But what do these checks do for the economy– Twin Ports and beyond?
Monica Haynes, director of the Bureau of Business and Economic Research, says, actually, quite a lot!
1. How do individual stimulus checks contribute to the greater economy?
The individual stimulus (or relief) checks will most definitely help stimulate the economy and help the economic recovery. So far, each COVID relief package has increased spending in the areas of retail, home improvements, and other personal consumer spending. Spending increases the most among lower-income households, while higher-income households may end up saving a significant portion of their share. The Brookings Institute estimates that the package will boost GDP by about 4 percent at the end of 2021 and 2 percent at the end of 2022, relative to a projection that assumes no additional fiscal support.
2. Does tightening the economic threshold change the impact in any way?
Actually, the fact that the income threshold is slightly lower than it was previously may actually mean that the relief payments will have a larger economic impact (or ripple effect) through the economy. As I mentioned, lower-income earners are going to be more likely to spend their payments rather than save or invest. This will immediately stimulate the economy. This, combined with the fact that the payments are larger than either of the previous relief packages, should mean that the economic effect will be more pronounced.
3. Can you talk about the funding for small businesses?
There is a lot in this new bill that is aimed to help small businesses survive the next few months. First, the bill extends the EIDL and PPP loans, just as they were set to expire, and provides more EIDL funding for businesses who lost between 30-50% of their revenue in the last year. Second, the bill includes several programs aimed specifically at restaurants, bars, and entertainment venues, who have been hit exceptionally hard over the past year. For example, restaurants with 20 locations or fewer (which is basically every restaurant in Duluth!) will be eligible for grants equal to the difference between their 2019 and 2020 revenues, up to $10 million per company and $5 million per physical location.
4. Is there anything else you'd like to add?
One thing that I think has gotten overshadowed by the payments to households is the additional child tax credit. Under the new bill, families can claim up to $3,600 per child under age 6 and $3,000 for children up to age 17 for one year, to help combat the economic challenges of the pandemic. The current tax credit is up to $2,000 per child. This is going to be a huge benefit for families. And from what I understand, the hope is that the tax credit will eventually become permanent.
About Monica Haynes
Monica Haynes is the director of the Bureau of Business and Economic Research, which collects, analyzes, and disseminates information regarding the economy of Duluth, Northeast Minnesota, the State of Minnesota, and Northwest Wisconsin. Haynes’s expertise includes regional economics, energy, tourism, local industry, and economic impacts.
Contact
Monica Haynes
Director of the Bureau of Business and Economic Research
[email protected] | 218-726-7895