Congress approved a $2.2-trillion Stimulus Check package in March 2020, which was accompanied by two more COVID-19 relief installments later that same year and again in 2021. Overall, it was one of the most generous financial responses to the pandemic ever seen anywhere on the earth.
There would, however, be a catch. As prices in the US continue to rise at unprecedented rates, it is clear that the Stimulus Checks are having an unintended consequence: inflation. In a larger sense, the stimulus checks shielded workers from the worst market crises in recent memory, helping the economy to rebound at record speed.
Stimulus Checks Resulted In Higher Rates Of Inflation
In April 2020, when Americans were receiving the first wave of Stimulus Checks — up to $1,200 under the CARES Act — the unemployment rate was at an all-time high of 14.7%. However, it is practically back to pre-pandemic levels two years later, with lots of job openings.
Many policymakers, including Federal Reserve Chair Jerome Powell, concluded that infusing too little money into the economy posed a greater risk than injecting too much. Part of the problem is that the most recent stimulus rounds, which included checks delivered in December 2020 and March 2021, were maybe too large.
However, there was no evidence or economic arguments to back up the decision to give most Americans an extra $2,000 Stimulus Check each. Since the epidemic is still ongoing, we are still learning what the lessons are in many ways. Of course, it is impossible to determine what could have happened if the authorities had not reacted so violently. However, one clear conclusion from the COVID-19 outbreak is that America’s social safety net was unprepared to deal with such a disaster, which explains why the response had to be so massive.
