Effects Of Stimulus Check On The American Economy 2022

Stimulus Check
Stimulus Check

According to CNN, the government spent $6 trillion on Stimulus Checks, with roughly $850 billion going to three distinct installments of direct cash transfers.

Those payments were one of the largest transfers of wealth in history, with more money flowing from federal coffers into American homes than at any other time in history. The 3 payments — $1,200, $600, and $1,400 — offered the poorest households a 20 percent increase in income and saved the neediest Americans from financial ruin.

Fear, worry, and unemployment were all high as the first Stimulus Checks from the Cares Act were issued in April 2020.

Targeted Stimulus Checks Won’t Drive Up Inflation Rates

However, when the economy evolved, so did those spending habits.

By the spring of 2021, when the American Rescue Plan was implemented, less than one in five Americans were in such a financial bind that they had to spend their money on essentials. About half of those who received it used it to pay down debt, but a full one-third were able to put the money into savings.

The Stimulus Checks saved millions of American families from financial ruin, but they had a far-reaching indirect effect as well. The economic impact was immediate when the third and last wave of inspections arrived in March. All of that spending gave a much-needed lift to the economy, but it came at a cost. Increased demand equals higher prices, and the third round of checks heralded the beginnings of escalating inflation that would characterize the economy during the spring, summer, and present holiday season.

State Stimulus Checks are limited enough in scope that they are unlikely to raise inflation anymore. Unlike the federal government, which spent trillions of dollars over several stimulus rounds to provide most Americans with $3,200 or more, state stimulus amounts are often $500 or less, with many, targeted mainly at low-income taxpayers. These modest, targeted amounts may assist Americans in coping with inflation without increasing it.