Fourth stimulus check 2022: No, there are no plans to release another payment, but why?
The covid-19 pandemic continues to cause disruptions to everyday life and the economy, but several factors are keeping lawmakers from sending more stimulus.
The covid-19 pandemic is approaching its two-year anniversary and the US just crossed another grim milestone surpassing 900,000 deaths. Despite continued disruptions to business as usual and covid-19 keeping people from working, no new covid-related relief is on the table.
Several factors are at play preventing action to help American households still struggling in the aftermath of the recession caused by the virus. Even after the nation experienced its largest surge yet of the pandemic. Here’s a look why.
Congress previously acted quickly to get relief to Americans affected by the pandemic
When the US and the world were put on lockdown, millions of workers were confined to their homes sending the unemployment rate skyrocketing to 14.7 percent in April 2020. Congress acted rapidly to pass the 2020 CARES Act to get relief to businesses and households, including the first round of stimulus checks of up to $1,200 for eligible adults and $500 per qualifying kid under age 17.
Congress also passed generous enhanced pandemic unemployment benefits which kept households afloat where workers’ businesses were shuttered or they had to stay home because of pandemic-induced upheavals in their lives. Those benefits were extended in 2020 and again in 2021 but have now ceased, being seen by some as the reason behind a severe labor shortage in the US.
Two more rounds of stimulus checks were also passed in the interim of up to $2,000 in total. They are credited with supercharging the economic recovery which had begun to lag at the end of 2020 as a new variant caused infections to surge. But the last one has also been blamed for the current high rate of inflation.
Unemployment expected to fall to 3 percent
The US economy has been going gangbusters, recovering much faster than after the Great Recession. With covid-19 vaccine shots in their arms, Americans began venturing out once again driving up demand and hiring. This led to the most jobs gained on record in one year with the US adding 6.4 million in 2021.
The current unemployment rate of 4 percent though is still above the pre-pandemic level when it was 3.7 percent. And for all the jobs that were added there still remains a nearly similar number of Americans unemployed. However, the St Louis Fed President Jim Bullard predicts that it could decrease below 3 percent in 2022, a level that could mean the economy is overheating.
The Omicron variant didn’t slow down job gains
Unlike last year though, when the Omicron variant pushed new infections to levels much higher than at any time during the pandemic, the US recorded significant job gains. Data collected in the middle of the surge reported 467,000 new hires, over three times what analysts had expected. Additionally, there are more job openings than there are workers available to take them pushing up wages as businesses try to attract employees.
On the other hand, 6 million people, nearly twice as many as in December, could not work or lost hours over the previous month due to the pandemic disrupting normal business at their place of employment. The incredibly fast rise in infections from the highly contagious Omicron variant fortunately appears to have reversed just as quickly.
Stimulus blamed for high inflation
The final round of $1,400 direct payments which started in March 2021 along with the massive amounts of covid-19 relief funds injected into the US economy have been blamed for the higher-than-normal inflation afflicting the nation. The Federal Reserve Bank of San Francisco looked at the effect of the American Rescue Plan specifically on inflation.
It found that Biden’s stimulus is temporarily ratcheting up inflation, but not causing “overheating” as has been suggested. Their analysis found that “the ARP, is expected to cause inflation to increase by about 0.3 percentage point in 2021 and by a bit more than 0.2 percentage point in 2022. The impact in 2023 is negligible.”
Other factors are helping push up prices on just about everything, a major source has been disruptions to supply chains caused by the pandemic. This caused manufacturers to scramble to secure scarce supplies of inputs to make their products. Americans in turn have been scooping up consumer goods with excess savings they acquired during the lockdown increasing demand on limited supplies.
Bringing inflation under control is the goal
Over the course of 2021, many economists and policymakers at the Federal Reserve felt that the higher-than-normal inflation would be temporary. However, as the level of inflation continued to rise to new heights by the end of the year the consensus shifted, and the central bank decided to be more hawkish.
In January the Fed announced that it would begin tapering its stimulus programs which have poured vast amounts of liquidity into the US economy. It has also helped the stock market reach ever greater heights.
Additionally, the central bankers will start increasing interest rates, expected to begin in March, which have been at near zero during the pandemic. The Fed will have a difficult balancing act to pace the fiscal tightening without entrenching inflation by moving too slow or causing a recession if it moves too fast.
Although another stimulus check could help people with the rising cost of living, the fear of driving inflation even higher by injecting even more money into the economy has silenced lawmakers’ calls to do so.