fbpx
13.2 C
London
Monday, September 26, 2022

Stimulus Checks Have Changed How Americans Perceive Money

The coronavirus epidemic came on quickly and with a vengeance. Outside of China, the first case occurred in mid-Jan 2020. By the conclusion of March, most of the world had been put on lockdown. The United States Congress authorized the first of several stimulus packages to prevent the country’s economic decline, with many workers remaining at home and most firms restricted to internet operations at best. In the end, over $5 trillion in stimulus money entered the American economy, with $817 billion in direct stimulus checks to citizens. While the broad view is that a stimulus package was necessary at the time, its magnitude and breadth had significant unintended consequences.

Stimulus Checks Have Helped Americans Improve Their Credit Score

Here’s a rundown of the benefits and drawbacks of the pandemic incentive checks. The advantages of pandemic-era stimulus checks went beyond regular dollars and pennies for Denise Diaz. They changed her perspective on money.

- Advertisement -

Diaz, a mom of 3 who lives south of Orlando, Florida, got more than $10,000 in “stimulus checks” over three rounds. They are among 472,000,000 payments totaling $803 billion made by the federal government. As Covid-19 wreaked havoc on the US economy, the initiative constituted an unparalleled experiment to keep homes afloat.

The pandemic stimulus checks had the best effect of keeping the US economic system out of a serious slump.

There was a sense of terror in the early stages of the epidemic. Between January 2020 and March 2020, the unemployment rate rose to 14.8 percent, the highest level since records started in 1948, as well as the Dow Jones Industrial Average dropped by a stunning 37 percent in just over a month.

- Advertisement -

In a conventional inflationary cycle, prices rise as a result of a surplus of money pursuing a scarcity of commodities. Whereas the pandemic-induced economic downturn suffocated the supply chain, resulting in “too few commodities,” the rush of stimulus funds undoubtedly contributed to the creation of “too much money.” According to the FRB of San Francisco, by the end of 2021, the economic stimulus measures would have added up to three percentage points to the inflation rate.

And, as of now, inflation is at 8.6%, the highest level since 1981, with no indication of where it will go from here. At the start of the epidemic, a sharp rise in American poverty looked plausible or perhaps imminent, with unemployment rates increasing and businesses closing across the country. The stimulus checks, on the other hand, not only avoided this but also helped to lower the poverty rate.

According to the US Census Bureau, the stimulus will have lifted 11.7 million people out of poverty by 2020. “The most influential measures for relieving destitution were stimulus checks under the American Rescue Plan and unemployment benefits,” the Department of Health and Human Services agreed. 

According to a study conducted by Columbia University’s Center on Poverty & Social Policy, the poverty rate peaked at 16.3 percent in late 2020, when some pandemic stimulus programs were phased out but fell to 9.3 percent by March 2021, when extra stimulus checks, CTC, and tax refunds were distributed. Diaz, who now co-directs the Central Florida Jobs With Justice charity, used the money to pay off a credit card and a vehicle loan. Her credit rating has improved. Diaz’s partner lost his job earlier this year, and she was able to tap into her emergency savings to help the family. Some argue that the stimulus package’s enormity has had the unintended effect of keeping masses out of employment.

Unfilled job postings have more than quadrupled since Q2 2020, according to the St. Louis Fed, to a near-record of 11 million. This increase can be attributed to several causes, including some workers’ unwillingness to return to work while COVID-19 is still in effect, as well as early retirement packages provided to older workers.

However, the flood of stimulus checks, enhanced child tax credits, prolonged unemployment benefits, student loan forgiveness, and other types of stimulus have undoubtedly hindered some Americans’ return to work. According to data from the National Bureau of Economic Research, almost 60% of the early stimulus funds were utilized to pay off debt or save.

According to the New York Fed’s monthly Survey of Consumer Expectations, up to 74% of the second and third stimulus checks were spent on the same things. This has the dual benefit of lowering consumer debt and rising consumer savings in the United States. In addition to lowering consumer credit card debt, bank balances in the United States increased. According to the Washington Post and the JPMorgan Chase Institute, while credit card debt has resurfaced as some Americans regard the coronavirus as a thing of the past, bank account numbers remain greater than pre-pandemic levels. The United States had to issue large amounts of additional debt to cover the projected $5.3 trillion in overall stimulus given out throughout the epidemic.

The US Treasury has borrowed roughly $6 trillion since March 2020. As a result, Diaz, 41, feels more financially secure than she has in any previous era of her life.

Her mentality was altered as a result of the financial cushion and the attendant peace of mind. For the first time, she streamlined financial transactions (for utilities, a second family car, and credit cards, for example).

Beginning in July 2021, Latif and Bhatti, like Diaz, obtained monthly payments of the boosted child tax credit — $250 or $300 per minor, depending on age — for 6 months. On the flip side, the 3 Treasury bill rate was below 0.4 percent as late as Feb 24, 2022, resulting in extraordinarily cheap borrowing costs. However, once the Fed embarks on a quest to combat inflation by raising interest rates, those expenses may rise dramatically. If the present and future presidential governments fail to find a means to pay down the debt, the economy might suffer significantly. Only time can tell if this is true.

- Advertisement -

Follow Us

16,985FansLike
4,865FollowersFollow
1,643FollowersFollow

Latest news