State Stimulus Checks Help Americans At A Crucial Period As They Struggle With Even Increasing Prices: Inflation Could Be Followed By Recession


The stimulus check issued by the US government at regular intervals covering the period of the COVID-19 pandemic and later during the period of the economic downturn helped in multiple ways. While its immediate effect was to stave off poverty, credit default, and homelessness, it also saved the economy by keeping the recession in control while it also prevented the virus from spreading faster. But the payments also took part of the blame for the present inflation.

The truth tends to become an unfortunate casualty in an election year and as Americans head towards the midterms. The opposition Republicans’ election pitch has become shriller by the day as they have laid the blame for the inflation at the door of the third stimulus check, part of the American Rescue Plan Act signed by President Biden.   

Republican Attack On Stimulus Check Gets Shriller With Approaching Midterms

While the successive direct payments are believed to have contributed partially to the record inflation that Americans are facing, they are multiple factors at play that combined to send the inflation rate on a crazy unending run. The unceasing rise since March 2021 has seen the rate climb from 2 % to 9.1% ending June 2022, the highest since November 1981.

Prices have risen drastically with the gasoline rates almost double in the past two years before they eased in the past weeks. Food prices and other essential goods have also seen similar steep appreciation while the same goes for utility rates and home rents.

Federal Reserve Moves To Deliberately Slow Down The Economy To Arrest Inflation

The Federal Reserve has responded by raising interest rates b 0.75 percentage points for the second consecutive time to fight inflation. This takes its benchmark rate to a range of 2.25% to 2.5%. the Fed has been cautious with its interest rate increase as it seeks to dampen runaway inflation without triggering a recession.

Moving the benchmark borrowing rate up to the present rate in June and July marks the most stringent action ever since the apex bank began using the overnight fund rates as the principal tool of monetary policy in the early 90s.

While the most direct impact of the Federal Reserve funds rate increase will be limited to what banks charge each other for short-term loans, it could affect a multitude of consumer products including auto loans, credit cards, and adjustable mortgages.

The move was largely expected after Fed officials hinted at the move in June. It had a positive effect on the stock market. Jerome Powell, the fed chairman has stayed vague about his move at the next meeting. He has stressed that it would depend on the situation of the economy.

Apex bankers in the US have emphasized the importance of bringing down inflation even if it means putting brakes on the economy. This portends another recession shortly.

Stimulus Checks Saved Economy From Show Economic Growth And Even Outright Deflation

Economists and central bankers have maintained that without the support of successive stimulus checks and parallel measures, the economy would have slid into slow growth and even outright deflation. The consequences of this would have been way tougher to manage.

The first round of the stimulus check came out within weeks of the shutdown declared by the federal government. The CARES Act of April 2020 gave every eligible adult $1,200 and $500 to children. The 2nd round was given under the Consolidated Appropriations Act and gave $600 per eligible adult an equal amount to children in December 2020.

The third stimulus check, the economic impact payment under the ARPA signed by President Biden came along without a couple of months in March 2021. it was the largest of the three and gave $1,400 per eligible adult and an equal amount per child.

The total impact of the three rounds of stimulus checks released in the last two years made a significant difference in helping bring down poverty and unemployment and jump-started the economy. The majority of households who lost their source of income received stimulus support from the federal administration.

Stimulus Check Did More Than Just Save Citizens From Poverty

Every round of stimulus checks led to a significant increase in personal income and boosted economic spending in that month. For instance, there was a 10% increase in real personal income and a 3% rise in consumer spending in January 2021, the month the second stimulus checks were distributed.

The economic relief program also kept 6 million children out of poverty, 3 million of them direct beneficiaries of the expanded Child Tax Credit stimulus checks that continued through December 2021.

The stimulus checks thus were vital in both preventing Americans from being dragged into poverty while also helping the economy stay afloat during the crucial months of the pandemic and after.  

The series of economic impact payments did a great deal to stimulate the US economy ad helped American citizens stay afloat during the pandemic that led to an unprecedented loss of jobs, healthcare coverage, and economic security for millions of Americans.

State Stimulus Checks Take Over From The Federal Support System

The support afforded by states is expected to significantly relieve residents from the additional burden of rising prices even as millions of citizens are yet to recover from the financial downturn triggered by the pandemic.

With wages down in real terms due to high inflation rates, people are facing less purchasing power than they did before the pandemic. this despite a healthy rise in wages in the past year. the average 5% increase in wages across industries has been negated by the above 9% rate of inflation, the highest in over 4 decades.

Illinois has declared a stimulus check relief package of around $1.83 billion. It went into effect in July and includes a rebate in property and income tax plus a limited period cut in multiple levels of state tax.

Individuals earning below $200,000 last year have received a rebate of $50 in their tax while couple filing jointly and earning double that amount will receive a $100 rebate. An identical amount will be provided to up to three dependents.

All residents of Indiana are eligible for a rebate of $125 under the refund law of the state. the amount was increased by another $200 later. For married couples filing jointly the total stimulus, of the check comes to $650.