Understanding the American Rescue Plan Act, beyond the $1,400 stimulus checks
CHARLOTTE, N.C. (WBTV) - The American Rescue Plan of 2021 includes $1.9 trillion dollars in funding to individuals, schools, businesses, and areas suffering from the COVID-19 pandemic. Wells Fargo Senior Economist Mark Vitner explains some of the key takeaways from the stimulus package.
The most easily understandable benefit from the American Relief Plan is the $1,400 stimulus checks that are landing or will soon be landing in qualifying American’s bank accounts or mailboxes if received by check.
“That certainly has a beneficial impact to the economy. Most of that money gets spent, some of it gets saved, and some of it is used to pay down debt,” Vitner said.
The stimulus package also includes an expansion of unemployment benefits. People who qualify for unemployment in their state will receive an additional $300 per week from the federal government. With this addition, a person who collects North Carolina unemployment benefits will double their take home pay. The addition extends to September 2021.
“That actually has some knock-on effects. There’s a lot of people that are out of work or having trouble making timely rent payments, and have fallen behind on their rent,” Vitner said. “Then of course, their landlord. It may not be some big corporation. It may just be a person that owns a quadplex, and if they’re not able to collect the rent, they’re not able to pay their mortgages. So, those unemployment benefits have some carry through to other parts of the economy.”
About $350 billion dollars of the $1.9 trillion plan will go toward state and local governments. Vitner says this money could be instrumental in helping small businesses that do not qualify for federal subsidies.
“Here in Charlotte, we saw that the City of Charlotte played an important role in providing relief to small businesses that really didn’t qualify for the PPP or any of the other federal programs, or if they did qualify, they couldn’t get the money quick enough,” Vitner said.
This stimulus package comes on the heels of a $900 billion stimulus package passed in December 2020. With help from the two plans, Vitner estimates the economy to bounce back by summer.
“When you add all that together, the economy is going to take off like a rocket, and we’ve upped our forecast for GDP growth. This year to 6.5 percent in growth in the spring in the summer is likely to be in excess of 9 percent. Now those are numbers that we’re used to seeing in China or in some developing economy. We haven’t seen growth like that in the United States until really since 1984, and on a consistent basis you’d have to go back much further than that. Back to the 1940s. So, I so we are likely to see very strong economic growth.
“We’re going to add a lot of jobs. We should be back in terms of GDP in terms of the output of the country, we should be fully recovered by this summer. But employment is going to take longer to recover, and it’s probably not going to be covered until early next year.
“Some people are worried that this might be too much stimulus hitting the economy at one time and that we might see inflation become a problem. I’m one of those that’s a little worried about that, but I don’t know that we have a whole lot of choice in the matter,” Vitner said. “Inflation was likely to become a little bit of a problem anyway because we start the account. There are all sorts of production bottlenecks. We have shortages of all sorts of things throughout the economy, and that’s going to force prices up, but hopefully, and what the feds is counting on is that this is going to be a short-term pickup in inflation. And just like we saw after the Korean War and after we had a pandemic in the late 1950s. Inflation soon thereafter returned back to its underlying trend, which would be around 2 percent.”
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