Recession Could Prompt Fresh Round Of Stimulus Checks – Following the third and final round of federal stimulus checks, delivered under the American Rescue Plan Act of 2021, there has been much discussion about the possibility of a fourth round of federal stimulus. Despite the talk, however, it has been left to the states to use their tax surpluses to distribute multiple rounds of checks and rebates to help struggling families amid an economic crisis.
And while Congress and the White House have no plans to initiate a fourth round of federal stimulus – despite pressure from the progressive wing of the Democratic Party – some experts say that a recession could prompt the White House to act.
What the Experts Say on Stimulus Checks
Tara Sinclair, a George Washington University economics professor, told MoneyWise recently that stimulus checks have been a “common policy in the past” during times of economic recession and predicted that they would “likely” be part of a federal response to the next recession.
That doesn’t mean, however, that she thinks it’s a good idea. Sinclair instead suggested that now would be a “terrible” time to distribute a new round of stimulus checks, despite the fact that the United States is technically in a recession.
“If we stimulated the economy even further, that wouldn’t get us more economic growth, that would instead, very likely, just get us even more inflation,” Sinclair said.
Megan Curran, policy director at the Center on Poverty and Social Policy, also told MoneyWise that stimulus packages are a good way to reduce poverty.
“If you talk to families directly, they will probably already tell you that they’re in a tight spot, or they’re worried about finances,” Curran said, noting that unemployment benefits and child tax credit payments have allowed for real reductions in poverty. But while some economists say that stimulus checks are a short-term solution that worsens inflation and hurts the lowest paid, the fact that stimulus checks provided immediate relief could well be enough for the White House to pull the trigger on another round of stimulus.
First, though, the White House has to admit we’re in a recession, to begin with.
Stimulus Checks Possible: But We Need to Admit Recession First
After the United States posted negative growth for the second consecutive quarter last Thursday, President Joe Biden and White House officials rejected the idea that the United States is in a recession – despite the fact that the definition of a recession has long been understood to be two consecutive quarters that see negative growth.
The United States Bureau of Economic Analysis announced last week that real gross domestic product (GDP) “decreased at an annual rate of 0.9 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter.”
Treasury Secretary Janet Yellen denied that the news meant the United States was in a recession – as did economic adviser Brian Deese and Commerce Secretary Gina Raimondo.
President Biden also told reporters on Monday that the U.S. is “not going to be in a recession.”
“My hope is we go from this rapid growth to a steady growth,” he said.
Secretary Yellen also claimed that the news showed a “transition” in the U.S. economy. During a press conference at the Treasury, Yellen insisted that a recession requires a “broad-based weakening” of the economy that included business closures, layoffs, and a private sector slowdown.
“That is not what we are seeing right now,” she said. “When you look at the economy, job creation is continuing, household finances remain strong, consumers are spending, and businesses are growing.”
But high-profile Democrats have long accepted the definition of a recession as two-quarters of economic contraction. House Speaker Nancy Pelosi said in 2008 – the time of the last recession – that the “technical definition” of a recession is two-quarters of negative growth.
“And so while they may have saved the second quarter from a technical definition of recession, the fact is, we are now into the third quarter and we need to have another stimulus package,” Pelosi said in July 2008.
If the Democrats, who presently control both chambers of Congress and the White House, have any intention of implementing a fresh round of economic stimulus, it will first require its leaders to admit that a recession is taking place. At this rate, however, it seems unlikely that they will – at least until the November midterms.
Should the economy continue to contract after the fall, Alexandria Ocasio-Cortez and her progressive “Squad” may finally get the additional stimulus check they have been calling for since last year.
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.