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Thursday, December 8, 2022

Successive Federal Stimulus Checks Helped People Survive The Pandemic: States Move In To Support Residents In 2022

The successive stimulus checks distributed by two successive governments in the pandemic era helped Americans stay out of starvation and avoid the debt trap.

A large section of the population suddenly found themselves out of a source of income and only the three successive stimulus checks and other measures taken by the administration helped them pay bills, put off paying their installments, reduce their debts, and even build their savings.

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For many, the stimulus check transformed the way they felt about money. Recipients admitted that the relief payments completely changed how they felt about what was possible. It gave them a new insight into personal spending practices and the method they could use to manage their finances.

Families with dependents received over $10,000 in stimulus money in a year and a half. Over 472M payments were issued by the government, sending a total of $803B directly to people. It stood out as an incredible experiment to bolster low and moderate-income families as the pandemic almost destroyed the world economy.

While the federal payments have dried up by the end of 2021, the last quarter of the year also saw inflation rise to record levels, crossing the 8.5% mark for the first time after 1981. At the very center of a heated debate on the causes is the stimulus check.

Stimulus Checks Blamed For Unprecedented Inflation

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The opposition Republicans have squarely blamed the unprecedented inflation rate on the third stimulus check, the Economic Impact Payment under the American Rescue Plan Act signed by President Biden in March 2021.

Analysts are divided if, and to what extent, the successive stimulus checks fueled inflation, generally agreeing that it was partially responsible for the record rise. But they have also pointed out that most nations, including developed nations, are also facing severe inflation rates though they have not allowed any stimulus checks.

Stimulus Checks Proved Lifeline To Millions Of Low And Moderate Income Families

The stimulus checks undoubtedly proved to be a lifeline to millions, especially from the low-income groups and those who lost their source of income immediately following the pandemic as many business sectors such as hospitality, transport, and tourism remained fully shut for months at a stretch.

For some families, the funds provide an opportunity to millions during the worst spell of unemployment after the Great Depression a century ago. Most people spent it on immediate needs like food and household staples, and also to pay off high-interest debts such as credit cards. Card debts reached record lows during the last two years. Many families also managed to save for a rainy day for the first time.

Many families managed to save for the first time in their life and became more financially stable than ever.

The End Of Federal Support Meant A Return To Old Ways Of Budgeting

But people have since returned to their old ways, and are now more into budgeting. While people felt grateful for the sustained financial assistance, they felt a slight letdown after their brush with financial freedom.

With the opening up of the economy, the US economy rebounded immensely after the first quarter of 2021 even as President Biden signed the bill sanctioning the last of the stimulus checks.

While the pandemic stimulus check was a big relief, the federal employment programs created under the CARES Act in March 2020 also provided solace to workers whose income came to a grinding halt with the pandemic. They expanded the workers’ safety net to an unprecedented degree. Around $794 B was issued in benefits starting March 2020 and continued through July 2021.

The jobless received 1.5 billion total weekly payments during that period. It was the federal government’s most aggressive response to the large-scale unemployment that workers faced during the peak months of the pandemic.

The $794B issued till July last year included the bonus stimulus checks of $300 and $600 a week which cost the Treasury $418 B. The state unemployment insurance cost the government another $167 B.

Pandemic unemployment assistance was also given to gig workers and cost the nation $122 B while the bill for the Pandemic Emergency Unemployment Compensation for long-term benefits came to $75 B

Finally, the cost of the extended benefits for long-term unemployed workers came to another $12 B. Almost half of the states ended their part in any or all of the federal unemployment programs between June and July, way ahead of the official date of expiration. This limited the scope of the payments.

The End Of The Unemployment Benefits Coincided With The Child Tax Credit Stimulus Checks

The end of the extended unemployment benefits coincided with the start of the enhanced child tax credit stimulus checks. These payments were for the first time extended to cover non-filers and half the money was given in advance between July and December 2021 in 6 monthly equated stimulus checks.

The child tax credit payments helped a lot of low and moderate-income families and staved off starvation in many families.

With record inflation again pushing American families into desperate times bringing back the enhanced CTC stimulus checks every month would help lift millions of children out of poverty at a time when families continue to struggle with skyrocketing prices due to economic uncertainty and inflation. But the federal political gridlock continues to hamper any chance of progress.

States Step In To Help Out Desperate Residents

With federal payments on hold, for now, states have stepped in with several measures to counter inflation. The relief payments measures by around a dozen states could roll out within the next few months, and Maine and New Mexico have already legislated on the issue.

Single filers in New Mexico with an AGI of $75,000 or below in their 2021 tax returns will get a $250 stimulus check while married couples filing jointly and earning $150,000 or less will get double that amount.

While an initial round was given to New Mexicans in June, another round is expected in August.

Governor Gavin Newsom has finally convinced lawmakers in California to a $1,050 stimulus check which will be paid out of the huge state budget surplus of $97B. It will be paid either through direct transfer into accounts or through debit cards. The income, household size, and tax filing status will be determining factors in selecting beneficiaries in California.

Maine is among the first states off the mark with an $850 direct stimulus check for residents with an AGI of $100,000 or less. A couple filing jointly will receive double that for an income of $200,000 or below. Around 858,000 residents are expected to benefit from the stimulus check.

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