How Have the Stimulus Checks Impacted the US Economy?

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Graph showing Stimulus Check Impact on the US Economy

Impact of Stimulus Checks on the US Economy

The covid-19 pandemic was marked by great pain and disease, but it will also be recognized for establishing a social assistance system unprecedented in the United States.

Residents were inundated with government cheques to keep them afloat as the economy collapsed, getting thousands of dollars in assistance.

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This has inevitably resulted in significant changes to the American economy.

Several notable elements include a decline in unemployment, averting food poverty for many, but rising inflation.

The first stimulus check

President Trump signed the CAREs Act into law on 27 March 2020.

The IRS immediately started delivering $1,200 stimulus cheques. When the cheques were sent, the US unemployment rate was 14.8 percent.

Additionally, 38% of respondents to the Household Pulse Survey (HPS) in late April said that they or someone in their household expected to lose income in the following four weeks.

By early May, the stimulus check had been received by a large number of homes. However, food insecurity rates did not decrease as a consequence.

The HPS inquires if respondents had “either sometimes or often” insufficient food in the preceding seven days.

Around one in ten families reported suffering food insecurity six weeks after the first payout was sent.

Inflation plummeted to almost zero at the outset of the epidemic but quickly increased.

By the time of the second check, inflation had fallen to 1.2 percent, far below the Federal Reserve’s target of 2%.

Unemployment started to decline as well.

After skyrocketing to more than 15%, the first stimulus check assisted in bringing it down to 6.75%.

This was a significant rise above the pre-pandemic level of less than 4%.

The Second Stimulus Check

Congress enacted the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 in December 2020, which contained money for the distribution of a $600 stimulus check.

By the time the second payment was paid, families were already in financial difficulty.

Food insecurity reached an all-time level in early December 2020.

Almost 20% of parents with children indicated that they did not have enough food “sometimes or often.”

Additionally, 35% reported having difficulty paying for basic costs.

Due to the check’s reduced size compared to the first, it did not have the same effect on people’s spending patterns.

By the end of January, the number had stayed constant at 35%.

Unemployment continued to decline, but at a considerably slower pace, decreasing from 6.7 to 6%.

Inflation eventually above the 2% barrier, rising to 2.6 percent by the third stimulus.

Third Stimulus

The third stimulus check, which was much bigger than the second, was President Biden’s first, worth $1,400.

This was despite his election campaign promise of $2,000 checks.

According to researchers at the University of Michigan, the passage of the CRRSA and the ARP resulted in a significant decrease in hardship as indicated by respondents, notably among “individuals with children and adults living in families with yearly earnings less than $25,000.”

Even individuals with greater salaries saw the declining trend.

The third stimulus witnessed the greatest inflation rate in decades, increasing to 5.4 percent as of publishing.

This is placing a strain on Americans’ bank accounts, as their stored money rapidly depreciates in value.

The unemployment rate, which is slightly around 5%, is practically back to pre-pandemic levels.

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