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Home›Personal Finance›Stimulus checks reduced financial hardship for American families, study shows

Stimulus checks reduced financial hardship for American families, study shows

By Hector C. Kimble
June 10, 2021
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As lawmakers contemplate the possibility of a fourth stimulus check, it helps to understand the impact of the first three payments.

Lawmakers are currently debating the possibility of a fourth stimulus check, with many prominent Democrats calling for continued payments. As politicians scramble to determine the best path forward to recover from the pandemic, it is helpful to consider the impact of stimulus payments already made.

Three separate checks were distributed in 2020 and 2021, including two under the Trump administration and one under the Biden administration. Recently, the University of Michigan conducted a study to determine the impact of these direct payments on Americans’ bank accounts.

Here is what they found.

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Stimulus checks played a major role in reducing material hardship

According to research from the University of Michigan, the government’s initial response to the coronavirus pandemic helped millions of Americans avoid financial catastrophe during the pandemic. In fact, the upfront direct payments actually improved the financial stability of some American families (at least temporarily) compared to before COVID hit.

Unfortunately, a delay in passing further stimulus has caused more difficulties in the intervening months. This was before additional relief measures were enacted that once again improved the financial situation of millions of people.

Researchers analyzed responses from the Household Pulse Survey conducted by the US Census Bureau. This survey assesses the level of material hardship experienced by American families. Material hardship is defined as including food insecurity or the inability to cover household expenses.

According to Pulse data, there has been a decrease in difficulties following the passage of each of the three stimulus bills, including:

  • The law on aid, relief and economic security against the coronavirus (CARES law) during the start of the pandemic in March 2020
  • December 2020 relief bill, former President Trump enacted
  • The American Rescue Plan Act signed by President Joe Biden in March 2021

This decline in the number of families facing financial hardship came at a time of record unemployment. As a result, researchers believe it was the stimulus checks and income support provisions contained in COVID-19 relief legislation that have helped improve the personal finances of so many.

This improvement was spectacular following the authorization of stimulus funds. In fact, between December 2020 and April 2021 alone, there were:

  • 40% reduction in food insecurity
  • 45% reduction in financial instability
  • 20% reduction in adverse mental health symptoms

Low-income households experienced the largest drop in hardship rates. In particular, those with an annual income of less than $ 25,000 saw a particularly marked reduction in:

  • Food insecurity
  • Financial instability
  • Inability to cover household expenses

Adults with children also experienced a larger decrease in financial instability, likely because the stimulus payments provided funds to both adults and dependent children. However, even many high-income households have experienced a decrease in hardship.

The pandemic has resulted in massive unemployment and an unprecedented economic and public health catastrophe. Despite such difficulties, the researchers concluded that the actions taken by the federal government “in the form of strong and large-scale cash income transfers” helped to avoid hardship and, in some cases, to reduce suffering.

Lawmakers shaping policy goals for the future may want to keep this research in mind, especially if the economic recovery does not occur as quickly as hoped.



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