Yahoo Finance’s Kristin Myers and Dr. Stephen Brincks, San Diego State University Finance Professor, discuss the impact the stimulus bill may have on economic growth.
KRISTIN MYERS: So I want to start here on this news of stimulus. I want to bring in now Dr. Stephen Brincks, San Diego State University Finance professor. Professor, thank you so much for joining us today. I want to start with that individual payment checks, about $600. A lot of folks are saying, you know what, this is a slap in the face. And that it's a little bit of a day late and a dollar short, or we can call it billions of dollars short really here. What kind of impact do you think that this $600 can really make for folks and families that are struggling right now through this pandemic?
STEPHEN BRINCKS: Well, one of the good things about the $600 check is it's going to get in the hands of many people very quickly. So if you have a direct deposit with the IRS, then you might receive your check maybe in the next several weeks. So that can provide an injection of liquidity into the economy immediately. And then depending on how things go, maybe there will be additional stimulus perhaps in the next couple of months.
KRISTIN MYERS: So I know that you said that this could add a boost and some liquidity to the economy right now. How big of a boost? As I mentioned, a lot of folks are saying, this isn't a lot of money and it's coming months and months and months after the time that folks have been struggling for a very long time. So a lot of this money might be going to these places where people have been really struggling for a very long time.
They're not going to be able to run out and spend it the same way folks were able to the last time around when they had a $600 boost to their unemployment, they got a $1,200 check. So how much of a boost do you think this can actually provide to the economy?
STEPHEN BRINCKS: Well, just by itself, it will provide of small to moderate boost. But when you put it together with the other parts of the package, it's about $900 billion total. That can provide a fairly sizable boost to the economy. That's about 4.3% of GDP. So if that is able to, get into the economy fairly quickly then together everything can help.
KRISTIN MYERS: What about aid to state and local governments, however? That's missing from this package. And I myself have spoken with several mayors, I've talked to lieutenant governors of some states that have said, listen, we actually really need aid and we need aid quickly. And we need Congress to give us some funds. So how can the economy continue to recover if those states and those local governments don't receive any help?
STEPHEN BRINCKS: So that's the one big missing piece of the COVID aid bill, is there are a lot of difficulties among state and local governments, potential for them to have to fire and lay off additional people. And of course, that's going to hurt the economy. And what you're trying to do is to prevent state and local governments from having to implement additional layoffs that's going to cause the economy to suffer even more. So there needs to definitely be something done on there.
Of course, it's tied up with the political process. But I think almost every economist would say that we need to have a sizable package go to state and local governments, to shore them up and to make sure that that's not going to be a source of economic weakness in the next several months.
KRISTIN MYERS: Now as I mentioned, this is an extremely trimmed down version of what Democrats at least had originally wanted. It's even a trimmed down version of some of the packages that Republicans had offered by hundreds of billions of dollars. Do you think Americans are going to need more economic aid in 2021? Even as we have this vaccine going out and folks are expecting that they can go back to things as normal?
STEPHEN BRINCKS: Yeah, I think that there should be some additional aid given to the economy. I mean, the main goal is to try to keep people employed and to try to keep people tied over until we can get to the other side, when the vaccine is widely distributed and we have hopefully a level of herd immunity through the vaccine; that the economy can open up again and we can get back to normal. And what we want to make sure is that we don't have any additional economic damage hurt the economy and hurt individuals before we can get to that point.
So hopefully, if we can get ourselves tied over for the next three to six months, that we can go back to normal and we can get the economy back to where it should be. So having additional aid, particularly to state and local governments, but also individuals, to make sure that they're not going to face evictions, and further job losses, loss of income, that's still really important.
KRISTIN MYERS: Now I spoke with someone just last week who said the economic scars of this pandemic could last well into next year. And that Congress really can't just pat itself on the back and think that its job is done once this recovery really gets back going, especially now that we do have this vaccine. I'm wondering if you're also seeing it the same way. I believe that the phrase that he used was, "taking the punchbowl away from the party really before it got started." Do you see the economic recovery at risk if Congress either pulls support too soon or just doesn't, as you mentioned, give more aid that is necessary?
STEPHEN BRINCKS: So it depends on how quickly people return back to normal. So if we get the vaccine widely distributed, people take that, and they feel confident to go out and return to normal activities, then I think most economists are hoping for a pretty strong recovery. But of course, before we get there, we still have some very difficult times ahead. So in particular, as states are imposing more lockdowns, that's really what created the impetus for needing additional funds. So I think most economists, including the Federal Reserve, believe that there needs to be more fiscal stimulus implemented to make sure that we can get through this rough patch.
KRISTIN MYERS: All right. San Diego State University Finance professor, Dr. Stephen Brincks. Thanks so much for joining us today.
STEPHEN BRINCKS: Thank you. It was my pleasure.