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McConnell floated $40,000 income cutoff for stimulus checks that could leave out 20 million people



  • Republicans are signaling they could support a second round of stimulus checks for Americans.
  • Sen. Mitch McConnell floated a $40,000 income cutoff for a direct payment this week.
  • But that step would leave out 20 million middle-class Americans who benefited from the initial wave of payments.
  • Visit Business Insider’s homepage for more stories.

More Republicans in Congress are signaling they’re willing to get on board with another round of $1,200 stimulus checks for Americans as lawmakers debate what should be put in another economic relief package later in July. That comes after months of GOP lawmakers conveying alarm over the substantial amount of government spending to confront the coronavirus pandemic.

This time, however, Republicans are weighing whether to sharply limit the number of recipients eligible for the government payout, The Washington Post reported.

In March, Congress authorized a wave of direct $1,200 payments for individuals earning up to $75,000 a year, plus $500 for each dependent child. The cash amount diminished until phasing out for those making above $99,000. Married couples drawing up to $150,000 a year also qualified for a full payment.

The health and economic environment hasn’t improved dramatically since the spring. The economy remains weak and the pandemic is still raging, dampening the prospect of a speedy recovery. Many experts say another infusion of federal cash would keep struggling people afloat during a period of high unemployment and scarce jobs.

Trump said he favors additional stimulus checks, and some Republicans appear to be open to the idea despite ongoing rifts. Sen. Majority Leader Mitch McConnell said at two events this week that any direct payment should be narrowly focused to lower-income Americans grappling with financial calamity.

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“The people that I think have been hit the hardest during this whole episode have been people making $40,000 a year or less,” McConnell said on Wednesday at a public appearance in Kentucky.

He went on: “Many of them work in the hospitality business, hotels, restaurants — we’re going to be acutely aware of that particular segment of our population going into this next package that we’ll be putting together in the next few weeks.” 

Plenty of details are still missing from the figure McConnell suggested. It’s not clear whether that represents the new cap Republicans will seek or what the income threshold would be before the payment phased out. McConnell’s office did not respond to requests for comment.

However, economists started modeling what another round of payments could look like. Ernie Tedeschi, a former economist for the Obama administration, estimated around 20 million Americans would be left out who benefited from the initial wave of payments.

‘We’re talking about solidly middle-class families’

Tedeschi’s projection assumes similar income thresholds to the initial round of stimulus checks: $40,000 for single-filers and $80,000 for married couples with a payment reduction of $5 for every extra $100 of income.

He told Business Insider many people taking home middle-class incomes wouldn’t get as much support from the federal government as they did under the CARES Act if the $40,000 threshold was implemented. Instead, many in the middle would fall into what he called a “no-man’s land.”

“The people being left out when you lower the threshold to $40,000 are not rich, high-income families,” Tedeschi said. We’re talking about people between $40,000 and $75,000 if you’re single and $80,000 and $150,000 if you’re married. We’re talking about solidly middle-class families in those cases.”

FILE PHOTO: Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort, Kentucky, U.S. June 18, 2020. REUTERS/Bryan Woolston/File Photo

FILE PHOTO: Hundreds of people line up outside a Kentucky Career Center hoping to find assistance with their unemployment claim in Frankfort


That was echoed by Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth. A family of four was eligible to get $3,400 from the federal government in the first round of direct payments.

“Most families don’t have much of a financial buffer. Three thousand plus-dollars, that’s real money for a lot of American households,” Sahm told Business Insider.

On top of significantly buttressing personal finances during a period of extraordinary uncertainty, the government cash prompted a quicker consumer spending rebound among lower- and middle-income households. Early research from Northwestern University indicated much of the money was spent on essentials like groceries, take-out food, and rent. And it found that people with fewer dollars in their bank accounts were likelier to spend the funds faster.

Implementing the $40,000 income threshold also raises a slew of administrative questions. The last of the direct payments were based on 2019 tax returns. People who earned above that amount last year but no longer do so due to a job loss would not receive a check, despite the hardship they’re enduring.

“They’ve already sent out the recovery rebates once. They have all of the information,” Sahm said. “If they make no changes in eligibility, it is the push of a button at Treasury and direct deposits would go out in two days.”

The IRS and the Treasury Department have distributed nearly 160 million payments so far — the vast majority between mid-April and early May.

Democrats are pushing for another round of $1,200 direct payments similar to the previous one. On Thursday, House Speaker Nancy Pelosi said, “I think families making over $40,000 probably need assistance. Again, just depending on their family situation.”

Meanwhile, Republicans are driving to keep further stimulus spending below $1 trillion. Experts like Sahm say that’s not enough to shore up the economy still weathering an unemployment rate of 11% and rising permanent job losses.

“Instead of trying to get the package under $1 trillion, they should just spend the money,” Sahm said. “The cost of doing too little right now is enormous.”

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