Those checks may seem necessary, but here’s why they aren’t.
Most important points
- Stimulus controls usually come into play during periods of high unemployment and economic downturn.
- The amount of cash Americans were sitting on this year makes stimulus checks a non-discussion.
Inflation has been rampant since 2021, forcing many Americans to make difficult choices. For some, that meant moving to a less expensive home to avoid falling into credit card debt. For others, it meant paying bills late and hurting their credit scores in the process.
Given the high rate of inflation, many Americans have wondered why lawmakers failed to step in with a round of stimulus in 2022, when in 2021 they were clearly willing to be generous in that regard. But the answer really comes down to the state of the economy — and that of US finances.
Stimulus controls were not required this year
Incentive checks are a common response to an economic slump and rampant unemployment. But that was not the case in 2022. Consumer spending has in any case remained stable this year and the labor market has expanded. And under those circumstances, it was hard to justify bringing stimulus discussions to the table.
But more than that, another reason stimulus checks weren’t in the cards this year is that Americans generally don’t need them. Bloomberg reports that US households held about $1 trillion in cash in the fourth quarter of 2019. By the second quarter of this year, that total had risen to $4.7 trillion.
If that number seems unbelievable, consider that many Americans started 2022 right away with cash for a number of reasons. First, personal spending fell in many households during the pandemic as lockdowns were instituted and then encouraged.
Second, lawmakers have been extremely generous with stimulus aid during the pandemic. They approved not one, but three separate rounds of stimulus checks, the last of which was approved in March 2021.
And it’s not just stimulus checks hitting bank accounts during that time. Lawmakers also expanded the child tax credit, helping many families increase their personal cash reserves. They also improved unemployment benefits to the point that many people who lost their jobs for a period of time during the pandemic came out financially better off.
Because Americans had so much cash this year, it basically wiped out the ability to send stimulus funds. And honestly, that’s not a bad thing. If lawmakers had issued stimulus checks this year, the inflation problem would likely have gotten even worse. So, in a sense, those yearning for a stimulus check can be thankful that lawmakers have not gone down that road.
Dealing with inflation
While Americans in general saw their cash reserves increase over the past three years, not everyone ended up in a better position in 2022 than they were before the pandemic. But unfortunately, legislators have never really been able to find a way to enact pure needs-based stimulus checks. And so while there to be families struggling because of the higher cost of living, the task of isolating those who need a short-term windfall is probably beyond the capabilities of legislators and the IRS.
This means that struggling consumers will unfortunately have to persevere in the coming months until inflation starts to moderate. We already saw year-on-year inflation fall in October compared to September, which is a positive sign. It doesn’t mean that rampant inflation is over, but it does mean that those desperate for a stimulus check will eventually do well.
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