December's $600 stimulus boosted spending by 30% - and Biden's new plan calls for checks twice as large
- President-elect Joe Biden's $1.9 trillion stimulus package includes a $1,400 top-up for
stimuluschecks, bringing the total distributed amount from December to $2,000.
- These kinds of direct payments are intended to encourage consumers to spend, stimulating the
- BofA Research found those who received $600 checks in the last stimulus spent 30% more than those who didn't, and as a result upgraded its forecast for GDP growth to 4% in the first quarter, from 1% previously.
- The stimulus is the first step in Biden's attempt to fix America's K-shaped recovery, in which the wealthy are doing fine and the rest are struggling.
President-elect Joe Biden introduced his plan for a $1.9 trillion stimulus package on Thursday. Called "The American Rescue Plan," the package would provide another infusion of federal aid to stimulate the economy as the pandemic continues to sweep the nation.
That includes a $1,400 top-up for stimulus checks, bringing the total distributed amount from December to $2,000. It's set to make a big difference in consumer
Now that Americans will have even more extra money in their pockets, it's likely that spending will continue to rise among those who receive stimulus checks, continuing to prop up the economy.
$1,400 checks are intended to help America's K-shaped recovery
BofA's economic growth forecast indicates that Biden's near $2 trillion package could be a promising tool as America's
But most Americans don't own stocks, and that's where stimulus is supposed to come in. After the $2.2 trillion stimulus package passed in March, US savings rates soared to an all-time high of 33% in April. When that package expired in July, Americans were left waiting out eight months of political gridlock before a second package was passed, with individuals falling into poverty and many small businesses closing their doors. Meanwhile, the Fed's quantitative easing continued uninterrupted, and the stock market finished the year on a record high.
Powell has repeatedly advocated for more stimulus spending, and Joe Biden's $1.9 trillion stimulus package looks like a clear response. If it passes, it may make Bank of America's 5% annual GDP growth forecast look tame.
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