Biden Stands Behind Stimulus Policies -- Even Though They May Have Fueled Inflation
- Lawmakers were generous with federal stimulus aid in 2021.
- That may have helped caused the massive surge in inflation consumers are dealing with now.
Did last year's stimulus checks drive living costs up?
It's hardly a secret that living costs have gone way up over the past year. These days, consumers are spending more money on everything from food to apparel to utility bills. And the cost of existing could climb even more before leveling off.
In June, the Consumer Price Index, which measures fluctuations in the cost of consumer goods, rose 9.1% from a year prior. That represents the highest level of inflation in roughly 40 years.
Meanwhile, many financial experts blame the Biden administration's stimulus policies on the current state of the economy. But despite that criticism, Biden is convinced that he made the right call by issuing stimulus funds early last year.
Holding firm on stimulus policies
In the wake of the most recent jobs report, which showed an uptick in new jobs, President Biden praised his administration for taking action in 2021 to get the U.S. economy back on track. He specifically called out the success of the American Rescue Plan, the massive stimulus bill signed in March that led to a number of windfalls for U.S. consumers.
Not only did the American Rescue Plan authorize a round of $1,400 stimulus checks, but it also boosted the Child Tax Credit in 2021. And on top of that boost, it allowed for monthly installment payments of the credit to hit recipients' bank accounts from July through December.
But while those payments were certainly a lifeline for struggling Americans, they may have led to an unwanted consequence -- rampant inflation. A big reason living costs are up so much right now is that consumers found themselves with money to spend last year at a time when supply chains were battered. That led to an excess in demand, which drove up the cost of goods.
Now, supply chains are in a better place, generally speaking. But they haven't fully caught up to consumer demand. And that's why we shouldn't expect inflation to slow down significantly anytime soon.
Of course, the Federal Reserve is trying to do its part to slow inflation by raising interest rates. Once it becomes more expensive to take out a loan or pay off a credit card, consumer spending is apt to decline. But still, it's easy to argue that while stimulus payments were a necessity back in March of 2021, they inevitably helped lead to the sky-high living costs Americans are battling today.
Americans aren't thrilled with the economy
In a recent Gallup poll, the overwhelming majority of Americans -- 88% -- classified the economy as fair or poor. Now the reality is that from a job perspective, things are far from bleak. But when it comes to maintaining a decent standard of living, many Americans are struggling in a very big way due to inflation.
Meanwhile, some people have been calling on lawmakers to issue stimulus checks for those having a hard time making ends meet. But seeing as how stimulus policies may have fueled inflation to an unhealthy degree, that's not likely to be a solution lawmakers look to anytime soon.
Alert: highest cash back card we've seen now has 0% intro APR until 2025
If you're using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.