MStimulus money could be coming your way if you live in certain states. But the federal government is unlikely to allow another round of stimulus checks in the near future.

Payments issued by the state are generally lower than those approved by Congress in 2020 and 2021. For those struggling to cover the high cost of food, gas and utilities, any help is welcome. But some experts worry that the stimulus payments could push consumer demand even further and raise inflation even further.

How effective have Covid stimulation checks been?

Stimulus checks, which were designed as advance tax credits, have been largely effective in helping consumers cover essential expenses during Covid shutdowns.

Those who received a payment told the Bureau of Labor Statistics that their main uses of the money were for food (66%), rent (28%) and mortgage payments (23%).

A few features helped make the relief effective, including the fact that earned income was not required to qualify and the tax credits were refundable, meaning they didn’t just lower your bill. tax, but could also be refunded to you.

“[The] The Treasury and the IRS very quickly provided a lot of money to eligible people,” says James R. McTigue, Jr., director of tax policy and administration at the US Government Accountability Office (GAO). The GAO publishes regular reports on the federal response to COVID-19.

But there were difficulties in distributing the payments. Some of the most financially burdened people were the least likely to receive a check, including 12 million people who weren’t required to file their taxes and didn’t automatically receive the CARES Act stimulus payment.

“We found that underserved communities such as non-filers, new filers, unbanked/under-banked families, families with mixed immigrant status, those with limited internet access, and homeless people were likely to have difficulty receiving timely payments,” says McTeague.

Dunning checks passed

The Covid pandemic wasn’t the only time a national emergency prompted the federal government to send large-scale relief to individuals. These past relief efforts also included direct payments:

• 1933 New Deal: Direct payments are sent to farmers to compensate for reduced production, and to individuals.
• Economic Stimulus Act of 2008: Included rebates of up to $600 per taxpayer, with an additional payment of $300 per child.

Why the Feds Won’t Send Another Stimulus Check Soon

Although the three rounds of Covid stimulus checks kept many households afloat during the worst stages of the pandemic, lawmakers show little support for another round to tackle inflation.

Some experts say providing more money to consumers would exacerbate the main cause of inflation: high demand and low supply.

“We don’t seem to have a demand generation problem today. People (including businesses and governments) spend a lot, so we don’t need to increase aggregate demand,” says Josh Bivens, research director at the Economic Policy Institute.

“Stimulus checks would increase demand,” says Jason Furman, a Harvard economics professor and former chairman of President Obama’s Council of Economic Advisers. “At the moment, however, the supply is very limited, so any additional demand would simply drive prices up.”

Furman points out that past stimulus checks helped fight economic recession because they were associated with interest rate cuts by the Federal Reserve.

Read more: The Fed raises rates another 75 basis points: How it can affect your money

“If the government sent stimulus checks today, however, it would fight the Fed raising interest rates to curb inflation,” Furman said, “the result would be increased economic volatility and uncertainty.”

Bivens suggests a better solution would be to focus on addressing supply chain delays. Additional policies that could also help include higher taxes on the wealthy and corporations, he says, but reducing inflation should be narrowly focused on low-to-moderate income households.

What is the federal government doing to fight inflation?

President Biden has proposed a handful of measures to fight inflation, but many have faced opposition from Congress. In the meantime, certain measures are being taken at the federal level to reduce inflation:

Increased oil supply

An additional million barrels of oil per day are being released from the country’s strategic petroleum reserve until November. Furman notes that this decision likely had a slight impact on inflation.

In a further effort, the Environmental Protection Agency (EPA) has granted an emergency waiver to allow E15 gasoline, which produces higher emissions but costs less, to be sold throughout the summer .

Improving supply chains

Lawmakers took several steps to improve supply chain infrastructure and lower prices for consumers, including cutting tariffs, passing the bipartisan Infrastructure Act and launching the Disruption Task Force supply chains.

Reduce demand

“The main lever the government has to reduce inflation is to rein in demand in the economy,” Furman says.

“The Fed currently does this by raising interest rates and Congress could help by cutting government spending or raising taxes. Historically, this is the only way the government has brought inflation down,” says- he.

On July 27, the Federal Reserve made its fourth interest rate hike in 2022. Several more hikes could take place before the end of the year.

How do governments react to inflation?

Direct payments may not help inflation, but many state governments respond to price increases by offering direct payments to their residents. Here is the maximum payment for people in states that have approved payments:

• California: $350, plus $350 for qualifying dependents
• Colorado: $500
• Delaware: $300
• Florida: $450 per child for some households
• Georgia: $250
• Hawaii: $300
• Idaho: $75
• Illinois: $50
• Indiana: $125
• Maine: $850
• Minnesota: $750 for frontline workers
• New Jersey: $500
• New Mexico: $750 over two discounts
• Oregon: $600
• South Carolina: $800
• Virginia: $250

Five additional states have pending legislation for stimulus payments or tax refunds, including Kansas, Kentucky, Massachusetts, North Carolina and Pennsylvania. Some states have also approved gasoline tax holidays, during which the state gasoline tax will be suspended.

President Biden has called for a federal gasoline tax exemption that would lower gasoline prices an additional 18 cents per gallon, but Congress is unlikely to pass the proposal.

Additionally, the Gas Rebate Act of 2022, which includes a proposal for energy rebates of $100 per month per eligible ratepayer, also appears to lack the support it would need to pass.

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