Relief checks are a lifeline for some, a cushion for others

Millions of Americans received government relief checks this week, and more are on the way. For some, the payment gets them to a more comfortable place financially; for others, the money just gets them to next month.

Bridget Hughes, a mother of three, received a $2,200 stimulus check this week that allowed her to pay April’s rent and utilities, and to buy groceries. But now she’s worried about rent for May.

Hughes usually works two fast-food jobs; her husband works at a gas station. The coronavirus outbreak is making it even harder for the Kansas City, Missouri family to make ends meet. Hughes had to take two weeks off unpaid to quarantine herself after a relative tested positive and then her hours were greatly reduced.

Hughes won’t get another pay check until mid-May and her husband’s relief payment has yet to arrive. While grateful for the federal aid, she remains anxious.

“It was definitely a necessity,” she said. “But at the same time, I feel like it’s a Band-Aid. It’s going to get us through these next 30 days to where we’re not homeless … (but) we don’t have anything to fall back on.”

The coronavirus has ravaged the economy as limitations to stop its spread have shuttered many businesses. About 22 million Americans have applied for unemployment benefits in the past month alone—that’s about one in seven workers.

The relief payments are just one piece of a massive $2.2 trillion economic rescue package rolled out by the government to try and counter the devastating impacts of the pandemic. Congress also approved increased and expanded unemployment benefits, delayed tax bills and created a lending program to help small businesses keep people on their payroll.

The one-time relief payments will offset some of the economic shock of the health crisis, said Mark Zandi, chief economist at Moody’s Analytics. He expects the payments to boost U.S. gross domestic product—the broadest measure of economic output—by $293 billion, or about 1.4% of pre-crisis levels, mostly this spring and summer.

Zandi expects most people will spend the money on necessities such as rent and food.

The Treasury Department says about 80 million Americans received their payments as of Wednesday. Millions more have signed up to get direct deposit, and paper checks will be distributed starting later this month.

Eligible adults will see a payout up to $1,200 — married couples up to $2,400—plus $500 per child. Eligibility is cut off at earnings of more than $99,000 for individuals and $198,000 for married couples.

The payouts are twice the size of the stimulus payments given in 2008, according to the Tax Policy Center.

Americans eager to find out the status of their payments caused delays on the IRS website and the sites of several banks this week as well as long waits on phone lines. Credit counselors received a flurry of calls from people worried that debt collectors would take their payments to cover outstanding debts, said Bruce McClary, spokesman for the National Foundation for Credit Counseling. (The funds are not protected, but debt collectors would need a court judgment to take them.)

The anxiety is just a small indicator of how financially stretched Americans were even before the virus outbreak.

Experts generally suggest people have three to six months of savings set aside for emergencies, but few do. At least one-quarter of American adults say they wouldn’t be able to cover an unexpected expense of $400, according to a survey done by the Federal Reserve before the pandemic.

Americans have also been taking on more debt in recent years, as a growing economy gave them confidence they would have the means to pay it off. U.S. consumer borrowing is at an all-time high of $4.2 trillion, according to the Fed. That does not include home mortgages or other loans secured by real estate.

Lenders have been encouraged to provide relief for loans as well as avoid evictions and foreclosures. Wells Fargo, one of the nation’s largest lenders, said it deferred more than one million payments representing $2.8 billion of principal and interest and waived more than 900,000 fees worth more than $30 million.

Still, Mariel Beasley, Co-Founder of Common Cents Lab at Duke University said that “many households are teetering.” They will use the relief check to get current on bills they’ve already missed and to purchase food—in other words, the money has already been spent before it arrives. Those who still have some income and savings may try to stretch the cash as far as possible.

Some taxpayers, however, admit the payment is nice to have—but not a must-have.

Charlette and Richard Kremer of Lewiston, Idaho got their $2,400 payment on Wednesday. The retired couple used the money to pay some lingering credit card debt from Christmas and plan to use the rest to pay their state tax and maybe help pay some costs of their son’s wedding reception later this year.

While they welcome the money, they say there are others who could use it more—particularly those with lower incomes.

“Those are the folks that are really going to be hurting,” Richard Kremer said. “This $1,200 is just going to kick the wolf back from the door. It’s not going to keep him away.”