Please ensure Javascript is enabled for purposes of website accessibility

Now Congress Wants to Give You $2000 -- a Month

By Rich Smith - Feb 9, 2021 at 5:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Democratic lawmakers revive the idea of a Universal Basic Income, for now.

In March, Congress cut many Americans a $1,200 stimulus check. In December -- $600 more. Now talk is turning to discussions of a third stimulus check for $1,400. And after that?

Would it surprise you to learn that Congress is considering perma-stimulus payments of $2,000...a month?

Fashionably dressed young lady throwing $100 bills in the air against a purple background

Image source: Getty Images.

It's true. Last week, some 55 Democratic members of the U.S. House of Representatives signed a letter crafted by Minnesota congresswoman Ilhan Omar, urging President Biden to back a plan for "recurring cash payments" to both "adults and dependents" (including elderly dependents and children over age 16), payable not only to U.S. citizens but also "to all immigrant workers, refugees, and their families."  

And for how much, you ask?

As CBS News reported over the weekend, and Rep. Omar has confirmed, the targeted amount is $2,000 per month, "until the economy recovers."  

A billion here, a billion there...

The $2,000 figure being bandied about would be the largest per-person stimulus payout envisioned yet -- and, taken as a whole, would produce some pretty staggering sums.

For example, with children receiving the same payout as their parents, a family of four could be in line to receive something on the order of $96,000 annually under the proposed stimulus program. That's 46% more than the median household income in the United States in 2019, before the pandemic hit, according to Census Bureau data.  

Extended across the entirety of the U.S. population -- 331 million souls -- a $2,000-a-month stimulus would approach $8 trillion in size over a full calendar year. That's 64.5% bigger than the entire federal budget for fiscal year 2021.  

And an $8 trillion stimulus would account for 37% of U.S. GDP -- approximately the same percentage we spent on defense in World War II.  

Plus, if you consider that the federal government would also have to cover its usual non-discretionary and discretionary expenses in a year -- providing for the national defense, building roads and repairing bridges, paying government salaries, and making Social Security payments, for example, then federal government spending could easily surpass 60% of GDP -- the highest percentage of national income going to the government since 1944.  

More money, more problems?

Caveats abound. Even 55 votes is still far short of the majority needed to pass this perma-stimulus bill in the House, after all. On the other hand, it's worth noting that the idea also has support outside of the House.

In the U.S. Senate, for example, Senators Bernie Sanders and Ed Markey joined with then-Senator, now-Vice President Kamala Harris to propose legislation authorizing similar $2,000-a-month payments during the pandemic in May 2020. And a recent poll conducted by progressive think tank Data for Progress found that 41% of voters surveyed "strongly" support, and a further 24% "somewhat" support, the idea of recurring $2,000 monthly stimulus payments during the pandemic.    

Even support across the House, Senate, White House, and among voters still doesn't guarantee passage, of course. It doesn't guarantee that if passed, the amount of stimulus approved will be $2,000. And it doesn't guarantee that such a stimulus would outlast the pandemic. (Although it's possible that, once gifted, voters would greatly resent seeing such a stimulus later cut off, pandemic or no).

Still, if a recurring stimulus is passed ... what would that mean for investors?

Let's start with the obvious: Regularly putting $2,000 in the pockets of every American consumer would mean a lot more folks can do a lot more discretionary spending for as long as the stimulus lasts.  

It would mean a massive stimulus to America's consumer economy (at least until the tax bill arrives), and you could expect everything from retail stocks to automobile stocks to (dare we hope, eventually?) cruise line stocks to benefit.

That being said, the tax bill would eventually arrive, and if the federal government starts redistributing more than 60% of GDP, there's likely going to be an economic hangover to deal with after the stimulus ends -- higher taxes, for example, which would sap the strength of the stimulus amount itself, by pulling money out of consumers' pockets.

Ultimately, the limiting factor in all of this would be the size of the gross national production itself. No matter how it's distributed, or redistributed, consumer spending can't long grow faster than the economy as a whole. The effects of even a $2,000-a-month stimulus, therefore, while gigantic, will not be permanent -- and the effects such a stimulus would have on consumer goods stocks would therefore be just as temporary.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.