Why the Stimulus Check and Unemployment Benefit Squabble Is Bad for the Economy

There continues to be a back-and-forth between Congress and the White House in negotiations for the next federal stimulus package with unemployment bonuses and a second stimulus check at the forefront of the discussion in both the HEALS and HEROES Acts. The stalled conversations and lack of urgency may prove to be a negative impact on the economy.

Isaac Boltansky, the director of policy research at Compass Point Research & Trading, explained this concept by saying states reopening does not go hand-in-hand with an economic boom. He added that the impact of the coronavirus, including the increase in cases across the country, has significant ramifications on the country's economy. With fears growing about COVID-19 and some states having to dial back its phased re-openings, consumer confidence is beginning to waver. Add to that the expiring unemployment bonus, which saw an additional $600 tacked on as part of the first stimulus package in April, and the first set of $1,200 checks exhausted; the economy may be facing a setback in spending.

With less money in the hands of consumers, there, of course, will be fewer dollars being invested back into the economy. After the first stimulus checks began to make the rounds and land into the hands of the people, the economy began to see an uptick in spending, so much so that May and June reported increasing spending among consumers. The extra $600 for unemployment proved to be an incentive for consumers to spend their money more confidently, but with that perk now in jeopardy, people will be operating on much tighter budgets until another package is agreed upon.

The economy has remained a hot topic throughout the pandemic and a driving factor in states deciding how quickly or slowly to take its reopening. It's also been the biggest point of discussion for President Donald Trump, who has remained vocal on Twitter throughout the second stimulus package talks. On Friday, Trump said the Democratic policymakers were the ones "holding back the $1,200 to $3,400 checks that were ready to be sent out." He also said he was "very disappointed" in Sen. Chuck Schumer for blocking the temporary extension of the unemployment benefits.

While the discussion around a second stimulus package remains high on the priority list, the country continues to face growing COVID-19 cases. The past month saw the highest monthly total with 1.9 million new positives reported in July. There have been more than 4.65 million altogether with deaths passing 154,000 on Sunday.