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'Ridiculous' to think another $1,200 stimulus check is enough: Expert

Edelman Financial Engines Founder Ric Edelman joins Yahoo Finance's Zack Guzman to discuss the latest stimulus outlook as the House passes $3 trillion COVID-19 relief bill

Video Transcript

ZACK GUZMAN: But now a lot of debate is framing around what the Democrats have been pushing for in their latest $3 trillion stimulus bill that would include another round of stimulus checks. Of course, we already had one round of those, totaling up to $1,200 for Americans. And now they want another round.

That is one thing that President Trump has seemed amenable to when we think about what pieces of the CARES Act he is now saying he would support. But is that enough? That's a question that Democrats-- more progressive Democrats are asking.

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And for more on that, I want to bring on Edelman Financial Engines founder Ric Edelman to chat that with us. And Ric, I mean, we've seen, you know, a lot of people coming out and saying that 1,200 bucks is clearly not enough to make me whole through all this.

But I guess, the question is, it's not necessarily what it's supposed to do. It's supposed to kind of make you at least able to weather the storm as we get to reopening.

But now we're seeing reopening become a partisan issue and the timeline very much impacted on that thinking, whether or not you're a Republican or a Democrat, so it almost seems impossible to come together. But what's your take on whether or not that stimulus checks should just be a one-off or income guarantees potentially every month moving forward?

RIC EDELMAN: It's got to be far more than just once. I mean, to suggest that a one-time $1,200 check is going to be enough is just ridiculous. The average American household earns about $44,000 a year. That's better than three grand a month in net take home pay. Well, 1,200 bucks one time isn't going to replace three grand on the basis. So who are they kidding?

So we've got millions of American families that are struggling. They don't have any money to buy food. They can't afford medicine. They're really at financial jeopardy. And Congress has to stop dillying dallying and get the money into the hands of Americans who desperately need it.

And that's just talking about the families. What about the small business owners who employ 3/4 of all American workers? What about colleges and universities, which are threatened with massive reductions in funding, partly because of state cutbacks, partly because students are electing not to go to college, partly because of their endowment restrictions? What about the state and local governments, who have their own budget and pension crises?

The list goes on and on and on. And Congress is acting way too slow, way too stingy, out of focus on who's responsible for this mess, as opposed to dealing with the fact that we have a mess that's got to be dealt with.

ZACK GUZMAN: Yeah, and I mean, you raise a good point there in the timeline here because it's increasingly clear we're not going to get anything passed here before the long weekend that we have coming up here.

But when you do look at it, I mean, it sounds like Democrats weren't even able to make their own party happy when you're thinking about calls for basically universal basic income here versus just another stimulus check.

It would seem to me to be kind of a compromise and saying that all right, it sounds more likely that we can get this done since it does sound like the White House was on board with at least another stimulus check round. So does that kind of make you seem to think that they're at least willing to work with Republicans here to at least get some sort of a next round of stimulus out there?

RIC EDELMAN: Well, I hope so. What I'm hopeful is that as the two parties try to win this argument for political benefit, that in the end, their reluctance to act with speed is going to catch them both upside the head by the voters who are going to demand quicker action, more meaningful action. So that's what really has to happen.

The Washington politics are simply acting as business as usual. They aren't recognizing the severity of the crisis. I mean, we're getting word from the IRS that families who were supposed to get $500 per child didn't get the money and now won't get it until they file their 2020 tax returns next April. Well, they don't need the money nine months from now. They need it immediately.

So we've got to get Washington moving to help people deal with this pandemic immediately. And that means the political parties have to set aside their bickering differences and do what's right for the country.

ZACK GUZMAN: Yeah, that's a good point in terms of the way that we have seen, I guess, things play out in theory versus in reality. And right now, I think that there's a few different data points that I guess people would normally watch that just aren't matching up to what we're seeing right now.

I want to use one example there because we hear about inflation and costs that American families are dealing with, mostly measuring inflation. The Fed mostly strips out food prices, but that's something that we've seen incredibly rise here. When you think about how much money that Americans do spend month to month, that is pretty shocking, the jumps we've seen for the last monthly increase we got, the largest monthly increase for food prices since February 1974.

But that wouldn't necessarily show up in the core inflation that the Fed likes to look at. So I mean, how problematic has this downturn become for Americans on Main Street versus maybe some of those measures that we see, headline numbers that we track, when you try and take a macro picture of the economy that maybe not be captured right now.

RIC EDELMAN: Well, you're absolutely right. Take it a step further. They do include gasoline prices. And those are dropping dramatically. Well, who cares? Nobody's driving anywhere. So it doesn't matter that the gas pump is cheaper. So you're absolutely right. The government is looking at data that isn't necessarily accurately portraying the crisis that American families are facing.

For example, we keep talking about the fact there are 35 million Americans unemployed. Some data is showing that the actual number is 50 million. Because the DOL data only refers to those who try to get unemployment benefits. But there are millions who don't file for those benefits for a very wide variety of reasons. And so they're not counted in the numbers.

All of this suggests that the crisis is more acute and more stressful than the government is really acknowledging that it is. And we have to note that most members of Congress are insulated from a lot of this because they're not experiencing it in their own daily lives. That's what we have to overcome. They've got to understand the pain that the average American family and the average small business owner is experiencing right now. That's how we get them to act fast.

ZACK GUZMAN: And for people who watch the show and maybe people who don't, you know, I just want to be very clear. We like having you on because you're mostly a more rational mind that says, look, we need to be careful about spending. We need to be careful about the deficit. But even you through all this have noted that you can't worry about long term problems. We need to fix the crisis we're dealing with right now.

So on that front, I mean, how extreme do these measures need to be? We opened this conversation with the question of stimulus checks. Are you now advocating for basically universal basic income to say, look, we need to make sure that we're doing everything to replace lost wages and replace all the problems that we're seeing right now play out for American families?

RIC EDELMAN: We need to help families survive this crisis financially, as well as health wise. And we do recognize that as people are struggling financially, it spills over into health effects. Not just people suffering medically, but also rates of spousal abuse and child abuse increase, alcoholism and drug dependency rise, crime rises.

There are side effects, domino effects as a result of financial stress, and we've got to address all of this all at once. It's not nearly as something as simple as saying, oh, we've got to get people back to work so the economy gets fixed. Yeah, of course, we've got to do that. But we can't do that until we solve the more immediate problem. And we have to recognize that this is an urgent, big situation. The longer we delay, the harder it will be to recover.

ZACK GUZMAN: All right, there you go, the latest in terms of financial thinking and the new way we should be thinking about these problems from Ric Edelman. Ric, I appreciate you taking the time again, man.

RIC EDELMAN: Always good to be with you.