Economists:18 countries sending stimulus checks likely won't exacerbate inflation

Economists say 18 countries sending stimulus checks likely won't exacerbate inflation — but it's not the best solution to help people cope.

One economist said checks likely wouldn't exacerbate inflation, but they're not a permanent solution.

Reforming supply chains, increasing wages, and improving productivity are more effective measures.

Republicans blamed President Joe Biden's stimulus checks for driving up inflation, but bipartisan states recently sent out their direct payments to ease the pain of rising prices.

Eighteen states, including California, Colorado, Idaho, and Indiana, have made tax cuts in recent months to provide much-needed cash relief to families. Conservatives say the funds are helping to offset the impact of higher prices across the economy. Inflation in the US is at its highest level in 41 years, and with Americans panicking about the economy, conservatives are betting on old cash to provide some support.

Garrett Watson, the chief policy analyst at nonpartisan research firm TAX, isn't too concerned that the payments will initially exacerbate widespread inflation. However, the domestic stimulus might not be the best way to relieve pressure on people's wallets.

"Nationally, they're not likely to contribute significantly to inflation, but in terms of direction, that's where they're going to be" if consumers start spending money parked in government revenue departments.

Watson added that while some see government stimulus payments as a viable way to offset rising food and gas costs, it is a "balancing act" for states in terms of how they handle them, and this is likely to be a temporary influx of cash in terms of US bailout funding and revenue trends that They see it, in exchange for making permanent changes in state tax or spending policy."

Thomas Hogan, a senior faculty member at the American Institute of Economic Research, told Insider that the payments present upward risks to inflation but that the actual effects would be "marginal." Hogan said state governments don't raise cash by selling debt like the federal government. Treasury auctions have helped "crowd out" some of the inflationary effects of pandemic stimulus packages.

He added that it wouldn't happen at the state level, but the extent to which the tax cuts can raise inflation may be minimal.

"It could have some impact, but it's going to depend on whether people are saving or spending that money, and whether they're spending it locally or on things from Amazon or something," Hogan said, adding later that there are very few studies that indicate that. Shed a lot of light on the effects of government stimulus checks.

Others are not convinced. A new round of checks is a "good idea." Still, Americans spend a lot more when they suddenly come across an incredible amount of cash, Jared Delian, the investment strategist at Molden Economics, said in a Bloomberg opinion column on June 29.

California is the worst offender, according to Dillian, with its program among the most generous and set to assist 23 million people. He added that while inflation has reached historic highs, stimulating another spending spree is an unnecessary risk.

"Newsom's discounts represent first-class economic illiteracy," he said. "Of course, the intent is not to fight inflation. The intent is to redistribute and win over voters."

While Watson acknowledged the political benefits of making direct payments, he noted that both Biden's checks and those currently being implemented by states are aimed at combating rising costs caused in large part by the public health crisis, and "no one expected a swell of this magnitude" when deciding to implement.

Stimulation tests are a 'temporary bridge' and not a permanent solution.

The states' plans mirror the federal government's response to the coronavirus recession, which included three rounds of stimulus checks by Presidents Trump and Biden.

Democrats said the size and scope of the plan were essential, given the pandemic uncertainty, but Republican lawmakers took the opportunity to blame high inflation on the stimulus.

0/Post a Comment/Comments