Impact of Stimulus

“I am very grateful for the stimulus checks. They were a short-term shot-in-the-arm for clients at a time when it was challenging for us to keep up with needs.”

Lisa Bolen, Northeast Michigan Community Service Agency

According to the New York Times, June 2, 2021, when the federal government approved offering most Americans two additional rounds of stimulus checks totaling $2,000 in the early months of 2021, it effectively conducted a huge experiment in safety net policy. Supporters of the stimulus checks said the outpouring of cash would ease economic hardships caused by the pandemic. Skeptics called the policy wasteful and too expensive.

An analysis of Census Bureau surveys found that from December 2020 to April 2021, in households with children, food insufficiency fell by over 40%, financial instability fell by 45%, and reported adverse mental health symptoms fell by 20%.

While it is likely that the economic rebound and other forms of aid helped, the largest declines in measures of hardship coincided with the $600 checks that reached most recipients in January 2021 and the $1,400 checks that were distributed mostly in April 2021.

Critics of such aid warned that recipients might waste it. But the authors of the study say the size, speed, and variety of the hardship reductions justify the use of broad cash relief. Furthermore, other forms of aid that were targeted for specific use took many months to distribute.

“We see an immediate decline among multiple lines of hardship concentrated among the most disadvantaged families,” observes H. Luke Shaefer, a professor at the University of Michigan, who co-authored the study with colleague Patrick Cooney. The two conclude that the success of the federal government’s relief measures may be due to the speed, breadth, and flexibility of its broad-based approach, primarily relying on cash transfers.

The impact of the checks is being assessed to determine several factors including whether they offer lessons on how to best help those living in poverty during less exceptional times.

(reference Material Hardship and Mental Health Following the COVID-19 Relief Bill and American Rescue Plan Act by Patrick Cooney and H. Luke Shaefer, May 2, 2021)