty of identifying the truly needy and the problems inherent in trying to do so, sending every American US$1000 asap would be a good start," Mankiw wrote on his blog.
Furman tweeted: "Thrilled to see @MittRomney proposing US$1000 [cheques]. This would [be] a critical floor of social insurance for hundreds of millions of Americans and would help the economy rebound more quickly when we are past the virus lockdown phase."
The money probably can't go out in two weeks, as the White House proposed. In 2008, it took about two months to get the checks to people, notes Mattie Duppler, a fellow at the conservative-leaning National Taxpayers Union. But she said it's reasonable that the money could start going out in April.
The IRS has many people's direct deposit information because about 90 per cent of people filed their tax returns online last year. On top of that, money could be delivered even faster to a lot of the hardest hit people, if it were sent through Social Security payments to the elderly or through the Electronic Benefit Transfer (EBT) debit cards that government aid recipients already have.
Sahm, the recession expert, has urged Congress and the White House to send the initial money quickly, and then say they will do more if the unemployment rate jumps above a certain level this summer.
"The world is de facto at war," French economist Olivier Blanchard tweeted.
The former top economist at the International Monetary Fund urged the US Government not to hold back on spending.
While some have raised concerns that sending money to most Americans comes with a hefty price tag that could send this year's budget deficit to a record US$2 trillion or more, Blanchard points out that that's about 10 per cent of the nation's economy. During World War II, the United States ran deficits of over 20 per cent of gross domestic product (GDP).