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6 Ways More Government Stimulus Checks Would Be Good for the Economy


6 Ways More Government Stimulus Checks Would Be Good for the Economy

Rumors of potential additional stimulus checks have been circulating social media. Posts on platforms like TikTok suggest that the checks could be for as much as $2,000 and that they could supposedly arrive by the end of the year.

While receiving a stimulus check during the holidays could certainly help with gift purchase expenses and heating bills, the rumored stimulus checks have not been confirmed and at this time, there's no indication that the Biden or Trump administrations plan to send out additional checks.

However, stimulus checks could have numerous potential benefits for the economy. Much like the two rounds of checks sent out during the COVID-19 pandemic, an additional round of stimulus checks could boost the economy in several ways.

Data from the U.S. Census Bureau's supplemental poverty measure indicates that the 2020 COVID-19 stimulus payments helped to move 11.7 million people out of poverty. That transition resulted in the poverty rate declining from 11.8% to 9.1%. The checks also helped workers navigate a 14.7% unemployment rate, offering valuable support when people were vulnerable to falling into poverty.

Another round of stimulus checks could have a similar effect. By bringing people out of poverty, those individuals become less reliant on federal assistance programs and other supports. Stimulus checks could also potentially help individuals avoid foreclosure or bankruptcy.

Stimulus checks can also help individuals to pay off debts. National Bureau of Economic Research (NBER) data indicates that 31% of the COVID-19 stimulus spending went to paying off debt, while 27% of the checks went into savings.

By paying down or paying off debt, individuals can reduce or eliminate hefty interest payments, which are particularly common on debts such as credit card balances. Paying off debt entirely eliminates a monthly payment, allowing individuals to put that money into savings or other expenses. Chances are that stimulus checks would help people to build up emergency funds, meaning they could avoid going into credit card debt to pay for an unexpected essential expense, like a car repair. Overall, using stimulus checks to pay off debt and save money can put people into better, more stable financial situations.

While some individuals saved their stimulus funds or paid off debts, others put the stimulus checks toward purchases. According to the NBER data, 42% of stimulus checks contributed to consumer spending, including on food, health, and household products. The checks helped to boost consumer spending, and would likely have a similar effect if issued this year, especially during the holidays.

Stimulus checks might lead to a bigger boost in consumer spending because of our current strong economy. The Peter G. Peterson Foundation found that all households were more likely to have spent the first round of checks than saved them, and higher-income families were more likely to save the money. Analysts suggest that some homes may have been reluctant to spend the next round of checks because of the economic uncertainty the country faced during the pandemic. Given today's more stable economy, more households might choose to spend the checks.

That increased spending can lead to greater business support. As businesses sell more inventory, they also purchase more inventory, which supports other businesses and suppliers, as well as the transportation companies involved in shipping that inventory to the business that purchased it.

If enough consumer spending occurs to significantly boost a business, its stock value may increase, leading to profits for investors. Plus, a business that experiences growth may need to hire more staff, which can lead to more employment opportunities. As more jobs are created, the economy is further boosted by a lower unemployment rate, which can lead to more spending that further strengthens businesses in a full-circle effect.

When stimulus checks provide individuals with extra funds, those individuals may choose to invest the money. They might make contributions toward retirement accounts or stocks, decide to buy a home, or might even invest in starting a new business. By encouraging investment, stimulus funds may help individuals to increase their overall net worth. When individuals are more willing to invest in purchases like stocks or homes, the stock market and real estate industries are also strengthened.

Stimulus checks can have widespread effects on the economy, much like we saw during the pandemic. One of their most valuable benefits may be helping to prevent inflation. Since the checks encourage spending and increase demand for goods and services, they also pave the way for economic growth and higher employment rates.

We may not see another round of stimulus checks this year, but past stimulus checks have impacted the economy in many ways. From boosting businesses to helping individuals save and pay off debt, these checks have many positive effects. Most importantly, they provided people with a bit of financial relief and peace of mind during frightening and challenging economic times, allowing us to move forward into a stronger economy.

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