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Thursday, October 6, 2022

Inflation Stimulus Checks Get Moving: More States To Legislate On The Issue Even As Inflation Rate Crosses 9%

With the federal administration held by on the issue of stimulus checks for several reasons, it is for the states to go ahead and rescue their residents from the record inflation rate. But legislating the inflation relief measures has not been easy over concerns that the present mess was the result of too much generosity on the part of the federal administration.

A little over 2 years ago the pandemic hit the shores of America with a ferocity matched by the initial lukewarm response of President Trump and the Republican administration.

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Even as the pandemic raged on in China, on January 22, 2020, President Trump told the nation that the virus was totally under control. But he was lying, and the nation found out weeks later.

Trump’s distortion, lies, and evasion allow us to see what exactly a president, his Cabinet, Congress, and the administration staff should not do at the pace of a global crisis.

The Initial Deceit, Distortion, And Dithering By The President That Caused The Mess

Even at the beginning of March, Trump and many in his inner circle were initially skeptical of the seriousness of the pandemic. He had appeared uninterested and unconcerned as long as the virus was abroad. He played around with a flurry of confusing statements and deliberate misinformation. It muddled the administrative response and confused the ranks of the federal administration. The delay proved vital in the end.

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Even on March 9, he tweeted that the Fake News Media and the Democratic Party were doing all in their power to inflame the situation regarding the virus. He stressed then that the risk was too low for the average citizen.

After fooling around for 8 weeks, Trump was forced to admit to the magnitude of the COVID-19 virus that posed a mortal threat to the economy and was poised to fundamentally upend the normal rhythm of American life.

At every step, he contradicted experts and the US Dept. of Health. While he began saying that all who felt they needed a test could have one, the health authorities clarified that only a doctor could prescribe the test.

The resilient American economy cratered in a matter of two weeks. Trump’s incompetence and cowardice killed thousands and decimated the economy, which is yet to recover from the disastrous damage. The stimulus check was the only way now to prevent a total catastrophe as the economy suddenly shut down to prevent further damage.

The Stimulus Check Was A Necessity Then

The federal administration realized that the bungling by their top leader had brought America to the brink of a total breakdown and was forced to quickly act on it.

Lawmakers passed a $2.2T stimulus package in March 2020, followed by two more installments of COVID-19 relief later in December 2020 and the last by the new Democratic government led by President Biden. It would go on to become the most generous fiscal response ever to a global pandemic.

But the forced response came at a huge price for the US economy. As prices continue to rise at rates not seen in over 4 decades, it has become clear that the initial bungling of President Trump and the subsequent stimulus checks came at an unintended but significant cost.

Even as the inflation keeps increasing unabated, it crossed the dreaded 9% mark and stood at 9.1%. And it remains uncertain that inflation has reached its peak. The situation remains economically and politically toxic in Washington. It has left many policymakers, economists, and advocates wondering whether they blundered in their economic response to the pandemic.

The Stimulus Checks Were Necessary But Led To The Present Economic Disorder

It is undeniable that given the situation in March 2020, the stimulus checks were the only way to wiggle out of the mess created by the then president, Donald Trump, and the Republican government. With millions of Americans staring at certain poverty, the nation was poised to descend into chaos.

The successive stimulus checks helped put food on the table and moved around 11.7M people out of the clutches of poverty in 2020 alone. This led t a drop in the poverty rate from 11.8% to 9.1%. it fell even further in 2021 to 7.7%. It was clear that the stimulus checks were the reason for the dramatic decline in poverty.

The stimulus checks cushioned workers during the worst crisis that the US faced in modern times. It also helped the economy bounce back in record time, especially the Economic Impact Payment of $1,400, under the American Rescue Plan Act signed by President Biden in March 2021.

Inflation Was Inevitable At Some Point

We can not deny that the federal administration got its act together at the right moment. But the stimulus checks, especially the last round, could have stoked inflation and hit the very people they were intended to help.

While the global supply chain gridlock was a major factor, the war in Europe has added to the woes. But the stimulus checks and the subsequent measures including the extended unemployment check and the child tax credit stimulus check may have been partially to blame for the mess.

The San Francisco Reserve Bank estimated through a study that the successive stimulus checks led to US inflation increasing by 3 percentage points by end-2021.

Wages Have Not Kept Up With Inflation

Americans are struggling financially as a result of the mess. Low-income and moderate-income households are particularly despondent as they do not have a cushion to absorb higher prices, with most families living paycheck-to-paycheck.

Inflation has steadily outpaced wage growth in the past few months. Despite a jump of 5.6% in year-over-year wages, the March 2022 inflation figure of 8.5% reveals that Americans suffered close to a 3% decrease in wages when adjusted for inflation.

Will State Stimulus Check Add To The Inflation?

Around 14 states are in various stages of sending out stimulus checks to their residents. While Maine and New Mexico have already legislated on the issue and begun sending out inflation relief payments, California and other states could send out payments by the last quarter of 2022.

While the amount seems small when compared to the federal stimulus check, there is the danger that it will delay the cooling down of the economy by 2022.

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