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$5000 Stimulus Check Proposal, A Loan On Future Social Security

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    Democrats and Republicans have very different ideas when it comes to proposing another round of stimulus checks. They can't seem to agree on how much they should be, if they should be one-time or recurring, for what duration, or if another round is needed at all. Basically there is no consensus on any of the variables for another round of direct cash payments to the American people. Not yet, but hopefully there will be soon.

    That said, we have seen a few direct payment stimulus proposals of $2000/month floated by some Democrats in Congress. And as Congress gears up to announce their next large relief bill in the House by May 19th or sooner, a one-time or even monthly stimulus payment for most Americans of up to $2k is very possibly going to be considered/announced, within a larger bill that will likely cost anywhere from $800B - $4 trillion. We currently don't know. We just know Congress has already approved 3 rounds (or 3.5 rounds if you include re-upping the PPP) of relief packages that total well over $2 trillion.

    Whatever they come up with, it will be highly contentious and will be negotiated and likely look a good bit different once it makes its way from official proposal bill into law.

    I mentioned Republicans have a much different approach, here's what I mean.

    Proposal: $5,000 Stimulus Check In Exchange For Slightly Delayed Social Security Benefits

    Basically two senior economic officials at the White House, Andrew Biggs and Joshua Rauh, have the idea of a stimulus check loan instead of an advance on a tax credit.

    This would be a loan of $5000 that you would pay back whenever you retire and start taking Social Security. The loan would be paid back in 1-3 months max, depending on how much your SS payments are. (The $5k isn't set in stone, so could be more or less if this proposal gains traction).

    What this would do is allow for people to borrow from their own future retirement account essentially, and worry about not having a Social Security check once you retire for a few months after the fact. Kicking the can down the road, so to speak.

    On one hand, this would help people now, and it would be entirely opt-in, meaning only those that needed the money now would be enticed to do this. And perhaps they will allow you to 'pay it back' between now and retirement, on a very low to no interest basis.

    On the other hand, you would be setting yourself up for a few months of hardship in your older age, if you find yourself retiring and plan to live on only SS benefits, without any savings. Basically you would have no income for a few months, which would put you in the exact situation as you would likely be in today, just years or decades from now.

    What do you think about this? If there is no additional stimulus and this is the best idea Congress can come up with, do you think its a good idea, bad idea, dangerous, smart, what? I think this is certainly better than nothing and I honestly would consider taking the loan myself if given the option. But I think Congress can also do better.

    I personally don't think we need to be as concerned with the national debt when we are staring down the largest unemployment numbers this country has seen since the Great Depression.

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    I can't help but think this is a terrible idea for a number of reasons. For starters, this proposal is presenting already struggling (and desperate) Americans with an impossible choice - quick cash now at the expense of having less money later in life. Depending on how old (and sick) someone is right now, that is just a bridge too far for me.

    Another reason I don't like this proposal is because it will disproportionately affect the lower and lower-middle class who were struggling well before this pandemic hit. This is the group who needs help the most right now and forcing them to take a loan out (of, technically, money that already belongs to them) just seems...wrong.

    I'm far more open to direct cash payments to most, if not all, Americans for as long as this crisis lasts, especially those who are out of work for no fault of their own. I don't think we've begun to wrap our heads around how severe this crisis is and will continue to be. A $5,000 loan of money already owed to you would only be a drop in the bucket in addressing the economic calamity tens (if not hundreds) of millions of Americans are facing down.

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    The way I understand it, it doesn't force anyone to take the loan. Which is good. It just gives you the ability to. Really this is just an advance of $5k on your future SS benefits. Where you get it now as opposed to when you retire. And then when you retire, you just go without benefits for a few months until its 'paid back'.

    I mean, for everyone that has been paying into the system for years/decades already, especially if you fear SS might become insolvent before you get around to retirement age (I'm a good 40 years or so away from that, so that's a real fear of mine actually), I could see this appealing to a good portion of the population that is suffering in the here and now.

    We are supposed to get SS at some point anyways, it's a forced retirement account and our money, so getting it now vs later is really just a matter of circumstance, I think.

    So, I don't think its a terrible idea. Far from the best though and its certainly not helpful for those already on SS benefits or likely any other benefits for that matter. Which is a LOT of people. So for that reason alone, this is not a complete answer to say the least. But at least its budget/deficit conscious and in conjunction with an actual stimulus like we got with the CARES Act, I think might help a lot of people.

    This idea isn't that different from giving people mortgage forbearance or the ability to draw more on 401ks without penalties right now. Neither of those forgive anything either, they are just ways to free up thousands, with one pushing your mortgage payments down the road, and the other very similar to the SS idea where you can draw on retirement money early.

    I would be for this idea if it was paired with something more. Like another tax credit advance. $2000/month might be too expensive. The math gets crazy fast. But maybe $1000/month for 3-6 months is more doable. I do hope the Dems find a middle ground with the GOP and we get something that helps everyone, and not just subsections of the population.

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    Color me skeptical that the only motivation behind this proposal is to get money into peoples hands now and not, as I suspect, a backdoor way to raid the Social Security Trust Fund well before it is scheduled to run out of money (if nothing is done) in 2034 .

    I tend to take things to the extreme when I think about cost, so let's hypothesize that 150 million (roughly half) of Americans wind up taking this hypothetical $5,000. With so many Americans out of work right now, I don't think that is too crazy of a number to put out there. That would instantly deplete the trust fund of $750 billion. That is nearly 1/3 of the entire trust fund vanishing overnight. And if large swaths of the economy continue to stay closed then money won't be flowing back into the trust fund in any meaningful way anytime soon.

    Not just that, but this additional $5,000 doesn't address current Social Security recipients, many of whom were struggling to survive on their current Social Security benefits before the global economic shutdown. If this proposal were to become law then their modest benefits would undoubtedly be cut.

    I'm not saying I have the right answer and I don't envy our leaders who have to figure out a compromise to get badly needed help to hundreds of millions of people, but raiding the Social Security Trust Fund isn't the answer.