The US government has spent $6 trillion on Covid-19 relief, with around $850 billion going to three major Stimulus Check payments. More money went into American households from general funds than at any other time in history, making those payments one of the largest transfers of wealth in history.
The three payments — $1,200, $600, and $1,400 — gave the poorest households with a 20 percent rise in income and saved them from financial ruin. There was a lot of anxiety, concern, and unemployment when the first payments from the Cares Act were made in April 2020.
Targeted Stimulus Checks Won’t Drive Up Inflation Rates
However, as the economy changed, so did their spending patterns.
In the spring of 2021, when the American Rescue Plan was established, less than one out of every five Americans was in such a financial bind that they had to spend their money on necessities. About half of individuals who received it used it to pay off debt, while the remaining one-third were able to save it.
The stimulus payments saved millions of American households from financial disaster, but they also had a far-reaching indirect effect. The economic impact was immediate when the third and last wave of inspections arrived in March.
All of that spending offered a much-needed lift to the economy, but it came at a cost. Increased demand means higher expenses, and the third round of checks signified the start of the economy’s rising inflation, which would last through the spring, summer, and the current holiday season.
State Stimulus Check measures are so limited that they are unlikely to increase 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 checks are usually $500 or less, with many concentrating largely on low-income taxpayers. These little, targeted sums may be able to help Americans in coping with inflation without raising it.