The three rounds of stimulus checks were an immediate support system that kept millions out of poverty and homelessness. But months later as the inflation rate crept up to reach unbearable levels that broke a 4-decade high record, one section of economists, policymakers, and opposition politicians turned around to blame the same stimulus check for the mess.
It is obvious that the third stimulus check and the act under which it was passed, the American Rescue Plan Act, would bear the brunt of the attack as it was the last of the stimulus support and was passed by a President who is a member of the Democratic Party. And there is also an indication that the stimulus checks were in part responsible for the high inflation. But what they have chosen to ignore is that it was the only option at that juncture to save people from descending into immediate penury.
The stimulus payments helped bring food to the table, pay pending utility bills, save people from defaulting on their loans, and also prevented homelessness. And the number of people who faced immediate threats was in the millions as the whole economy went into a total shutdown.
The Federal Stimulus Checks Were An Immensely Successful Experiment In Safety Net Policy
The final round of support, which was way more than the stimulus checks, coincided with a sharp improvement in financial stability, a decline in food shortages, and a fall in mental anxiety, researchers have revealed.
Multiple studies revealed that parents for the first time were able to afford three meals every day for their children. They paid their water and other utility bills, and spent on much-needed medical tests and treatment, something that they could rarely afford even in normal times. People who lived paycheck-to-paycheck were for the first time in their lives able to set a part of it aside for a rainy day.
By offering a total of up to $2,000 per person, the government successfully conducted massive experimentation in safety net strategy that should be a pointer on how to effectively manage a crisis in the future.
Even as skeptics branded the policy expensively and wasteful, it was apparent that a quick and comprehensive outpouring of immediate cash eased the acute economic crisis as a result of the COVID-19 pandemic.
The aid came after the second round of payments and the results are still being analyzed for answers on how best to provide immediate help to low and medium-income groups in similar extraordinary times.
Clear Pointers That Stimulus Checks Prevented A Crisis
Analysis by the Census Bureau has revealed that the last two rounds of the stimulus check had a significant impact on people’s ability to purchase food, pay their utility and other household bills, and pay their home rents. It was the greatest psychological boost along with a great decline in depression and anxiety.
Significantly, the largest group to benefit were the poorest of the households, people who for the first time enjoyed many of the basic benefits that most middle-class Americans and above have taken for granted. It was the greatest application in hardship reduction undertaken by the federal administration.
Financial instability fell by 43% after the money was disbursed while there was a drop of over 20% in cases of depression and anxiety. The largest decline in the measure of adversity and suffering coincided with the successive stimulus checks of $600 followed by the $1,400 stimulus check under the ARPA.
It led to an instantaneous decline in multiple areas of hardship prominent among the greatest disadvantaged sections of society. The massive scale of the aid, which came to a total of $585B just for the direct portion of the aid, ensured a drop in all-around hardship. But it would be futile to measure if the benefits match the costs, given the intangible nature of many of the benefits.
Criticism Of The Stimulus Checks Was On Multiple Fronts
There were complaints on parameters other than inflation. While the spending was blamed for swelling the deficit, there were also widespread complaints that the money did not fully reach the sections of society that it was primarily meant to benefit.
There were accusations that the lowest sections of society remained out of the reach of the stimulus checks, especially the poor among the Black and Latino communities. A large percentage of such families are not even in the books of the administration.
It was evident that a part of the amount went to financially stable people who barely faced economic hardship despite the economic downturn caused by the pandemic.
Others maintained that the supply chain issues were indirectly a result of the stimulus check. The aid over the last year was a disincentive for a section of workers to join the workforce. A section of analysts says that the hardship would have eased without the aid of the later stimulus checks as a result of safety net programs and the job growth caused by the opening up of the economy.
The accusations are true to an extent. But the federal administration was forced to act on a war footing to contain the economic damage wrought by the pandemic. And mistakes were bound to happen in an operation undertaken on such a massive scale.
While critics of direct aid, such as the stimulus check, are inclined to maintain that the needy splurged on the aid. But the speed, size, and variety of the reduction in hardship afforded by the stimulus checks vindicated the federal government initiative.
One of the major upsides of the stimulus checks was that they shortened the period of the recession. The recession that followed the reopening of the economy after the long shutdown period was the shortest since World War II. There have been around 13 recessions since the war and the economy has bounced back strongly after each. But the recovery time had been prolonged and painful.
But it was a different story in this instance. The last two quarters of 2021 witnessed an unprecedented boom that wiped out the deficit and helped many states declare a budget surplus. It is these funds that are coming in handy for states to declare generous stimulus checks for their residents who have been affected by inflation.