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Another round of $1,200 stimulus checks? A more targeted plan to get money to those who need it most is better option, experts say

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Millions of Americans put a second round of $1,200 stimulus checks on their wish lists.

But Congress has yet to decide exactly what the next version of coronavirus stimulus legislation will look like.

If House Democrats have their way, a second batch of checks would be deployed to qualifying Americans. That's based on the HEROES Act it passed in May.

Those payments would be similar to the first round — up to $1,200 per individual or $2,400 per couple. And this time eligible dependents would stand to receive $1,200, up from $500, for a maximum of three per family.

However,  the plan needs  approval from Senate Republicans and President Donald Trump.

Meanwhile, talk of the next coronavirus stimulus package has instead focused on whether or not to extend enhanced unemployment benefits and whether to back-to-work bonuses could work.

Many economists generally aren't fans of sending another broad set of stimulus checks.

"There's definitely dire need for more help by the government, given how the economy is performing right now," said Stijn Van Nieuwerburgh, a finance professor at Columbia Business School.

"I do question whether this needs to be in the form of stimulus checks," Van Nieuwerburgh said. "The stimulus checks are not very well targeted to people who need them the most."

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Another problem is how expensive it is to send a broad wave of stimulus checks, noted Kevin Mumford, associate professor of economics at Purdue University.

Meanwhile, because many people tend to save the money, there isn't much benefit for the economy.

"They're expensive, they have long-run debt costs, they're a drag on the economy," Mumford said.

In order to provide financial help to those who really need it, lawmakers should consider more targeted strategies, the experts said.

Specific income requirements

The first round of stimulus payments authorized through the CARES Act included individuals and families within certain income thresholds.

Individuals with up to $75,000 in income were eligible for full checks. For married couples, the limit was $150,000.

Those with earnings above those levels would see their checks gradually reduced and then fully phased out at $99,000 in income for individuals and $198,000 for married couples.

That was based on the adjusted gross income from either the 2018 or 2019 tax return, whichever was most recently filed with the IRS.

So who's getting the stimulus checks?

The problem with that is an individual or family could have suffered a big income drop since then due to COVID-19's effects on the economy.

"If the same amount of dollars had been spent on a more targeted group, the aid could have actually gone a longer way," Van Nieuwerburgh said.

'Ex post' payments

One way to do that would be to compare an individual's or family's current earnings to last year, Mumford suggested. Only those who had suffered a decline would get a check.

Another method, economists like Greg Mankiw have suggested, is targeting the checks  to provide  payments as a kind of short-term loan. So individuals and families would get their payments now, and then would later be on the hook to repay that money next tax season if they didn't qualify for government support.

"You don't even have to know the rules ahead of time," Mumford said. "You could send out the checks in an emergency right away, and then later you could figure out the targeting you want to do."

Post job loss checks

Another way to potentially get money into the hands of people who really need it would be to cut one-time checks to those who have lost their jobs.

That strategy would have two benefits, according to Mumford. It would deliver money to those who have really been affected by the economic downturn. At the same time, it wouldn't discourage them from finding new work.

The potential downside is that, like all government payments, there could be delays in getting the money to everyone who qualifies.

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Expanded health care coverage

One item  lawmakers aren't discussing as much, but should, is how to make health care insurance accessible and affordable for those who lose their jobs, Van Nieuwerburgh said.

Recent research shows that people are avoiding going to the doctor due to the costs they're worried they'll incur, rather than fear of being exposed to COVID-19.

"That's potentially a problem we have, the massive underdiagnoses of debilitating afflictions – cancer, heart disease, and so forth," Van Nieuwerburgh said. "We want to make sure that people who get laid off, at least temporarily, keep access to their health care."

One potential way to do that would be to extend Medicare to people who were fired for coronavirus-related reasons, he said.

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