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Loved That $1,400 Stimulus Check? It Helped Create the Inflation You Hate

Stimulus Checks
US Treasury Check. Image Credit: Creative Commons.

Key Points and Summary: The massive COVID stimulus packages and stimulus checks under Trump and Biden helped the economy recover quickly but also contributed to years of inflation.

-Economists widely agree that stimulus was necessary but question whether the Biden administration’s $2.2 trillion American Rescue Plan was too large. While it prevented a prolonged recession, rising prices played a key role in Democrats losing the 2024 election.

-Analysts argue future economic relief efforts must strike a balance—big enough to support recovery but not so large that inflation spirals out of control.

-With lessons learned, policymakers face a critical question: How should the U.S. handle the next crisis?

The Stimulus Check Dilemma: Did the U.S. Overspend During COVID?

In 2020 and 2021, in response to the COVID pandemic, both the Trump and Biden administrations passed massive spending packages, both of which involved stimulus checks for most Americans. 

The years of inflation that followed are believed by many economists to have resulted, at least in part, from those government efforts, since they put so much money into the economy. 

Now, the debate isn’t really about whether there should have been a stimulus at all, but rather about the size of it. After all, when the Biden Administration passed the $2.2 trillion American Rescue Plan, its version of the stimulus, in early 2021, it was widely reported to have sought to avoid what it saw as the mistakes of the Obama Administration.

The American Recovery and Reinvestment Act passed in early 2009, was seen 12 years later as too small and not resulting in strong enough economic growth. 

But now, most believe that the lingering inflation helped the Democrats lose the presidential election in 2024. 

So what would have been the right thing to do, stimulus-wise? 

The View From 2022 

This question was frequently explored throughout the years 2022 and 2023 when it was clear that inflation remained a problem in the economy. 

That April, FiveThirtyEight published an analysis looking at whether the checks themselves had been a mistake. 

“As U.S. prices continue to rise by rates not seen in decades, it’s become clear that the stimulus came at a significant, unintended cost: inflation,” Santul Nerkar and Amelia Thomson-DeVeaux wrote in the FiveThirtyEight piece. “It’s unclear whether inflation has reached its peak, but the situation is now economically and politically toxic, and it has left many of the same policymakers, advocates, and economists now asking whether the stimulus checks were a mistake.”

The authors make clear that the 2020 and 2021 packages were successful in many ways: They reduced poverty, while also helping quickly pull the economy out of recession and lower unemployment. 

“The lessons we draw from the response to the COVID-19 recession are important, because they’ll almost certainly shape how we respond to the next economic downturn. In the wake of the Great Recession, policymakers shot too low,” the authors write. “Now, they appear to have shot too high. If this were the story of Goldilocks, we’d be poised to get things just right next time — but politics is not a fairy tale, and it’s very possible that we’ll overcorrect whenever another recession hits.”

A Series of Tradeoffs 

That June, CNBC also took a look at the same question. 

“There was a trade-off between speed and accuracy,”  Erica York, senior economist and research manager at the Tax Foundation, told CNBC, noting that the government got the checks out the door with unprecedented speed. “The payments were not as targeted as they could have been if lawmakers had other options… A higher priority for lawmakers was getting relief out fast because of the nature of the pandemic.”

“There’s inflation across the board, and the U.S. is experiencing kind of a uniquely higher inflation,” York added in the CNBC story. “I think it’s driven by not just the stimulus payments themselves, but the size of the relief overall.”

Krugman’s View 

More than a year later, in the fall of 2023 — at a time when inflation had been reduced from the previous year — Paul Krugman, then still with the New York Times, asked whether “Big Stimulus” had been a “Big Mistake.” 

President of the United States Donald Trump speaking at the 2018 Conservative Political Action Conference (CPAC) in National Harbor, Maryland. By Gage Skidmore.

President of the United States Donald Trump speaking at the 2018 Conservative Political Action Conference (CPAC) in National Harbor, Maryland.

“If you want to argue that policymakers made a historic mistake in 2021, I think that case has to rest on the proposition that even a temporary inflation burst did lasting psychological, or maybe even more important, political damage,” Krugman wrote. 

However, a year later, the Democrats lost the presidential election, with inflation a significant reason.

So, if they could repeat it, they would likely still pass the stimulus, just at a smaller amount. 

About the Author: Stephen Silver

Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.

Written By

Stephen Silver is a journalist, essayist, and film critic, who is also a contributor to Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review, and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

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