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Friday, December 9, 2022

Updates On The Stimulus Checks: Federal Pullout Leads To States Coming Up With Their Version Of Relief Payments

Even as plans of the Biden administration to send additional stimulus checks to Americans were stymied by the Republicans, several states stepped in to provide extra financial help. The brief recovery seen in 2021 after the economic meltdown during the peak period of the pandemic in 2020 was negated in the first quarter of 2022.

The third stimulus check signed into law under the American Rescue Plan by President Joe Biden was the biggest of the three stimulus checks. The Treasury Department, in total, was responsible for managing over $1T in American Rescue Plan programs and tax credits.

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When President Biden signed the plan into law, the economy was on the verge of a total collapse as tens of thousands of businesses were shuttered, many for good, while millions of families struggled to put food on the table.

An Unprecedented Pandemic And An Inept Administration

A year into the pandemic during the first quarter of 2021, the economy was in a spiral. In the fourth quarter of 2020 under Trump, the US GDP had nosedived by over 2% that year and the unemployment rate was at an average of 6.7%.

The growth rate in employment was down to a mere 213,000 jobs a month. The employment rate further slowed in December 2020 as the economy continued to lose jobs. It was a period of unprecedented difficulty for families, workers, businesses, and local administrations.

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Too many citizens were struggling to put food on the table and pay rent and utilities even as workers kept losing jobs or had their hours drastically cut.

On the other side of the divide, businesses struggled to stay afloat and several sectors such as transportation, travel, hospitality, and tourism were hit terribly. They were forced to lay off workers or shut down as Americans were forced to stay within their homes.

These economic challenges led to severe difficulties for local and state governments whose revenues from services and taxes hit rock-bottom as businesses closed shutters, and public transportation idled away.

The American Rescue Plan Act Jumpstarted The Economic Recovery

The main task ahead was putting the economy on a path to a robust recovery. And that required decisive action on multiple fronts. The first was immediate aid for individuals and families, followed by lifelines for stressed businesses to survive through the most difficult period and turn them on the road to recovery. The third was support for state, local, and tribal governments.

These measures go parallel to the historic vaccination effort to arrest the number of cases and usher in the recovery of personal economic activity.

The American Rescue Plan succeeded in meeting these immediate needs and managed to put the country on a road to recovery. It was just the jump start that the economy needed at that stage if it was to come out of the pandemic in a stronger state than when it started.

President Biden set up to meet these direct interlocked challenges and provide immediate relief to families, businesses, and local governments, including states.

The signing of the American Rescue Plan Act on March 11, 2022, led to immediate relief measures starting with the $1,400 stimulus check to all individuals earning below $75,000. For couples filing jointly, the income criteria were double that at $150,000. The stimulus check amount tapered with income levels above that amount.

American businesses received an additional $7B in loans under the Paycheck Protection Program. 10s of billions of dollars went to industries hit the hardest, such as the airlines. Other measures included vital tax credits to businesses to retain employees on their payroll and also providing leave to care for sick family members as the pandemic continued to grip American society.

Finally, for the local administration, the Rescue Plan provided $350B as support for immediate needs that would serve as the stepping stones to targeted programs that would support critical investments in future capital projects.

The Entry Of State Administration In Stimulus Check Payments

The stimulus check and other federal support died out in the final quarter of 2021. This is when the states stepped in with their stimulus checks and other economic recovery measures.

With federal efforts to provide additional stimulus support in 2022 falling flat, several states have already stepped in to provide additional financial support. The financial measures have come in various forms, starting from tax rebates, to gas cards, stimulus checks, and discounts on taxes on fuel and groceries.

California was the first among states to come up with stimulus checks, Golden State Stimulus I and II. With rising inflation in the first quarter of 2022, the Golden State has proposed a gas card worth $400 to families in the state with a maximum number of 2 cards permissible for a family. The cards could go out in July.

Residents of Hawaii will get a direct transfer into their accounts as the state legislature has already allowed $300 per individual for income below $100,000 and $100 above that.

Illinois has proposed multiple programs to support its residents that include a relief plan worth $1.8B signed recently into law. The plans include suspension f grocery taxes for one year and fuel tax for 6 months. Individual taxpayers will receive $50 per person and $100 per child for a maximum of three children.

Indiana is also enjoying a surplus budget and has proposed a taxpayer refund worth $125 as revealed by the Dept. of Revenue of the state. Taxpayers could get a direct deposit if they have filed their 2020 returns before January 3 this year.

Residents of Maine will get a direct stimulus check worth $850 if their adjusted gross income (AGI) is less than $100,000 for individual taxpayers and $200,000 for married taxpayers. The amount could start hitting accounts as early as the first week of June.

Around 858,000 residents of Maine could be in line for the state stimulus check.

The economy saw major progress in 2021, especially in the last two quarters. But it was negated in part by the high inflation rate that has continued to bleed the economy in the first and second quarters of 2022.

While some analysts have said that the successive economic stimulus checks fuelled inflation, the White House has maintained that the $2T injected into the economy under the American Rescue Plan did not significantly affect inflation and said that it instead saved the economy from a total collapse at a critical juncture.

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