Biden: Stimulus talks could take 'a couple of weeks'
Yahoo Finance Video
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Ric Edelman of Edelman Financial Engines, joins Yahoo Finance's Kristin Myers to break down the latest on stimulus negotiations, and President Biden's plans for social security and taxes.
Video Transcript
KRISTIN MYERS: All right, let's continue with what's happening in Washington, where President Biden is pushing for a stimulus, minimum wage hikes, and more. For our Funding Our Future segment, we're joined now by Ric Edelman, founder of Edelman Financial Engines.
So Ric, let's start with stimulus. Wondering what you think the likelihood of some sort of deal passing through Congress any time soon, as we heard Senator Schumer saying, a month to six weeks of a deal being hammered out. That seemed quite fast to me, considering we took nine months the last time around.
RIC EDELMAN: Well, we have a new president, a new administration, and the so-called honeymoon period that always occurs with one. So there is a sense of urgency to get this done and get it done quickly. So I would expect that we are going to see a stimulus package.
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The real question is, how big? $1.9 trillion? Probably not, especially since we just did a massive stimulus in late December. So we're going to have to wait to see exactly how much money is going to be spent in this next stimulus and what the true benefits-- where that money is really going to go. But yeah, we'll see something, probably sooner rather than later.
KRISTIN MYERS: What about the $15 minimum wage? A lot of these plans, as you mentioned, that number, $1.9 trillion, pretty ambitious, given Republican opposition. Wondering what you make of those minimum wage proposals. And just as you look at the package, you look at all the proposals, what do you think are some of those things that can be done that Republicans and Democrats will be able to agree on, at least even in a smaller package going forward?
RIC EDELMAN: Well, we have, I think, institutional issues, meaning foundational. Hospitals are in trouble. We have state and local governments that are in trouble. Pensions are in trouble. Nonprofits are in trouble. So there is a systemic need, where you then get into the muck of, at the individual level, which households are in most need. We know that about a third of the money that was distributed in the CARES Act last spring was banked. It went to money. It went to households who didn't need the money.
So they just threw it into the bank and added it to their savings. The American savings rate skyrocketed in 2020. That doesn't seem to make any sense. The whole reason we were giving this money was to stimulate the economy. But the money ended up going to a lot of households that didn't need the stimulation. Congress is going to want to avoid that problem again this time around.
So we may discover that less money goes to the households, or it goes to only households at a much lower income level. So we're going to have to wait and see how that gets worked out by Congress. It is a very political issue, as is the $15 an hour item. Nothing new about this.
KRISTIN MYERS: I'm going to ask you-- right. Well, I'm going to ask you a question that I feel like I see a lot of headlines asking, which is, how long will Americans be left waiting in 2021, as the economy still does struggle? As a labor market still struggling to get back on its feet, how long will Americans be waiting?
RIC EDELMAN: Depends what it is you're wanting to wait for. If it's waiting for a job recovery--
KRISTIN MYERS: For any kind of money. For any kind of money or help or lifeline or some sort of assistance.
RIC EDELMAN: Oh, with more money is probably going to be a month to three months away. Job recovery, if you're out of work today, we have to look back at past recessions. In 2008, it took 10 years for the unemployment rate to get back to pre '08 levels. Same thing happened in 1992. The same thing happened in 2000. When you have a very deep severe recession-- same thing happened in the 1970s recession-- it takes 10 years for the economy to recover.
So those who are doing well will continue to do well. They have their jobs, and they have their incomes. But if you've lost your job, it could very well be years-- 10 of them-- before you are able to get back to where you were. And that is devastating for a great many American households.
KRISTIN MYERS: I'm wondering what strategies you have for people in 2021 as the economic pain continues. And as you mentioned, stimulus paycheck might be three months away.
RIC EDELMAN: We need to recognize that this is not going to be over anytime soon for those who are struggling. So you need to do what is necessary. And that, in some cases, may be draconian-- selling your home, moving in with other family members, radically reducing expenses, potentially changing careers. Thank goodness the internet makes it easier than ever to gain employment, to create your own gig work that you can do part-time basis, that you can just do whatever it takes to generate income for yourself in your household.
Sitting back, waiting for the government check to roll in-- that isn't the behavior that I think anybody wants any of us to pursue. But we do have to recognize that some folks are out of work because they don't have a choice. Their health or that of a family member, forcing them to a caregiver role, is what we truly have to recognize. Many Americans are facing financial strife because of the realities of life. Not only 400,000 dead from COVID, but millions more sick, many of them long-term. And those are the folks we have to make sure get the stimulus from the government and get it as soon as possible.
KRISTIN MYERS: Rick, would love your quick thoughts on one last thing, as we've been chatting a lot about what's happening with GameStop. We've also seen crypto running up quite a bit. It is taking a bit of a hit today. Probably some crypto folks sell out and hope to cash in on a stock like GameStop. A lot of people trying to make a quick buck on some of these moves. What are some of your thoughts?
RIC EDELMAN: Yeah, get rich quickers always get what they deserve. And so, you have to wonder about the level of manipulation that is going on, the pump and dump environment, the sheer lack of knowledge of what's happening. You have people engaging in stocks who have never done it before. They are treating it like a video game or a online poker site or gambling site. They are having fun doing it because they think that prices only go up.
Well, we know the truth. Eventually, that will end. And it will end very badly for some folks. And while they may not get a profit from their investment, they will certainly get a profit from the education that they'll learn as a result. We wonder how long the SEC will allow some of these behaviors to persist and when-- and the SEC will act only if this is proving to be a problem for the fundamental confidence in the market and the stability of our capitalist system.
And at the moment, speculation in GameStop, it's something for those of us to look and shake our heads at, saying, I warned you. But in the meantime, let them have their fun. The day of reckoning is inevitable.
KRISTIN MYERS: Day of reckoning inevitable. Hard to believe GameStop right now over $330 a share. It's a little bit curious to see how long it will be able to sustain that. Ric Edelman, founder of Edelman Financial Engines, thanks so much for joining us today.