Lawmakers will likely roll out more stimulus money, but it may not come in a second round of checks. Instead, it’s sounding like the phase 4 stimulus package will take other forms like tax cuts and a credit for domestic travel.
More stimulus money is needed: Powell
According to The Wall Street Journal, Federal Reserve Chairman Jerome Powell told the House Financial Services Committee on Wednesday that if Congress doesn't pass more stimulus money, the recent improvement in the economy could be in jeopardy. Specifically, he said lawmakers should focus on workers who have lost their jobs and businesses that have been shut down due to the COVID-19 pandemic.
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In May, the economy added 2.5 million jobs, which was a huge surprise for economists, who had been expecting it to shed more jobs. However, Powell pointed out that despite the increase in jobs, 25 million people are still unemployed.
He told the House committee that "it would be a concern" if lawmakers pulled back on the support they have been providing "too quickly."
Debate over unemployment
Democrats have been pushing to get more stimulus money as soon as possible. However, the GOP-led Senate wants to see how well the first three stimulus packages of 2020 have done at stimulating the economy. The Senate seems to have set a timeline of looking at more stimulus money in July after their two-week recess that starts on July 3.
Lawmakers are up against a major deadline at the end of July when the expanded unemployment benefits end. Republicans and the Trump administration oppose extending the extra $600 in benefits because they result in many people getting paid more on unemployment than they did while on the job.
However, Powell emphasized that Congress should focus future stimulus money on people who are out of work and "smaller businesses that may not have vast resources for a period of time." He added that the $3 trillion in stimulus money lawmakers already approved seems to have increased hiring and consumer spending over the last few weeks.
Powell typically avoids issues that are at the center of partisan debate, so his remarks are a departure from his usual commentary. He explained why he was wading into the debate by pointing out the risks to economic growth he sees in the next year and a half. The Fed has already said it plans to keep interest rates close to zero at least through 2022. The central bank expects unemployment to average 9% to 10% in the fourth quarter.
What might additional stimulus money include?
One area of the economy that could certainly use more stimulus money is the travel industry. Several reports indicate that the Trump administration is considering a $4,000 tax credit to be used for domestic travel.
President Donald Trump has mentioned an "Explore America" tax credit that would incentivize Americans to travel within the U.S., spending money on restaurants and other travel-related expenses. According to Fox Business, U.S. Travel Association President and CEO Roger Dow said in a statement last month that providing an incentive for families to travel would help stimulate the economy.
The organization suggested that the travel credit cover expenses greater than $50 incurred while traveling domestically. Expenses could include lodging, entertainment, transportation, recreation, meals, events and business meetings.
Other provisions that could be included in additional stimulus money include a payroll tax cut. Many people are wondering whether a second round of stimulus checks will be included in the phase 4 package. It's sounding like lawmakers will go another route, but based on everything that's being talked about, there could be benefits for most people even if they don't come in the form of a second round of stimulus checks.