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Friday, February 3, 2023

Is There A 2023 Federal Stimulus Check? Inflation Wreaks Vengeance On The Low Income Groups

The present spell of inflation is wreaking havoc on the financial condition of low and moderate-income families in the US in the absence of any stimulus check support. A combination of supply-chain disruption, surging economic activity, and soaring prices of commodities combined in 2021 to push inflation to its highest level since the early 1980s.

The war in Europe has turned the matter from bad to horrid. Food and fuel prices have spiked, and the economic blockade of Russia by the Americans has hit the latter and its NATO allies more than the Russians, who have found alternate lines of supply in Asia, and a ready market for their fuel.

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Both Russia and Ukraine are big exporters of many commodities including gas, coal, oil, wheat, fertilizers, oil seeds, and corn. And disruption of such vital supplies and higher prices have caused increased food insecurity and hunger. Disruption to supply chains has intensely pushed up inflation making it tough for low-income families in the absence of federal stimulus checks.

For low and moderate-income American households, rising inflation posed a significant challenge that was compounded by the sustained nature of inflation that has continued its unabated run for over a year.

The Low And Middle Income Households Are Vulnerable To the Absence Of Stimulus Checks

Low and moderate-income homes have been hit hard due to high inflation than wealthier homes. That is a reflection of the composition of the assets, income, and consumption patterns. Everyone has paid the price for inflation but low-income families have suffered the most.

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Typically gasoline and food among products and housing have eaten up the biggest slice of the total income for low and moderate-income households than for higher-income families.

Stimulus Check
Stimulus Check

Poorer households invariably survive paycheck-to-paycheck. They often lack access to financial products that can protect them against inflation. In America, few households have investment or saving products or devices they can fall back on in the event of a disruption in their income. For months such families have faced negative wage growth made worse by the absence of stimulus checks.

Another crucial factor is that low and moderate-income families are forced to pay higher prices even for similar items. They may be able to travel less to discount stores or take advantage of seasonal discounts. They also do not have the purchasing power to buy up in bulk when prices are low and projected to move up shortly.

What people are paying for similar items at different stores is vital to understand inflation inequality say experts and only a thorough understanding of those realities are part of the effort to modernize how the government measures to cost of living and how inflation affects low and moderate-income families. Despite an increase in wages post-pandemic, families have been faced with the prospect of the above 8% inflation outstripping their wage growth which is in the region of 3.5%.

Further, the wealthiest quartile of American households has 5 times more holding of certificates of deposit and 6 times more holding of savings bonds. The holding of investment is 12 times more for the middle class and wealthier families.

Alternative Support In the Absence Of Federal Stimulus Checks

Close to 50% of American states have stepped in to fill the void created by the federal government exiting the support system that they created during the pandemic period and immediately after.

The economic downturn following the pandemic was not as tough for Americans as one would have expected to form such a severe economic disruption. Millions of Americans lost their jobs and it was made worse as there was no alternative source of income for months till the third quarter of 2020.

In 2020 Americans, especially low and moderate-income families, were saved by the $1,200 CARES stimulus checks and again by the supplementary stimulus checks declared in the last month of the year.

The third stimulus check under the American Rescue Plan Act signed by President Biden boosted the income and came soon after the second economic impact payment. For the first time, it allowed people to rise above their tight-budget economy and experience an excess budget. This allowed them to splurge and save for the first time in their lives.

In 2022 it was the series of state stimulus checks that served as an alternative to federal payments. Though not as expansive as the economic impact payments and other support measures, it was to some extent enough to ward off the economic downturn caused by rising inflation.

The payments have crossed over into 2023 in some states including California, which declared the biggest stimulus check support to 23 million of its residents, close to 60% of the state population.

Stimulus Check
Stimulus Check

While most payments in the Golden State have been dispatched, those missing debit card payments will have to wait for another month as the card payments will continue to be posted through the US postal service till January 14, 2023. Postal delays of up to 2 weeks are expected and the payments will continue for the whole month.

Californians received up to $1,050 with the payments being based on the Adjusted Gross Income for 2020. Residents who filed their 2022 income tax returns before October 15, 2021, received their Middle-Class Tax Rebate which was linked to the 2020 state AGI and the presence of dependents.

Taxpayers in Idaho are also having to wait with payments spilling over into January 2023. The amount they have received is $600 for joint-filing couples and $300 for individual filers. December was the deadline for the payments through administrative delays have pushed the payments into the new year.

The same goes for residents in Massachusetts with the payments scheduled to end in December. The $700 stimulus checks are still on their way for many families and the administration has cited postal delays.

The Federal Reserve is trying to cool off demand and try to get inflation pressures down. They are desperate for some help from the supply chain resolution, though they are not counting on it. The Fed has raised interest rates several times and signaled that two more jumbo hikes in rates are likely. The job market remains strong enough to weather a rise in interest rates.

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