State Stimulus Checks Come To The Rescue For Residents As Inflation Touches Record Figures: More States Move In To Provide Inflation Relief

Stimulus Check
Stimulus Check

The COVID-19 pandemic and the accompanying economic downturn led to the biggest ever federal and state support measures that reached out to a majority of citizens in the US. Immediately after the lockdown was declared in the first quarter of 2020 as the pandemic began to first spread, the federal administration came up with the first of the stimulus checks when a bipartisan economic relief plan was signed.

This $2 trillion support measure offered assistance to tens of millions of American households affected by the pandemic. The payments were not restricted to stimulus checks to individuals and families. It also had other equally supportive components for individuals and families that included extended unemployment coverage, expanded child tax credit stimulus checks, changes in student loans, and more.

The initial $1,200 stimulus check was followed by a $600 payment in the same year in December before the change in guard in Washington. President Joe Biden came in and immediately passed the American Rescue Plan Act in March 2021 which immediately sanctioned a host of economic measures that covered families and individuals on the one hand and businesses on the other. 

But the sudden stoppage of the stimulus checks and other federal support measures has meant that people have been suddenly left without help or protection just when they needed it the most. But states have moved in with various forms of stimulus checks and other support measures to help out residents as record inflation makes life miserable for them.

The Economic And Humanitarian Benefits Of The Stimulus Checks Were Huge

The stimulus checks and other support measures reduced poverty immediately as the payments were sanctioned within a month of the nation going into a prolonged lockdown that immediately caused the recession.

The recession turned out to be the shortest on record, lasting just three months. The quick response by the federal administration ensured that the economy did not grind to a halt as people had money in their hands. The economy was back on track immediately as markets and businesses opened.

The supplemental poverty measure of the American Census Bureau reveals that the stimulus checks helped 11.7 million people move out of the grip of poverty. It led to a drop in the poverty rate from 11.8% to 9.1%, a remarkable success in a pandemic year.

The poverty rate fell even further to 7.7% in 2021. It was clear from the analysis that the stimulus checks were the driving force behind the dramatic decline in the poverty rate.

The stimulus checks also cushioned workers and businesses even as one of the worst economic emergencies in modern history hit the world. The benefit was that the economy recovered within a single quarter after it reopened.

When Americans received stimulus checks under the first round of the CARES Act, unemployment had slid to a disastrous 14.7%. But it has gradually returned to pre-pandemic levels as the economy opened after the pandemic. It remained high for some time as workers were wary of returning to work immediately after the pandemic as the pandemic continued to take a toll.

These measures and the result they brought remind us that the stimulus checks were awesome, a word that can easily be used to describe it. People received the total support of the administration and as a result, the recovery was quick and complete at that point.

How Far Were Stimulus Checks Responsible For Inflation?

However, there are also signs that while the stimulus checks cushioned workers from the economic downturn of the pandemic, there is also evidence that it also paved the way for the inflation that inevitably followed a year later. There are signs that inflation may have stoked higher prices for the very people it was intended to support.

A section of economists believes that the stimulus checks came at an unintended, but significant cost. The rise in inflation started in the third quarter of 2021 and has reached record levels, ending at 9.1% y[Ma1] ear-on-year in June 2022. And prices of gasoline, food, and other essential items have touched record levels. Also affected are the rates of utilities and home rent.

People have seen an increase in average wages after the pandemic but in real terms, they are bringing in way lower than what they earned before the pandemic due to record inflation.

Even as the stimulus checks brought immediate relief for Americans in huge, tangible ways, they are also being blamed for the economic misery that people are currently facing.

But there are a host of issues linked with a pandemic that has not been taken into account before summing up the cost of the stimulus checks. Some analysts and economists, particularly those owing allegiance to the conservatives, believe that the stimulus checks caused a significant rise in inflation rates.

But there were multiple issues at work, both internal and external, that were beyond the control of any administration. The biggest was the supply chain issues. The world’s manufacturing and supply system completely collapsed with the pandemic. Even though the economy reopened within months, it happened in fits and starts as some nations were more affected than others.

The most affected were complex products that depended on parts from around the world, like vehicles. The shortage of even a single part meant that the whole production setup was disrupted and led to a cascading effect on the economy.

In one sense the stimulus checks added to inflation as they created an above-normal demand that the factories could not demand. People had surplus money in their hands, but the economy could not ensure its supply and the imbalance led to a rise in prices.

The third stimulus check was partially blamed for this imbalance as it put over $5,000 into the hands of a normal family of four if they were found eligible.

The Politicization Of The Stimulus Check Also Led To The Increased Amount In The Last Stimulus Check

The problem with the size of the last stimulus check was that it was a political decision. Both Trump and Joe Biden did not go by economic facts or evidence when they decided to promise a $2,000 stimulus check in their election campaign.

The winning candidate, in this case, Joe Biden, was forced to agree to that big a sum even as the economy was opening up and people were back at work.

Economists believe that the tradeoffs of the pandemic stimulus were worth it but will not be seen in that light through a political prism. This is the difficulty inherent in any decision that is designed by political hands.