Ever since Congress announced the first round of stimulus checks in March of last year, questions have been raised on the effectiveness of direct payments. Critics of stimulus checks have argued that it fails to meet the set objectives. However, a recent analysis of the last two rounds of coronavirus stimulus checks suggests that the money substantially reduced hardship for struggling Americans.
Q1 2021 hedge fund letters, conferences and more
In the past six months, Congress has approved two rounds of stimulus checks, including up to $600 in December and up to $1,400 in March. Prior to these, Congress approved one more coronavirus stimulus check of up to $1,200 in March of last year.
An analysis of Census Bureau surveys of the last two rounds found that the stimulus checks helped Americans to buy food and pay household bills. This, in turn, reduced anxiety and depression among Americans.
As per the analysis, the biggest beneficiaries of the direct payment were the poorest households, especially those with kids. Further, the analysis found that there was a 42% drop in reports of food shortages from January through April. Also, anxiety and depression dropped by over 20% among all households.
The analysis noted that other forms of aid also played a part in the economic recovery, but the timing of the biggest drop in the hardship measures coincided with the timing of the $600 checks (in January) and $1,400 checks (in April).
Proponents of another round of stimulus checks are hoping that the analysis will inspire lawmakers to approve at least one more direct payment. The analysis didn’t include the first round of stimulus checks (of $1,200 per adult and $500 per child) because the Census Bureau surveys started after that.
Some questions still unanswered
A point to note is that this analysis doesn’t address the main criticism against the stimulus checks. These criticisms are that a significant amount of money went to families who didn’t need it, and that stimulus checks and other aid discouraged many to get back to work.
Several experts feel there was no need of stimulus checks because other safety net programs and rising employment would have helped anyway.
Researchers at Columbia University also estimate that poverty dropped sharply in March. However, one member of the Columbia team noted that more than half of the decline in poverty would have happened even without the relief payments because of tax credits.
Debates have long been ongoing over the benefits of cash payments versus the targeted programs, such as food stamps or housing subsidies. Some argue that though cash payments are easy to distribute and use, the benefits of the targeted programs reach those who need help the most. Also, the targeted programs enjoy massive political support.
Since the start of the pandemic last year, the policymakers have used both – cash payments and targeted programs. Most would argue that the results have been exemplary, both socially and economically.
