The U.S. government has distributed approximately 130 million economic impact payments, or stimulus checks, to Americans over the last month.
The extra cash — up to $1,200 per adult, plus $500 per dependent child — helps both individuals and America's economic recovery, but it's not enough, says Lisa D. Cook, a Michigan State University economist and a former senior economist at the White House Council of Economic Advisers under the Obama administration.
Getting Americans, especially low-wage workers, more cash quickly through mobile payments will increase spending and therefore ramp up economic activity fast, she argues. "A check in the mail in September isn't going to help us. We need to get more money into the economy quickly by sending checks out quickly. And we need to provide more of them and let people know they'll be supported."
Here's why Cook thinks more stimulus cash and increased health safety measures are needed to help the economy recover.
Although unemployment was at a record low before the coronavirus hit the U.S., wages were also at record lows. That's one of the main reasons the pandemic has had such a devastating impact on the overall U.S. economy, Cook argues. Almost half of all U.S. workers, or around 53 million people, were earning a median annual wage of about $18,000, according to a Brooking's Institute report released in 2019.
Lower-income groups, many of whom depend on the service industry for jobs, have taken the biggest financial hit in the wake of the pandemic, according to the Federal Reserve. "Many of these workers are being characterized as 'essential,'" Cook says. "Well, then, we should pay for them that way."
Consumer spending accounts for more than two-thirds of all U.S. economic activity, Cook points out. Therefore, getting low-wage workers more cash quickly so they'd be more able to spend would assist with an economic recovery.
"It's difficult to get people who are already shocked and are being cautious with their money at this very uncertain time with unanticipated expenses to spend," she says. "Having extra money will help smooth consumption."
Although most Americans want a second stimulus check, according to an April WalletHub survey, it doesn't seem likely that they'll get one, and certainly not anytime soon. Another stimulus package would be extremely costly and it would have to be passed by both the House and the Senate and then signed into law by the president.
But if the government doesn't support Americans during this time of economic hardship, that could have a long-lasting impact on the way people spend, Cook says: "Think of people in the Great Depression who didn't use credit cards and only used cash. They saved a lot and didn't buy things."
In addition to receiving more cash from the government, consumers need to feel safe in order to participate in the economy, Cook says.
About half of all U.S. states have begun to reopen. Continuing to reopen without widespread testing could lead to further economic damage, Cook argues: "You don't want to be that restaurant that opens prematurely because if someone contracts the virus [at the restaurant] then people won't have the confidence to come in anyway."
The ramifications would be especially harmful to workers, she says. "Jobs are really at risk if we reopen too soon without masks or without social distancing norms. ... If customers don't get their confidence back to go back to that restaurant, people will lose their jobs. I seriously doubt small businesses will be able to take a shock like this twice if they open prematurely."
For businesses to succeed, they'll have to make health and safety a priority and incentivize their workers to do the same. "I went to get a coffee and the person making my latte wasn't wearing a mask. That doesn't inspire confidence and I'm not in a trusting mood," she says.
At the end of the day, It doesn't matter what the president or governor says. "If people don't feel safe, they're not going to go to that restaurant or that ball game," Cook says. "People need to feel confident they can go to work and participate in the economy without getting sick."
After all, she says, "what good is having an open economy if no one is spending?"
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