Brown on Business
March 22-28, 2021
Biden Rescue Plan gets off to speedy start
By Wesley Brown
wesley@dailydata.com
One day after President Joe Biden signed the American Rescue Plan into law on March 11, the U.S. Treasury Department said the Internal Revenue Service had already began disbursing stimulus payments on the very next day.
As of March 17, U.S. Treasury officials said approximately 90 million stimulus checks had been sent out nationwide. The remaining Economic Impact Payments will be rolling out in tranches to millions of Americans in the coming weeks at a total cost of $425 billion, IRS officials said.
The first batch of payments primarily went to eligible taxpayers who provided direct deposit information on their 2019 or 2020 returns, including people who don’t typically file a return. Altogether, the U.S. economy this week will get a huge boon valued at more than $242 billion, including roughly 150,000 checks worth approximately $442 million sent to Americans without banking accounts.
Of course, the centerpiece cutout of Biden’s American Rescue plan includes a $1,400 stimulus check for most taxpayers and individuals making less than $75,000 annually, and lower tiered amounts for those making slightly higher incomes. Married couples who filed joint tax returns will receive two $1,400 checks if their annual income is below $150,000.
Unlike the past two $1,200 and $600 stimulus payments under the CARES Act and Consolidated Appropriations Act of 2021 under former President Donald Trump, Biden’s bill will also provide payments to children and adult independents, including college students and people with disabilities.
The IRS will soon be sending additional batches and payments to millions of Americans by direct deposit and through the mail as a check or debit card. At the current rate, the Biden administration will have disbursed nearly one-fifth of the $1.9 trillion stimulus package before the end of March.
After an unruly roll-out of the CARES Act a year ago, the biggest controversy with the American Rescue Plan has not been caused by the federal government but by banking giants and J.P. Morgan Chase and Wells Fargo. In the past week, the nation’s largest and third-largest financial institutions incurred the wrath of millions of banking customers by deciding to put a hold thousands of stimulus payments for nearly five days.
Wells Fargo, which is habitually caught up in fraudulent banking schemes, scandals, lawsuits and customer controversies, was so inundated with calls and complaints last week that its website and banking app crashed on the day most customers were supposed to receive their checks.
On March 17, the West Coast banking giant was literally responding to customer complaints in real-time concerning its nationwide stimulus check snafu on the @Ask_WellsFargo Twitter feed. “We apologize to our customers who may be experiencing issues with our online banking this morning due to high volumes. This does not affect stimulus payments with a March 17 effective date which were credited to accounts today. Thanks for your patience,” stated Wells Fargo.
During the online bottleneck, several Wells Fargo Twitter commenters also took time to remind the nation’s largest mortgage financier of its most recent scandal involving millions of fraudulent savings and checking accounts set up on behalf of banking clients without their consent. That corporate crime spree began in 2016, led to the firing of two Wells Fargo CEOs and calls by some U.S. lawmaker for the banking giant’s operations to be dissolved.
A similar Wells Fargo scheme that affected Arkansas consumers in late 2016 involved a multi-state car insurance scam that impacted hundreds of thousands car owners. In that bait-and-switch trickery, Wells Fargo added monthly auto insurance fees to customers who had car loan accounts – without their knowledge.
Wells Fargo has since remediated over 650,000 customers, including many who had their cars repossessed or defaulted on auto loans. Some customers have complained since that Wells Fargo self-administered mediation does not fully restitute those injured financially and damaged credit.
Wells Fargo’s steady stream of mishaps has even caused its biggest cheerleader and investor, Berkshire Hathaway Chairman Warren Buffett, to cut ties with the multinational bank. In February, the famed 97-year-old billionaire sold 74.96 million of Wells Fargo shares, or nearly 60% of his investment firm’s stake in the bank. At Wednesday closing price of $39.91, Buffett shares today would still be worth nearly $2.99 billion.
Concerning the stimulus payments, some Wells Fargo and JP Morgan Chase’s customers on social media accused the banking giants of holding billions of dollars in stimulus deposits in their banks for several days to profit off the $425 billion government windfall. If true, a typical money market account holding the stimulus proceeds at current interest rate of 2% annual would easily produce a tidy profit of nearly $1.6 billion per day. Not bad.
But those billions of dollars will not be the last of the $1.9 billion stimulus funding that trickles down to average Americans, not billionaires. The second biggest cut of President Biden rescue plan also includes $350 billion in direct aid to state and local governments. That funding is well and above the $150 billion in COVID-19 emergency aid split by state governments under the CARES Act, including a $1.25 billion Arkansas aid package supervised by a Gov. Asa Hutchinson appointed task force.
Other key portions of the Biden plan include about $215 billion in $300 per week in unemployment benefit extensions through the end of August; $150 billion toward a $300 per month childcare tax credit; and another $130 billion to pay for COVID-19 response, testing and vaccine distribution. That same amount will also be set aside for reopening schools and colleges nationwide. Small business owners, which have received more than $820 billion under President Trump’s earlier $1.9 billion and $900 billion pandemic aid plans, will also get a $50 billion rescue with the Biden administration.
The Biden bailout will also funnel billions of dollars toward rental assistance, public transit and transportation, cybersecurity, homelessness and food assistance programs, mental and veterans’ health, and other pandemic-related aid. It also provides funds for childcare, paid leave and health insurance to accelerate the return of several million people, mostly women, who have left the workforce to take care of sick family members and friends and children unable to go in-person to school.
According to Moody’s Analytics, the Chicago-based credit rating service, The American Rescue Plan will also give the economy a much-needed “quick boost.” Moody’s Chief Economic Mark Zandi said real GDP would jump to more than 7% annualized in the first quarter of this year and to almost 8% for all of 2021.
“This is almost double the growth that would be expected without any additional fiscal support. Real GDP should post an additional almost 4% gain in 2022. At this pace of growth, the economy would create 7.5 million jobs in 2021 and 2.5 million in 2022 to fully recover the jobs lost since the pre-pandemic peak,” said Zandi. “By then, the economy will have returned to full employment—an unemployment rate of 4% to 4.5% and a labor force participation rate of more than 62.5%. This is about a year sooner than would be the case if there is no additional fiscal support.”
By that time, as Zandi noted, hopefully the nation may have the pandemic in its rearview mirror.
