When the American Rescue Plan Act was finally signed by President Biden in March 2021, the US economy was yet to recover from the devastating blow of the pandemic. Not only were millions of Americans without a job, but the COVID-19 vaccine was also available to only a few, mainly frontline workers and high-risk individuals. The third stimulus check came as a big relief for individuals and households.
Many people were in a position where they could neither join jobs even if they wanted to out of concern for their and their family members’ health. In this situation, the $1,400 stimulus checks were warranted and saved many low and moderate-income individuals and households from starvation, homelessness, and defaulting on their rent and loans.
But the situation has changed vastly after 2022 and not only have the people been finally freed from the clutches of the killer pandemic, there are many jobs on offer as all sectors have opened up and the economy is going ahead at a steady pace. But fears of another recession persist even as the federal administration has increased Fed rates to contain the record inflation.
But the rise in wages has failed to match inflation rates. Prices of almost all essentials have hit record highs. It includes gasoline, groceries, services, and transport charges. For the first time in decades, inflation rates crossed the 8% mark and as stated way above that mark for close to a year.
But the labor market is in a way better shape than it was in the first three quarters of 2021. And even as many consumers continue to struggle with the high cost of living, that will not be enough to warrant another round of federal stimulus checks.
Substantial Fall In The Jobless
The national rate for the jobless was at a healthy 6% in March 2021. It was a big relief from the abnormal spike a year earlier when it had spiked to 14.7%. it was a huge improvement but continued to be high when compared to figures before the pandemic.
But this rate had sunk way more by March 2022. The jobless rate was just 3.6% and was in line with the national rate of unemployment that was before the COVID-19 crisis (February 2020) when it stood at 3.5%.
Thus, the US economy stands in a much better situation than it was during and immediately after the pandemic. This makes it difficult to justify another stimulus check from the federal administration.
The stimulus check, especially the federal economic impact payments and inflation, have become inextricably linked to the US economy ever since the pandemic. It was a major political issue during the midterms, though going by the results, it appears that the Republicans did not make much headway by linking the stimulus checks and the record inflation rate.
But while the Republicans maintain the whole issue of rising prices is largely the reason for economic mismanagement by the Democrats and the successive stimulus checks, especially the third stimulus check.
While the Republicans argue that pumping such a large amount directly into the hands of individuals and families did not serve the purpose it was intended for. They say that the excess money handed over to households was spent in ways that led to inflation and which continue to assail the US economy to this day.
This sudden influx of money led to an excess of spending power and people spent their money on things that were not part of the essential list. This splurging led to excessive demand and consequently, there was a demand beyond which American factories could produce or supply. The disruption of supply chains during the pandemic worsened matters as complex products such as cars could not arrange for parts in time to satisfy consumer needs.
This led to a spike in prices and led to a situation when prices kept climbing to cool down the rising demand of consumers. At present more workers are employed and the unemployment rate stands at its slowest since the pandemic.
Bringing Down Costs To More Manageable Levels
If lawmakers introduce another stimulus check at this stage, there are fears that more federal funds could once again trigger the rise in prices that have already reached unmanageable levels.
But it is feared that it could be months of rampant inflation before living costs begin to settle. The first thing that has to be resolved is the one concerning supply chains.
The supply chains continue to be restrained by logjams in supply chains. They have to unclog and production has to be ramped up.
Once the supply chain issues are resolved for good, the demand for many goods will begin to wane. But America could face several months in which inflation goes out of control before the cost of living settles to a point.
supply chains continue to face severe bottlenecks, and one thing that needs to happen is that these channels should be unclogged and should ramp up.
Once goods are more easily available, prices are bound to go down with a corresponding drop in demand. But till that happens, consumers, especially those who live paycheck to paycheck without any savings, will have to continue to face financial trouble.
The only bright news is that with ample opportunities on the job front, people who need a boost to their income will be able to get one by going for a secondary gig. But that would not be an easy solution for all, and it is understandable why Americans are frustrated and clamoring for another round of stimulus checks. They contend that things are just as difficult now, if not more, as they were during the pandemic.
But it is apparent that President Biden is too tied down by Washington politics and has no plans to move forward with another round of stimulus checks in 2023. The House of Representatives has also changed hands and the GOP is now in control. This severely curtails the power of President Biden. Even the expanded Child Tax Credit stimulus check, a project close to Biden, was stopped by Congress even though it was initially slated to continue through 2025.
