New Census Data Shows That Direct Cash Payments Are Still Needed

04. 07. 2021

Many low-income families forced to spend checks to pay down debt, essentially covering basic needs from past months.

New data published today by the Census Household Pulse Survey shows that Americans are using the most recent round of $1,400 stimulus checks on necessities: paying for groceries, bills, and other household necessities. And while well-off households are on a stronger economic footing, low-income families and families of color are still struggling to make ends meet.

Here are key findings of the federal data:

  • Compared to higher-income and white families, more low-income families and Black and Latinx families are using their stimulus checks mostly to pay off debt, rather than save or spend it on expenses, suggesting that these families are digging themselves out of a hole for expenses already incurred in the months they’ve waited for Congress to act.
  • As with previous rounds, when asked what they spent their checks on, most people said they paid for essentials like food and bills.
  • Half of families are still having difficulty meeting usual household expenses, including about three-quarters of families earning under $50,000 and Black and Latinx families.
  • The conjunction of these findings about debt and household expenses is striking: The fact that many lower-income families are paying off debt despite still having difficulty meeting basic needs today is likely a sign of how far behind many families have fallen as many resort to bill-shifting and other practices to stay afloat.

“The numbers show that stimulus checks have been the most powerful tool the government has to help Americans survive this economic crisis, and are still desperately needed by low-income families to cover basic needs like groceries, rent and gas,” said Adam Ruben, Director of Economic Security Project Action. “We see most families spending checks on daily expenses and paying down debt incurred during the eight months between stimulus checks — evidence that checks need to be sent regularly, not just when Congress gets around to it. For low-wage workers and Black and Latinx communities, the crisis isn’t over — we need more checks to make sure the recovery reaches everyone, and to put in place safeguards like automatic stabilizers that keep families from falling into poverty when the next crisis hits.”

Automatic stabilizers are stimulus checks and expanded unemployment insurance benefits that would be triggered automatically by economic conditions in the future. Twenty-one senators recently sent a letter to the Biden Administration urging the President to adopt this important economic reform.

What are families spending checks on?

The number of families struggling to meet basic needs remains much higher for lower-income families (74% of families with incomes below $50,000 vs. 27% of families with incomes above $100,000). Similar to the first two rounds of direct checks, recipients of the $1,400 checks mostly spent the money on food, utility bills, household supplies, and paying down debt like credit cards.

Low-income families are spending checks on debt, a sign of deep economic pain.

With this latest round of checks, despite more than half of families still struggling to meet basic expenses, more families are continuing to spend this round of stimulus checks to pay down debt.

  • Among families earning under $50,000, 56% mostly used the check to pay off debt, compared to 49% of families earning between $50,000 and $100,000 and 38% of families earning over $100,000.
  • About 6 in 10 of Black and Latinx households mostly paid off debt with their $1,400 checks, compared to fewer than half of white and Asian recipients.
  • Families with children, larger households, and people with less education were similarly more likely to put their checks toward paying down debt.

This is concerning because as the pandemic has gone on, the number of low-income people using checks to pay off debt instead of spending them on meeting basic needs has shot up. This likely demonstrates that these families are taking on credit card and even riskier high-interest debt in order to meet basic needs in between the payments and now need to dig themselves out of the hole even as many still face struggles meeting day-to-day expenses.

  • When the first round of $1,200 CARES Act checks were sent in April 2020, 70% of families mostly spent their $1,200 checks, and only 14% used them to pay down debt — mostly higher-income households who used the money to pay down credit cards, student loans, or other debt.
  • After the $600 checks went out in January, only about 22% of families said they mostly spent them; another 26% mostly saved them; and more than half of families across the income spectrum used their checks to pay off debt. Low-income families were significantly more likely to use the money to pay off debt (60% of families earning under $50,000 vs. 40% of those earning $100,000 or more).
  • With this latest round of checks, the trend from January continues. Across the income spectrum, half of recipients used it to pay off debt, but lower-income families were more likely to pay down debt, while higher-income families were more likely to save their checks. Among families earning under $50,000, 56% mostly used the check to pay down debt, 26% mostly saved it, and 18% mostly spent it. Among families earning over $100,000, 38% mostly paid down debt, 39% mostly saved it, and 23% mostly spent it.

Savings rates are relatively low from these checks. For lower-income people, the savings rate has risen compared to CARES Act checks: some have regained employment and can afford now to save, others have likely learned the hard lesson that federal support is unreliable in the face of congressional gridlock and are setting some aside to make it through the spring and summer. For wealthier families, the savings rate has also risen slightly since earlier rounds of checks, reflecting the unequal recovery in which many higher-income people have recovered economically, yet still 6 in 10 are spending these new checks on expenses or paying down debt, suggesting that concerns about checks being ‘wasted’ were overblown.

Regular checks tied to economic conditions would help people — especially low-income families — meet basic needs when they have them, so that they don’t have to turn to debt, and can instead spend that money into the economy. A monthly Child Tax Credit beginning in July will also be a powerful tool for economic stability for many lower-income families.

Lower-income families and communities of color still need more checks

Families with low incomes are having difficulty meeting basic needs at almost three times the rate of high-income families.

  • In the latest data, 74% of households earning under $50,000 reported difficulty covering basic expenses over the past week, compared to 27% of families earning more than $100,000.
  • Nearly two-thirds of families earning under $100,000 are still having difficulty covering usual household expenses.

Black and Latinx families still face much more difficulty meeting basic needs than white people. Those with kids are having an even harder time putting food on the table.

  • In the past 7 days, 63% of Black households and 67% of Latinx families had trouble covering basic expenses, compared to 44% of white families.
  • In the past 7 days, 15% of Black and Latinx families with kids didn’t have enough to eat, compared to 6% of white families.

While the overall rate of unemployment across race and income is around 6%, the numbers remain much higher for low-income and Black workers.

  • The bottom 25% of earners faced an unemployment rate of around 22% in February, according to a speech last week by Federal Reserve Governor Lael Brainard.
  • Black unemployment rate is still 9.6% (and is certainly higher after accounting for people who have left the labor force or been forced into or caregiving, and after correcting for classification errors). White unemployment has dropped to 5.4%, which is lower than Black unemployment was before the pandemic.
  • Recent Tax Policy Center analysis shows that one more round of $1,400 checks — targeted to families with incomes under $100,000 — would keep an additional 7.2 million out of poverty. Two more checks would keep another 5 million out of poverty, for a total of 12.2 million — on top of the 16 million the ARP will keep out of poverty this year.