The US government has spent $6 trillion on Covid-19 relief, with around $850 billion going to three separate installments of Stimulus Checks. More money flowed from general funds into American households than at any other period in history, making those payments one of the greatest transfers of wealth in history. The three payments — $1,200, $600, and $1,400 — provided a 20 percent increase in income to the poorest households and spared them from financial collapse.
When the first payments from the Cares Act were made in April 2020, there was a lot of fear, concern, and unemployment.
Targeted Stimulus Checks Won’t Drive Up Inflation Rates
However, when the economy changed, their spending patterns changed as well.
When the American Rescue Plan was enacted in the spring of 2021, less than one in every five Americans was in such a financial bind that they had to spend their money on necessities. Approximately half of those who got it utilized it to pay down debt, while the remaining one-third were able to save the money. Millions of American households were rescued from financial catastrophe thanks to the stimulus payments, but they also had a far-reaching indirect effect.
When the third and final round of inspections arrived in March, the economic effect was immediate. All of that spending provided the economy with a much-needed boost, but it came at a price. Increased demand equals increased costs, and the third round of checks signaled the start of the economy’s growing inflation, which would last through the spring, summer, and the current holiday season.
The range of state Stimulus Check measures is so restricted that they are unlikely to boost inflation anymore. State Stimulus Check amounts are frequently $500 or less, with many focused primarily on low-income taxpayers, unlike the federal government, which spent trillions of dollars over numerous stimulus rounds to provide most Americans with $3,200 or more. These little, targeted sums might help Americans deal with inflation without raising it.