The pandemic-related stimulus checks have now moved into the third year with the start of the second quarter of 2023. The first stimulus check went out in April 2020, sent out by the federal government immediately after the nationwide shutdown.
The US government enacted a series of measures in response to the crisis. The policies led to the provision of fiscal stimulus to the economy, and also direct relief to the millions of low and moderate-income Americans who were affected by the global disaster.
The Federal Reserve also undertook several measures other than the three rounds of stimulus checks that complemented the Economic Impact Payments.
The federal stimulus checks and other relief efforts were part of the total monetary policies that the Federal Reserve implemented. And then there was the fiscal policy implemented by Congress and the Republicans and the present Democratic administrations. And though the pandemic and its economic effects linger across the US, most of these programs have been discontinued; the stimulus check in the second quarter of 2021 and most others by the end of that year.
The Pandemic And The Resulting Stimulus Check Both Impacted The US Economy
The early period of the pandemic in the first and second quarter of 2020 pushed the US economy into a deep recession. The COVID-19 crisis pushed the American stock market into the grip of the bear as early as March 2020. By April 2020 the unemployment rate in America rose to a peak of 14.7%. It was the highest since the Great Depression almost a century ago.
The American economy, as measured by the inflation-adjusted Gross Domestic Product (GDP), fell by around 32% in the 2nd quarter of 2020. The GDP rebounded in the third quarter and ended the year with an increase of 4% year-over-year.
The Federal Reserve divided its stimulus check and other support measures into three basic categories. They were regulation changes, loans and asset purchases, and interest rate cuts.
The Federal Reserve also went for specific lines of credit and programs by which it financially supported loans from the Primary Market Corporate Credit Facility through special purpose vehicles. Also called special purpose entities, these are subsidiaries created by parent companies to isolate financial risk. Its legal status is that of a special company and that makes its obligations secure even if the parent company faces bankruptcy.
All such initiatives were combined to try to ensure that Americans would not suffer a liquidity crisis that happened during the Great Recession in the first decade of this century. The Federal Reserve also cut its target range for the Fed funds rate twice during March 2020. At first, the cut was 0.5% to a range of between 1% and 1.25%. It was then followed by a cut of 1% with a range between 0% and 0.25%.
This assumes significance as the Federal Reserve did not move interest rates in increments greater than 0.25% since they were cut during the Great Recession.
The target rate range remained at rock-bottom rates to combat the pandemic through Federal Reserve officials moved in to increase the target rate range. However, the Fed succeeded in making a series of significant increases to the Fed Funds Rate in 2022 and for the second time in January 2023.
For Individuals And Households, The Federal Administration Went For Three Main Stimulus Checks
Through the first and second quarters of 2020, the federal government pushed through 3 main relief packages and a supplemental package. After these efforts, there was no significant action on the pandemic stimulus or relief for Congress for several months.
The $3.4 trillion Heroes Act was passed by the House of Representatives in May 2020. It was then under the control of the Democrats. The Republican Senate majority first proposed but then refrained from passing the HEALS Act of July 2020, which was worth $1 trillion. Though the House Democrats offered to agree to $2 trillion, the Senate Republicans, in control of the Senate, refused to budge from their position and insisted on lessening the stimulus check amount.
States Vary In Amount Of Stimulus Check Payments
While 21 states have sent out stimulus checks so far, The amount has varied among states. California remains on top of the list with over 9.1 million individuals benefitting from the Middle-Class Tax Refund payments. A total of $15.9 billion has been disbursed in this round of stimulus checks by the Golden State. This is the third round of payment after the Golden State Stimulus Check I and II.
The state remains at the top of the heap in terms of the total cash paid to residents thus far. Texas comes in second with 7.8 million households benefitting with a total outlay of $14.4 billion by the state.
Florida rounded out the list of the top 3 states whose residents received stimulus checks from the state as inflation relief payments. Around 6.3 million households benefitted with a total outlay of $11 billion.
California’s residents with a state 2020 Adjusted Gross Income of up to $250,000 for individuals and $500,000 for joint filers received payments between $200 and $1,050. The relief payments were linked to factors like income tax status, the AGI, and the presence of dependents. Filers who have filed their returns before October 15, 2021, received the stimulus check.
Texas is one of nine states that does not have a state income tax and none of those states generally offered any form of stimulus check. The state has cut property tax in every legislative session by a total of over $18 billion.
Florida, like the 20 other states, gave out payments, but on a selective basis, and limited it to just 59,000 families. The state gave families $450 per child for any household receiving welfare benefits, caring for foster children, or providing guarding services in the state.
Colorado on the other hand is giving its residents $750 per person as a tax rebate. Delaware residents received a $300 stimulus check. Georgia’s residents received a tax refund if they had paid their state tax in both 2020 and 2021.