Stim

Stimulus Round #3: what it means for the shape of recovery (and your wallet)

Monday, March 15, 2021 by Robinhood Snacks | Disclosures

Third time's the charm... After a months-long back and forth in Congress, Stimulus Round #3 is (officially) here. The $1.9T bill landed on President Biden's desk on Thursday, when it was signed into law. It’s nearly as big as the first stimulus we got when Covid hit last March — and more than 2X as big as the 2009 financial crisis package. Some highlights:

  • $1.4K direct payments to Americans making up to $75K/year (and $150K for married couples). If you make over $75K but less than $80K, you'll get a smaller check. Deposits started hitting bank accounts this weekend.
  • $300 per week in extra unemployment benefits, extended through September 6. Also: boosted child tax credits of $3K/kid.
  • $360B in state and local government aid, $130B to help schools safely reopen, $120B+ for Covid-related aid, and $59B to small businesses.
  • Not included: A federal minimum wage increase.

Charge it to the room... The US govt has passed a ginormous $5.3T worth of stimulus during the pandemic — that's $43K per household. And that $$$ isn't coming out of taxes. It's adding to the $28T national debt, which is now larger than the entire US economy. Some fear that the huge cash infusion could lead to higher interest rates and soaring prices. But the Fed says it won't raise rates any time soon. And inflation has stayed (relatively) low for a decade.

THE TAKEAWAY

This could turn a "Nike recovery" into a V-shaped recovery... Even without this stimulus, the economy has been healing. ~13M jobs have returned since April 2020 — but the pace of recovery has slowed. Last year, many expected recovery would take the shape of a Nike swoosh: sharp drop, slow rise. Now, economists predict a much faster recovery: this year, the US economy is expected to grow 6%, the fastest annual growth since 1983 — and 3M jobs are expected to be added. The US could finish 2021 with even higher growth than was projected pre-pandemic, thanks to Stimulus #3.