A few weeks ago, it looked like Andrew Cuomo was on track to break a New York curse and make it past a third term in office. But now, roiled in a Covid scandal, his political future is looking less certain.
And getting aid money out quickly is crucial to keeping the economy afloat after the hit it took from the coronavirus, economists warn, given that any lapses in assistance will lead to a drop in consumer spending. Spending among low- and middle-income Americans who are receiving stimulus checks and unemployment benefits is slightly higher than it was before the pandemic, heavily bolstering the economy even though 10 million people remain unemployed.
“When people talk about how startlingly strong the rebound was out of the depths of the initial part of the crisis, that was predicated on unprecedented support” from the federal government, said Diane Swonk, chief economist at Grant Thornton.
The start-and-stop nature of unemployment aid and other benefits is already weighing on consumer behavior, dampening the effects on the broader economy, Swonk and other economists warn. If people are unable to count on regular unemployment checks or anticipate a change in the amount of benefits they are getting, they will spend less.
“It creates uncertainty, and uncertainty is a tax on the economy,” Swonk said.
Among the stimulus policies that would most significantly increase cash to Americans, the package would boost the child tax credit and allow families to receive that money on a monthly basis, providing up to $300 a month per kid. But the IRS would not have to start offering those monthly payments until July 1.
The case for expanding the child tax credit as an immediate stimulus “is weaker given the timing challenge,” said Garrett Watson of the Tax Foundation, noting that there is also an argument for expanding the credit to reduce child poverty over the long term.
The IRS would also be charged with sending out new stimulus checks of up to $1,400 while at the same time facing the tidal wave of tax filing season. Leaders in the tax industry have already called on lawmakers to ensure the overburdened agency is not ordered to swiftly distribute all stimulus checks to the detriment of its core mission of collecting taxes.
John Koskinen, who served as IRS commissioner from 2013 through 2017, said the agency did “amazingly well” distributing stimulus checks last year despite being underfunded and short thousands of employees since a decade ago.
“But there’s a limit to what new things you can ask them to do without threatening the entire system,” Koskinen warned.
In another tall order, the stimulus would require the Small Business Administration to launch a $25 billion restaurant grant program that the industry has been fighting for since the early months of the pandemic. Since then, about 17 percent of restaurants have closed, according to the National Restaurant Association.
The SBA, which has faced unprecedented demands from Congress during the economic and health crisis, has not fully implemented relief efforts from December’s economic aid package. The most glaring example is a $15 billion grant program for shuttered…