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We shouldn’t expect lawmakers to come through with aid anytime soon.
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For well over a year now, U.S. consumers have been battling inflation. And higher living costs have forced many people to do things like take withdrawals from their savings and rack up debt on credit cards to keep up with their bills.
Meanwhile, February’s Consumer Price Index was just released, and it showed that inflation rose 0.4% on a month-over-month basis. And that’s not great.
Now the good news is that the annual rate of inflation dropped to 6%, which is still high, but lower than January’s 6.4% annual inflation reading. But all told, living costs are still exorbitant, and consumers are still struggling to cover their basic expenses. And unfortunately, we can’t expect stimulus aid to come to the rescue in this situation.
Economic conditions don’t warrant a stimulus round
Lawmakers have turned to stimulus checks in the past during periods of economic sluggishness and high levels of unemployment. But that’s not where we are today.
The national jobless rate in February was 3.6%, which is very low, historically speaking. (For context, it’s comparable to where we were prior to the pandemic.) And last month, the U.S. economy added more than 300,000 new jobs.
In a situation like this, it’s extremely difficult to make the case for a stimulus round because there are no indications that the economy needs a boost. And that’s why the federal government is unlikely to send out stimulus checks anytime soon.
Now what we might see is some stimulus aid later on in the year on the part of individual states. Many states took that step last year to help residents cope with inflation. But for many Americans, stimulus aid just won’t be on the table.
A round of stimulus checks might only make inflation worse
At this point, many Americans are no doubt frustrated over the fact that lawmakers aren’t stepping in to help them get through this prolonged period of inflation. But it’s important to realize that stimulus checks aren’t actually going to solve the problem at hand. If anything, they’re likely to make the issue worse.
A big reason inflation started to soar is that Americans’ bank accounts were more robust in 2021 after having received stimulus aid and funds from boosted tax credits, like the Child Tax Credit. That gave consumers a lot more spending power. But an uptick in spending created a situation where demand exceeded supply, and that’s the perfect formula for inflation.
In fact, the whole reason the Federal Reserve has been raising interest rates aggressively is that it wants to discourage consumers from spending. And driving up the cost of borrowing is likely to lead to that scenario. If consumers grow weary of rising credit card and loan rates, they’re apt to cut their spending to avoid getting overcharged.
It’s most likely going to take a notable decline in consumer spending to bring inflation levels down. And since a round of stimulus checks would have the opposite effect, we’re unlikely to see one anytime in the near future.
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