The income eligibility debate for stimulus checks may be unresolvable


Now that Susan Collins and her “Gang of Ten” have put forward a counteroffer to the Democrats’ bloated $1.9 trillion pandemic relief package, one of the main sticking points between the parties is coming back into focus. What will Congress do about a second round of direct payments to citizens? Some of the more liberal members, such as Congresswoman Alexandria Ocasio-Cortez, have demanded $2,000 checks on a monthly basis until the pandemic is “over.” But other members, including some Democrats like Joe Manchin, are balking at the total cost and saying that the direct relief checks should be targeted toward only those who are truly in need, having been hit by the pandemic and the shutdowns. This has put Joe Biden in the middle of what’s being described as an eligibility debate. (The Hill)

President Biden’s push for more direct payments is sparking a debate over what the income thresholds should be for the stimulus checks.

Many Republicans and some centrist Democrats say any additional payments need to be more targeted toward lower-income households, arguing they are most in need of relief and are more likely to spend the money quickly, providing a boost to the economy.

On Sunday, a group of 10 GOP senators made that argument in a letter to Biden announcing their own coronavirus relief proposal, one that includes payments “for those families who need assistance the most, including their dependent children and adults.”

For his part, President Biden has indicated that he’s open to negotiations on the amount of money that should be sent and the guidelines for who is eligible. But if we’re going to change the formula that was used last year (twice), how would that work? The original checks were sent to individuals earning up to $75K, or households making $150K. That was already problematic in a couple of ways. First of all, the checks were based on how much people had earned in the year prior to the arrival of the plague, but there was no mention of how well they were faring after the government-mandated shutdowns began.

Let’s be honest here. If your household was bringing in $150K per year, in the vast majority of the country, you were doing pretty well for yourself. That sort of income places you up near the top ten percent of earners. You might not be shopping for yachts or Teslas, but you should have at least been pretty comfortable. But what if you were fortunate enough to not lose your job(s) because you are an essential worker or in a line of work not affected by the shutdowns? Then you were still earning just as before, so what’s the justification for sending you a check?

Conversely, if you and your family were used to bringing in $150K and you suddenly found yourself getting $350 per week from unemployment, you very likely could use some help. I would imagine that few of us would have a problem with that sort of government largesse. People further down the income ladder who were also put out of work no doubt needed the relief even more.

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When we look at this puzzle in those terms, the proposals from Manchin and the Collins Crew seem quite reasonable. But here comes the catch. How does the government know whether or not you lost your job after the shutdowns began? Last year there was simply no way to quickly establish those facts. This year we at least have something of an advantage because everyone who was put out of work almost certainly reported significantly less income. But even that doesn’t really address the problem. If you reported an income of $16K last year, are you someone who was earning $150K previously and was put out of work, or were you always making $16K and you were unaffected by the shutdowns?

These are completely valid questions to ask, but as far as I’m aware, there is simply no way for the federal government to make such a determination outside of some sort of registration and application process where people would include their income tax data for verification. Then you’re going to have to process and verify literally tens or hundreds of millions of applications. That would probably take years, and the Democrats are already carping at the Republicans (and each other) because the checks aren’t on the way less than two weeks after Biden was sworn in.

So what’s the answer? As I explained above, there doesn’t appear to be one. So we’re basically back to just setting an income cap and sending another check to everyone below that level, setting another trillion dollars of magical money on fire. The debate over eligibility may be moot anyway, however, because Senate Democrats are talking about ramming Biden’s relief bill through via reconciliation, so the GOP may not have a seat at the bargaining table to begin with.

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