The federal administration sent out three rounds of stimulus checks since the onset of the pandemic. The relief payment helped to stave off a humanitarian and economic disaster that seemed inevitable when the whole nation went into lockdown during the first quarter of 2020. The stimulus checks and the other direct financial measures had their advantages.
But it also contributed to the runaway inflation that has crossed record figures and has stayed at that level for over two quarters now. Opinions are divided about what ultimately led to the economic mess. But it is generally agreed that it was a combination of supply issues, the war in Europe, and also the Stimulus checks.
Economists have cited several reasons for high inflation in America. While the unprecedented circumstances linked to the pandemic were undoubtedly the source of much of the mess, the multiple stimulus checks have taken a large brunt of the blame. And the opposition Republicans and conservative economists have pushed the blame on one particular issue, the third stimulus check, or the Economic Impact Payment, under the American Rescue Plan Act.
The ARPA was the most comprehensive aid that covered much more than the third stimulus check as it protected every section of the economic agenda. Of the $1.9 trillion earmarked under ARPA, only a part of the payment went to the stimulus check payments. The rest was spent on supporting businesses as they remained solvent despite a total stoppage in production and sales.
Workers continued to get their wages, and it helped them put food on the table, manage their debts, clear their utility bills, and avoid losing their homes. And when businesses opened after the long shutdown, they were primed to get back to work.
This support to businesses and other organizations helped the economy bounce back quickly after the recession. Consequently, the recession proved to be the longest ever on record.
And it was not just the regular workers who benefitted from the ARPA funds. Even gig workers and other temporary workers benefitted from the support measure. It was apparent that while spending was a factor, it was not an important one, and the benefits far outweighed the negatives.
President Biden has instead focused on the pandemic and the war in Europe and has said that it is not because of the stimulus checks, specifically the economic impact payment, or the third stimulus check.
Are Both Political Camps Oversimplifying The Stimulus Check Issue?
Both political camps were bent on oversimplifying the issues of the stimulus checks and their impact on inflation. And it is indeed hard to disentangle all the elements affecting inflation. The record inflation rise reached 9.1% year-on-year in June before showing a minor correction to settle at 8.5% in July.
The federal administration has reacted by increasing interest rates to cool down inflation. And the topic has unsurprisingly become a theme of midterm attacks by the Republicans on the Democratic Party. Their line has been limited to the third stimulus check and its influence on inflation figures. In June alone, the Republicans placed 7 ads that mentioned inflation, as per data released by political advertising monitoring agency, Kantar.
Republican Senator Ron Johnson along with the National Republican Senatorial Committee launched a TV spot in the last week of June. He claimed that the third stimulus check has led to an additional burden of $5,000 every year on families in the state of Wisconsin alone.
The figure is an estimate published by Bloomers based on the amount of money that will have to be spent extra on the same quantity of goods in 2022 when compared to figures last year from the same store. But it was also forced to concede that an increase in saving along with more wages would partially cushion the costs.
Emerging From The Inflation
The economy is gradually emerging from the exceptional circumstance of the pandemic and its terrible effect on the economy. The unprecedented shutdown of the American economy during the initial days of the COVID-19 pandemic in the first quarter of 2020 was flowed by the equally spectacular recovery that was never witnessed before during a recession, and there have been at least a dozen recessions after WW II.
The inflation was inevitable and only the quick support by the federal administration on multiple funds ensured that it remained short and within control.
The present inflation traces its roots directly back to the pandemic as it has interfered and interacted with everything else happening at the moment to lead to the present mess that Americans are facing at the moment. But parallel factors were also responsible for the trouble that we are in at present in its totality.
State Stimulus Checks
Around 20 states are moving ahead with more stimulus checks, this time to provide relief from high inflation rates. They have risen to the occasion even as other states have chosen to stay away from legislating on the issue.
A look at the states that have moved forward for a stimulus check to provide relief from high inflation rates reveals that only around 18 states have moved ahead. California and Florida are the latest among states to join in with stimulus checks that vary from the modest $450 offered by Republican Florida to families with children to the $1,050 maximum offered by California.
California is giving the highest support to families with joint income below $75,000. Even families earning as much as $250,000 jointly are eligible for a stimulus check but will only get a maximum of $600 for a family with at least one dependent. Around 23 million residents are expected to get a stimulus check, which is close to 60% of the population of the Golden State.
Florida is giving a $450 stimulus check to families with children. Around 60,000 stimulus payments will go out to families that include related and non-related caregivers.
Colorado, Idaho, Georgia, Hawaii, and Delaware are among the states sending out inflation relief measures.
Maine and New Mexico have been among the first states to go for stimulus checks to bring relief during high inflation.