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What Were the Results of the Stimulation Tests? Some Believe the Money Contributed to Inflation

When the United States began to shut down in the aftermath of Covid-19, millions of households were left without the income they needed.

Congress enacted a large emergency aid package targeted at giving relief in only a few weeks. “Economic impact payment” checks of up to $1,200 per qualifying adult were included in the law.

Many Americans refer to the three rounds of such cheques as “stimulus checks,” because they include additional payouts of up to $600 and $1,400 per person in 2021.

While the government has used stimulus checks in the past, particularly in the aftermath of the financial crisis, the magnitude and scope of the direct payments were a novel experiment in many ways.

“They were significantly bigger than anything the government had done previously,” Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center, said.

The IRS and the US Department of the Treasury got faster and more efficient with each stimulus check.

The IRS distributed 89.5 million payments in the first two weeks of the first stimulus check programme in 2020.

When Congress approved a third stimulus check on March 11, 2021, the IRS revealed on March 17 that it had already dispersed nearly 90 million payments.

“The IRS gets credit in general,” Gleckman added. “They basically did an incredible job getting these checks out in such a challenging situation.”

There were a few hiccups along the process, including some initial cheques being issued to deceased Americans.

Experts also believe the funds should have been better targeted, as some well-off taxpayers who were unaffected financially by the pandemic received funds as well.

The Tax Foundation’s Erica York, a senior economist and research manager, explained, “There was a trade-off between speed and accuracy.”

“The payouts were not as targeted as they could have been if legislators had alternative options,” York explained. “Due to the nature of the pandemic, politicians placed a larger focus on getting help out quickly.”


She estimates that 90 per cent of taxpayers received money regardless of whether they were in financial need.

The third $1,400 check was phased out more quickly to reduce the amount of money received by those with higher salaries.

According to York, when the money was distributed, the number of households that actually spent them decreased. While the early checks were mostly used for home expenses, the latter checks were more commonly used for saving or debt repayment – a trend that was observed across all income levels.
Payments go unpaid

Reaching non-tax filers who do not generally file returns because their earnings are too low was a problem that remained throughout the distribution of stimulus funds, and then again with monthly child tax credit payments.

President Joe Biden issued an executive order in January 2021 to redouble government efforts to locate the estimated 8 million people who remained unemployed.

While the number of persons who fell through the gaps may have decreased as a result of increased outreach, it’s probable that some people still did.

They couldn’t acquire the money any other way.


“Getting money into the hands of the most vulnerable, people who are transient or unbanked, or folks with little to no internet access, particularly in rural areas, was really, really difficult,” said Dorian Warren, co-president of Community Change, a national organisation that helps low-income Americans, particularly people of colour.

“They couldn’t acquire the money any other way,” he explained.

Furthermore, due to the intricacy of the forms or the fear and shame connected with the IRS, those individuals may have been hesitant to sign up for payments, according to Warren.

Mitch McConnell and Nancy Pelosi, respectively, are the leaders of the Senate and the House of Representatives.

In Washington, D.C., House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Mitch McConnell, R-Ky., pay tribute to the late Rep. John Lewis, D-Ga.

For much of 2020, legislators on Capitol Hill were split on whether or not to send more payments. Former President Donald Trump proposed a series of $2,000 cheques. President-elect Joe Biden did, too.

After Biden was elected, however, Washington leaders bargained down to $600 per individual for the second round, resulting in a new legislative package with $1,400 payments to top it off.

Those last checks took place just as the economy was beginning to improve.

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Gleckman stated of the third round of checks, “With the benefit of hindsight, you could conclude that was probably unnecessary.” “However, I believe that was an appropriate decision at the time.”

Some say that the stimulus money may have exacerbated such problems now that the US has reached new highs in inflation.

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