Monday, January 25, 2021
Home World Kelly Evans: "Third stimulus check update"

Kelly Evans: “Third stimulus check update”


I have to admit I didn’t realize until our market chat on #Power #Lunch yesterday that people are already looking ahead to what the next stimulus bill will bring.

“#We do believe that you could see another package passed after the next #Congress is in session,” said #Rebecca #Felton of #RiverFront #Investment #Group. I asked #Kirk #Hartman of #Wells #Fargo if he also thinks there’s more to come: “#Oh definitely,” he said. “I think when the #Biden administration comes in there’ll definitely be [another] package. #Ninety-five percent of #Americans are hurting…I think there’s bipartisan consensus for more stimulus.”

#Or is there? #And what kind of stimulus? #And are 95% of #Americans really hurting financially from #Covid? #Even as #President-elect #Biden is already calling for a third round of stimulus checks–and even as the #Democratic #House advanced $2,000 payments in a bill last night–other prominent voices on the left aren’t so sure.

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#Take #Larry #Summers, for instance, who has caught a lot of flak in recent days for opposing the idea of $2,000 stimulus checks since he’s been a #Biden advisor typically in favor of more fiscal aid. “I am not opposing stimulus or favoring austerity,” he wrote in an op-ed explaining himself. “The issue is whether…a one-time tax credit that would be worth $8,000 to a family of four and reach more than 85% of taxpayers makes good economic sense.”

“#What about the vast majority of families who are still working, and whose incomes have not declined…?” #Summers wrote. “#For this group, the pandemic has reduced the ability to spend more than the ability to earn.”

#Indeed, we’ve written many times here about the $1.5 trillion-plus in “excess savings” #Americans have piled up this year, which just resulted in a strikingly normal holiday sales season. #And we’re not talking about only high-end consumers here. #Shares of #Macy’s popped 10% for much of the session yesterday after #Mastercard #SpendingPulse said holiday retail sales overall were up 3% from a year ago.

#Michael #Darda of MKM #Partners draws the striking contrast between the recovery now versus the aftermath  of the #Great #Recession of 2008-09. #Back then, labor compensation plunged 10% below its prior trend “and never recovered,” #Darda wrote yesterday. #It eventually started growing again, but didn’t close that gap.

#This time around, compensation (which is to say, household earnings) also plunged 10%; but by last month –barely eight months into the recovery–had recovered so sharply that the gap was only 3.4%, or just over $400 billion. “#Why,” wrote #Darda, especially with the vaccine rolling out and the #Fed still pumping liquidity into the system, “are we enacting fiscal stimulus bills with a price tag of more than 2x that figure?” The $900 billion bill that was just signed, he said, “[should] have been both targeted to the pandemic itself and paid for.”

#Jason #Furman, the past chair of #President #Obama’s #Council of #Economic #Advisors, was also tweeting last week about the surprisingly small compensation gap and growing pile of excess household savings. #He too implied the focus should be on more targeted relief measures, like extending boosted jobless benefits when they expire again in #March.

#Already as of #October, #Summers noted, citing J.P. #Morgan #Chase, checking account balances were running above pre-Covid levels. #Even for the lowest earners, balances were up about 25% year-on-year. “#Without new stimulus, things would have normalized in 2021,” he wrote. #If the government were to send out $2,000 checks, “we [would be] in completed uncharted territory,” he warned, “with household incomes more than 15% above their normal level” next year.

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#It’s why the “economic boom” is quickly becoming the base case scenario for 2021 even without any further aid (“I don’t know how your baseline could be anything but” that, #Ben #Carlson of #Ritholtz #Wealth tweeted last night ). #And you can see why people are starting to worry about inflation–and why the dollar’s been slumping–even if the bond market remains in its deep slumber. #Are rates only still low because of the #Fed’s massive bond-buying? #Perhaps. #If they’re forced to start “tapering,” we’ll see how big a tantrum bond yields throw.

#But at least the #Fed can pretty easily dial back its support, even sell some of its holdings, if it has to in order to “normalize.” #How exactly would lawmakers deal with higher interest costs while we’re still running huge deficits from these relief packages? #Let’s hope we do get a boom next year; we’ll need it to pay the bills.

#See you at 1 p.m!

#Kelly

#Twitter: @KellyCNBC

#Instagram: @realkellyevans

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https://www.cnbc.com/2020/12/29/kelly-evans-third-stimulus-check-update.html

##Kelly ##Evans #stimulus #check #update

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