America is in a stronger economic position than most other major advanced economies in the world. But the pandemic has affected its economy more seriously than other advanced economies in the EU and UK. For a combination of reasons, the inflation rate has been way higher in the US than in any other developed nation by a clear 3 percentage points. While the opposition has blamed the third round of stimulus checks for the mess, the truth is somewhat more complex than that.
After two years of fighting the pandemic and simultaneously ensuring that the Americans did not slip into poverty and homelessness, President Biden finds himself fighting a battle on another front.
While the generous infusion of the fund to support households, businesses, other organizations, and state governments saved the nation from an economic recession, it may have contributed unwittingly to the record inflation rate that threatens to undo the good done over the past two years.
The American Rescue Plan Act was one of the boldest moves by any federal government in decades, especially due to its scope and magnitude. When the pandemic-induced shutdown was first declared in March 2020, people suddenly found themselves without a source of income. A majority of American families live paycheck-to-paycheck and any disruption in the family income would have immediate consequences.
Within weeks of the declared shutdown, American families were struggling to put food on the table, pay their utility and credit card bills, and foot their rent and mortgage payments. They were staring at immediate default, starvation, and homelessness. The federal administration stepped in at the right moment and the first of three rounds of stimulus checks followed.
But the delay caused by the refusal of then-president Trump to recognize the enormity of the situation complicated the matter severely within days of the virus crossing over into America. The delay in declaring the pandemic was to haunt the administration for the whole period of the pandemic till the vaccines could be put to effective use.
But by then the virus had spread to the hinterland and finally took a toll of 1.1 million, out of a total of over 9.5 million cases. In contrast, even India, with a population close to 5 times that of the US, could limit its deaths to around 0.5 million, thanks to strong and effective measures. The economic toll was as devastating as the health costs. The whole economy sank into a deep recession.
The first and second round mostly was limited to sending money directly to homes and was more of a stopgap method that succeeded in a limited way in containing the damage done by the pandemic. But it was not a comprehensive measure that covered all aspects of the damage done to the economy.
The American Rescue Plan Act addressed some of the other issues that were a direct result of the pandemic. while it was the most generous among all the stimulus checks and gave individuals and families a minimum of $1,400 per head, including for children and parents. But the support was not limited to direct payments to families.
The federal administration slipped in with support on all other fronts that would affect the economy. The American Rescue Plan Act proved to be more comprehensive in its coverage of the economic woes that were plaguing the nation at that moment.
The third stimulus check, or the economic impact payment, was a part of the ARPA, albeit a very important part. One of the key elements of the ARPA was the support it provided to support vaccinations and other measures to contain the pandemic.
there were also other strong measures to support businesses, help in the reopening of other organizations like schools and medical institutions, and also to fund states and other local governments to help them work more thoroughly in helping Americans ride out the pandemic.
despite it being touted as the pandemic relief bill, less than one percent of the ARPA, or around $17 billion would ultimately be spent on vaccine-related programs and activities. This included $8.5 billion to administer, promote, and increase the cases of the vaccine. Another $5 billion was for the production of vaccines and allied therapeutics. $1 billion went towards the coverage of vaccination under Medicaid and the Children’s Health Insurance Program (CHIP). This funding was on top of another $50 billion already allocated for vaccines under earlier legislation.
Extended Unemployment Insurance Supplemented Sitmlus Check Payments
The ARPA expanded the unemployment benefits that were scheduled to expire on March 14. The deadline proved to be a key driver of the ARPA. Around 13% ($246 billion) went towards increasing the federal supplemental payment which was increased from $300 to $400 a week.
Thanks to this increase close to two-thirds of workers drawing unemployment received higher benefits than they did earn wages when they were under employment.
But the benefits ended on September 6, 2021.
The Expanded Child Tax Credit Stimulus Check
The $2,000 Child Tax Credit stimulus check was generously expanded to between $3,000 and $3,600 a month for each child depending on their age. While those below 6 got $3,600, children between 6 and 17 got $3,000.
The CTC stimulus checks were broken up into monthly stimulus checks of between $250 to $300 per month that was paid between July and December 2021. That amount provides to be the last of the stimulus checks from the federal administration.
The end of the CTC stimulus check coincided with the rise of inflation, and it reached record figures by June when it touched 9.1%. it was the highest since November 1981 and brought another spell of trouble for the families with low and medium income.
Prices of gasoline and other essential commodities, including foodstuff, increased by close to 100% in a couple of years. The rates of utilities, home rent, and mortgage rates also touched record levels.
One of the core objectives of the ARPA was the safe reopening of public schools. Around 7% of the package, or around $130 billion, was dedicated to public schools. These funds were on top of the $54 billion allocated for K-12 public schools under the Response and Relief Act of December 2020 and the $17 billion allocated under the CARES Act.