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Monday, September 26, 2022

Innovative Stimulus Check Payment Programs Initiated To Study Effects Of Extra Income: Stimulus Payments Make A Comeback With Inflation Relief

With regular federal stimulus checks fading into oblivion, it is the new and innovative measures taken by states and other agencies that have kept alive hopes for low and moderate-income earners, who were the worst affected during the pandemic. And they continue to hurt thanks to the record inflation rate, the highest in over 40 years.

One of the programs in the Guaranteed Income Pilot Program directs the Dept. of Health and Human Services to establish and implement a 3-year pilot program that provides an assured monthly income to taxpayers between 18 and 65 years. The Level Up pilot at the same time studied the effects of direct payments to low-income families, families earning less than $15,000 annually.

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The stimulus checks came at a time the whole nation was reeling from the devastation wrought by the pandemic on the economy. People, most of whom lived paycheck-to-paycheck suddenly found that they were out of a job and there were no other jobs in the market. Unemployment rose to over 14%.

COVID-19 era unemployment benefits have proved that the US has moved at least for the moment toward a universal basic income system. And they do not require the recipients to prove that they are applying for fresh jobs.

The Stimulus Checks Were A Big Experiment And Were A Success

The stimulus checks that gave direct payments to Americans came at just the right stage. The first stimulus check of $1,200 came even as the US economy went into a total lockdown. This downturn in the economic situation led to people losing their jobs for the first time in their lives. The unemployment rate spiked to 14.6%, the highest since 1948.

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Millions of people received aid through the 3 rounds of federal checks following the onset of the pandemic. These stimulus check payments were supplemented by other measures such as the extended unemployment benefits and the expanded child tax credit stimulus checks. Which continued till December 2021.

The Rush To Send Stimulus Checks Led To Mistakes

But the rush to send aid quickly to a population that was on the verge of starvation and homelessness meant that accuracy was sacrificed to some extent. The stimulus checks went to a significant percentage of the population who remained economically unaffected by the pandemic.

This led to the inflation of the stimulus check budget, which could have been prevented with a little more hindsight. But the situation then was distressing and mistakes were bound to happen.

There has been a total of 3 rounds of stimulus checks including the additional payment of up to $600 and $1,400 per person in 2021. the economic impact payment was the last of the payments and was part of the American Rescue Plan Act signed by President Biden in March 2021.

While the federal, and even the state, government had taken the support of stimulus checks before, particularly after a financial crisis, the scope and extent of the stimulus checks during the pandemic was in many ways a fresh experiment.

The three rounds of payments were massively bigger than what the government had done before. With each successive payment, the US treasury department, and the IRS became faster and more efficient at deploying the amount.

In the initial weeks of the first payment in 2020, the IRS sent out 89.5M payments. When the third stimulus checks were announced and received the approval of Congress on March 11, 2021, the IRS distributed 90 M payments within a week.

The IRS took the lion’s share of the burden in calculating and distributing the stimulus checks. And they succeeded amazingly in getting those stimulus checks out under extremely difficult circumstances.

As with any initiative of this scale, there were mistakes like when many deceased people received payments. Experts also say the money should have been more focused, as some well-off taxpayers who were financially not affected during the pandemic received the money.

In some cases, there was to some extent a trade-off between speed and accuracy. The payments were not as targeted as they should have been, but accuracy was of utmost importance then. The nature of the pandemic and the effect it had on the economy left the administration with no other option than to continue with the stimulus check payments at the same pace.

The third stimulus check was phased out more quickly and thus limited payments to high-income groups. By the time the third stimulus check payments were sent, there was a marked drop in the amount that was immediately spent.

During the first and second stimulus checks, people spent more on food and savings were considerably less. The last stimulus checks of up to $1,400 were more used for paying off high-interest debts such as credit cards or used for saving. This trend was noticed across all income segments.

State Stimulus Checks More Targeted

With federal stimulus checks on the back burner at the moment, several states have moved in with inflation relief payments of their own. The latest to move in is California and Florida, two diametrically opposite states both geographically and politically.

Democratic Governor Gavin Newsom has announced a generous stimulus check that will give up to $1,050 to eligible families with at least one dependent. This full payment is for families earning $150,000 or less as joint filers and has at least one dependent.

Individuals will get the maximum payout of $350 plus an additional payout for the above families who have at least one dependent. Income limits to qualify for the minimum payout are $200 for individuals earning up to $250,000 a year and double that for couples.

Families with children in Florida can expect a $450 EIP to help them cope with rising inflation. The money is being given for back-to-school expenses, but there is no restriction on its use.

Republican-run Florida has given this EIP to empower adoptive and foster families in the state and create a public-private partnership. This program was activated in July. The check is on its way to the resident through the postal services and should reach them even as the back-to-school tax holiday begins, expected to run through August 7.

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