Why Joe BIden Might Look Back at Stimulus Checks as a Mistake

Stimulus Check Return

Why Joe BIden Might Look Back at Stimulus Checks as a Mistake

But some middle- and- low-income households may have been reluctant to spend the second and third rounds of stimulus payments due to the uncertainty of the pandemic and the labor market.

The majority of American households that received the third round of stimulus payments of $1,400 mostly used the money to pay off existing debts, according to a new analysis.

The report, released by the Peter G. Peterson Foundation that 49 percent of recipients used the extra funds to pay off debt, 32 percent mostly saved it and only 19 percent mostly spent it.

The report also compared how the three separate rounds of direct payments were used among recipients.

“The first round of funds was mostly disbursed in April of last year when the unemployment rate was at its highest (14.7 percent), and therefore many households used the money to pay for expenses… Nearly three-quarters of U.S. households used, or planned on using, those initial $1,200 payments primarily for expenses as opposed to saving them or using them to pay off existing debt,” the report said.

It added, “However, that spending pattern changed for the second and third round of stimulus checks. While many households reported that they still used, or planned on using, part of those latter payments for expenses like food and rent, only about one-fifth of households indicated that they used the money primarily for those purposes—opting to either save the payments or use them to pay off debt instead.”

The Cares Act, which sent eligible Americans $1,200 direct payments, passed at the onset of the coronavirus pandemic, just as the unemployment rate hit the double digits and statewide lockdowns were in place. The report indicated that 74 percent of the stimulus check recipients spent that money on essential expenses like food and rent.

But just a few months later, former President Donald Trump passed a second round of direct payments of $600, and, according to the report, only 22 percent of recipients spent the extra funds, while 51 percent used it to pay off debt and 26 percent saved it.

The spending dropped again for the third round of direct relief, as 19 percent mostly spent the direct federal aid.

“Those spending patterns were even more pronounced by income level,” the report said. “While all households were more likely to have spent the first round of payments, higher-income families were more likely to have saved the money—a trend that was more noticeable for the second and third round of payments.”

The analysis also noted that some middle- and- low-income households may have been reluctant to spend the second and third rounds of stimulus payments due to the uncertainty of the pandemic and the labor market.

And while economists are still examining the impact that the direct payments had on the economy, the report suggested that “they may have contributed to a rise in personal income, consumer spending, personal savings, and economic growth.”

President Joe Biden has recently faced growing pressure from congressional Democrats to pass a fourth round of stimulus payments or approve of a massive spending bill that sends recurring checks to struggling American families until the end of the pandemic.

Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report, and The Hill.

Image: Creative Commons