Are The New Stimulus Checks Causing Inflation Rates To Go Up?

Stimulus Check
Stimulus Check

No good deed escapes retribution. Recent reports relating inflation to state-level tax Stimulus Checks and other household payments have this as their central focus.

At least 20 states have sent Stimulus Checks to their citizens since the COVID-19 outbreak or will do so shortly; the cheques are often billed as economic stimuli or, more lately, as relief from rising energy and food prices. In actuality, every state—except Vermont—operates under some sort of balanced-budget mandate. They can not borrow money to pay for giveaways, and they don’t. Every dollar that is spent must be matched by an equal dollar in earnings.

Stimulus Checks Are Not The Cause Of Increasing Inflation Rates

The amount of money spent by consumers, governments, and enterprises together in the economy is known as aggregate demand, and it is often impossible for the states to raise it. In other words, states don’t generate money; they just move it about. The issue of timing is another. Similar to the initial wave of government checks issued during the Trump presidency, some of these payment systems were started during the pandemic era as financial lifelines to their citizens.

Those Stimulus Checks were unmistakably countercyclical stimulus programs designed to make up for lost household income during a recession when firms were shut down by lockdowns and consumers stayed at home instead of spending money locally or traveling.

The majority of the Stimulus Check money was long gone by Thanksgiving last year and had nothing to do with the startling price hikes we have witnessed over the past 12 months, even though part of that pandemic relief money was preserved until now and not used before inflation started in.

The few states that reduced their gas taxes and provide their inhabitants financial assistance at the pump are a near relative of tax refunds and tax limitations. Consider this: Cutting a product’s consumer-level cash register cost is scarcely inflationary. Gas tax holidays may be a misguided strategy for supporting transportation, but they are not contributing to inflation.