Update on the Stimulus: Was It a Mistake to Distribute the Checks?

According to the US Census Bureau’s supplemental poverty measure, when the US government distributed more than $850 billion in stimulus payments to Americans during the epidemic, the extra money helped elevate 11.7 million individuals out of poverty. According to the Census Bureau, the national poverty rate has dropped from 11.8 percent to 9.1 percent.

The checks may possibly have prevented Americans from sliding into poverty during the pandemic when unemployment reached 14.7 percent.

“I hope we don’t forget how amazing it was that we were able to help people so well and recover so rapidly,” Tara Sinclair, an economics professor at George Washington University, told fivethirtyeight.com.

However, according to a recent study conducted by academics at the Federal Reserve Bank of San Francisco, the negative implications may have overshadowed the benefits, particularly for the final rounds of checks given in December 2020 and March 2021.

According to estimates conducted by the San Francisco Fed, the stimulus may have increased US inflation by about 3% by the end of 2021.

Supply chain issues, rising oil prices, and the Russia-Ukraine conflict have all contributed to the United States’ high inflation rates in 2022. According to, inflation is exceeding wage growth, making it more difficult for lower-income Americans who got stimulus monies during the pandemic to keep out of poverty.

Update on the Stimulus: Was It a Mistake to Distribute the Checks?

Although earnings increased by 5.6 percent year over year in March 2022, inflation increased to 8.5 percent. Inflation was fueled by increased demand for consumer goods prompted by stimulus payments.

The increased spending money for many Americans aggravated the inflation problem, especially when combined with a lower supply of various products — from silicon chips to, most lately, beef.

Policymakers, including Federal Reserve Chair Jerome Powell, were more concerned about the possibility of not injecting enough money into the economy than injecting too much.

“I’m much more worried about falling short of a complete recovery and losing people’s jobs and lives that they established because they don’t get back to work in time,” Powell stated at a press conference in January 2021.

“I’m more concerned about it and the harm it will cause, not just to their lives but also to the economy of the United States.”

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Sinclair told that one of the issues with the checks was that it was impossible to tell who needed the money and when it should cease. According to the San Francisco Fed, the last rounds of checks may have been excessively large, bringing more discretionary money into the economy than typical and increasing inflation.

The government could have better-matched people’s financial demands with the broad fear of inflation if they had been able to reach and identify individuals who needed the money more efficiently.

According to the Fed’s research, the United States has greater inflation rates than other countries with similar economies.

The San Francisco Fed experts found that the economy would have “tipped into outright deflation and weaker economic growth… which would have been tougher to control” if the stimulus monies had not been delivered during the pandemic.

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