Stimulus Checks Could Return In A Recession

Americans benefitted greatly from stimulus checks during the beginning of the COVID-19 Pandemic, and now, with the threat of a Recession looming, some have wondered if other rounds of payments could be on the horizon as many struggle with record inflation. While no decisions have made yet, some experts feel that if a Recession does in fact happen, that the government could consider sending out more checks as a result.

Speaking to CNBC, several financial experts indicated that a recession could trigger the government to send out another round of stimulus checks, as Americans may need the funds. However, the likeliness also depends on what is believed to have triggered the recession, according to Joseph Vavra, an economics professor at the University of Chicago.

In his analysis, Vavra stated that because some believe the high inflation rates are at least partially tied to the three rounds of COVID-19 stimulus checks, and a recession could be triggered because the Federal Reserve continues hiking interest rates, checks would be counterproductive. However, he also noted that if a recession got bad enough, the government would likely change its tune.

“I think it’s likely they may be used again in future deep recessions,” he said.

However, while Vavra was more cautious about the possibility checks would be utilized again, others felt that they could be more guaranteed.

“I expect stimulus checks to be sued again,” Claudia Sahm, a macroeconomic policy consultant and former Federal Reserve economist said. “They worked.”

Why stimulus checks worked is a reason some economists feel they could be deployed again in the case of a recession. When many were facing unemployment, the extra cash allowed them to feel the effects of the pandemic less severely, with the first two payments playing a role in helping lift more than 11.7 million Americans above the poverty line. Because Americans had extra cash in their pockets, they were able to still keep the economy stimulated through purchases and paying down debts.

“In their absence, consumer demand would have likely been lower, threatening larger declines in employment,” Zachary Parolin, a research scientist at the Center on Poverty & Social Policy at Columbia University said.

“If economic shocks put the economy at risk, then stimulus checks will certainly be a tool that the federal government considers applying,” he added.

In addition to stimulus checks, Americans also saw other forms of aid during the pandemic, including enhanced unemployment benefits if they were furloughed, enhanced child tax credits, eviction moratoriums for unpaid rent and a freeze on student loan repayments.

As of now, most of those programs have ended, with the pause on student loans the only remaining form of aid, and currently set to expire in August. Americans have been feeling the pinch even more with inflation, which has caused prices on everything, from food to fuel, to skyrocket, and several states seeking ways to try and provide some relief to residents.

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