Since the U.S. government approved a third stimulus check in March, there has already been talk of the White House and Democrat lawmakers potentially pushing for a fourth payment. While critics assert that another round of relief efforts would add more pressure to an already bloated federal deficit, the latest economic data suggest that the recovery might require another injection of cash to continue growing the post-pandemic economy. Could the recent retail sales and inflation numbers prompt the administration to deposit more money into Americans’ bank accounts?
It’s All in the Data
According to the U.S. Census Bureau, retail sales tumbled 1.3% in May, down from a 0.9% increase in April. The market had penciled in a drop of 0.8% as economists anticipated consumers would have exhausted the fiscal support they received earlier this year. This also represented the first decline in three months, led by decreased sales at stores specializing in building materials, electronics, automobiles, and furniture.
The Bureau of Labor Statistics (BLS) reported that producer prices climbed 6.6% year-over-year in May, the largest 12-month increase since the data series started more than a decade ago. This was also the fifth straight monthly gain. Excluding the volatile food and energy, the annualized producer price index (PPI) jumped 5.3%.
This reading comes one week after the annual U.S. inflation rate in May surged to a larger-than-expected 5%.
Officials from the Federal Reserve and the White House insist that higher inflation is transitory, buoyed by a reopening economy and supply chain disruptions. But inflation forecasts are beginning to change, with Treasury Secretary Janet Yellen adjusting her projections from higher prices not occurring at all to rising inflation heading into 2022. Investors will be monitoring what comes out of the Federal Reserve this summer, with financial experts not holding their breath about too much monetary policy change.
With interest rates hovering near zero, sluggish economic growth, and consumers tapped out, will Uncle Sam pull the trigger on a fourth stimulus check? If President Joe Biden and his team were open to the idea before the most recent numbers, then it might be possible lawmakers will cut taxpayers a check sooner rather than later.
Democrats Nudging Biden on Stimulus
It has been three months since the Internal Revenue Service (IRS) started paying out the federal government’s third coronavirus-related stimulus checks for up to $1,400. The funds have been dried up for many struggling households as they were used on everything from covering their bills to paying down their debts.
Dozens of Democratic members of Congress have penned letters pushing President Biden to sign off on a fourth stimulus check. Seven members of the House Ways and Means Committee wrote a May 17 letter arguing that a fourth and potentially fifth stimulus check would keep 12 million Americans out of poverty.
“The pandemic has served as a stark reminder that families and workers need certainty in a crisis. They deserve to know they can put food on the table and keep a roof over their heads. They should not be at the mercy of constantly shifting legislative timelines and ad hoc solutions.”
A specific dollar figure was absent from the correspondence. Some amounts tossed around in the House and Senate go as high as $2,000 until the financial crisis is completely finished. Proponents purport that the economy is recovering, but many facets of the country continue to be impacted by fallout of the COVID-19 public health crisis: $20 billion in back rent, a growing number of households reporting food shortages, and 25% of Americans revealed they cannot pay their household expenses.
“The president is certainly open to a range of ideas,” she said. “He’s happy to hear from a range of ideas on what would be most effective and what’s most important to the economy moving forward.”
If the federal government sits on the sidelines, some states might choose to mail out stimulus checks. California Governor Gavin Newsom has proposed issuing $600 income-support payments. But many jurisdictions across the country are adopting employment-focused incentives instead, offering residents bonuses for finding a job. Connecticut, for example, is extending one-time $1,000 bonuses to 10,000 people who go back to work.
Can the US Afford More Stimulus?
Should the president and his administration agree to a fourth stimulus check, could the government afford it? As Liberty Nation recently reported, the Treasury Department confirmed that the U.S. budget deficit topped $2 trillion in the first eight months of the current fiscal year. Washington is on track to surpass last year’s record of $3.13 trillion, bringing the national debt above $28 trillion. With more spending on the way, the Congressional Budget Office (CBO) expects the budget gap to stay above $1 trillion over the next decade. Republicans and the U.S. central bank aver that this is unsustainable, but many have accused both entities of helping fuel this immense level of red ink in the nation’s capital.
Whether the next payout is $600 or $2,000, the price would be added to the ever-intensifying debt pile.
Read more from Andrew Moran.