Stimulus Update: Here's Where $5 Billion in Stimulus Payments Went and How It Worked Out
- In total, the federal government provided $5 billion in stimulus funds to the American people.
- It may take years to fully understand which payments worked as intended and which did not.
Some stimulus payments provided more benefit than others.
As we await answers regarding whether the U.S. government will consider another round of stimulus payments to help families deal with inflation, we look back. Here, we focus on the $5 billion that's already been spent and measure whether it met its intended goals.
According to a New York Times report from March, economists credit stimulus payments with helping the economy recover from the economic damage inflicted by COVID-19. The infusion of cash is also credited with making the pandemic recession the shortest on record, lasting three months.
Still, where did all that money go, and did it accomplish its intended purpose?
The American public
This chunk of stimulus funds was distributed in a number of ways. In addition to sending checks to more than 150 million bank accounts, unemployed workers (including self-employed and gig workers), received an additional $600 per week in unemployment benefits. About $62 billion was spent on expanding the food stamp program.
Was it successful?
The University of Michigan conducted an analysis of Census Bureau surveys and found that the poorest households and the families with children benefitted the most from the influx of cash. In fact, according to the Census Bureau, nearly 12 million Americans were lifted out of poverty thanks to stimulus checks.
As for those GOP leaders complaining that stimulus payments contributed to inflation, statistics show -- and economists agree -- stimulus aided in the economic recovery. How much worse inflation might be if the U.S. had gone into a prolonged recession is unknown.
Stimulus funds were sent to more than 9 million small businesses through the Paycheck Protection Program. In the early days of the pandemic, the funds were meant to be used to retain employees. As the pandemic continued to ravage the population, that rule was softened and companies were allowed to keep the funds even after making staffing cuts.
Was it successful?
The answer depends on who is answering the question. Undoubtedly, many small business owners would say that the $1.7 trillion sent was a lifeline. However, because the program was not narrowly targeted, it is estimated that for every $1 in wages that would have been lost without the Paycheck Protection Program, over $4 in relief money was spent.
Complaints include the number of companies that did not need the funds taking them anyway and the lack of fraud control that allowed some to skim billions.
The saving grace may be the government's disaster loan program. The program provided low-interest loans to nearly 4 million businesses. Because these loans must be repaid with interest, this portion of stimulus relief will take in more than the total amount lent to businesses.
Once the pandemic set in, elective procedures and surgeries were not performed in hospitals. This, in addition to the resistance some Americans had to seeking routine care from their physicians, helps explain the revenue losses experienced by hospitals, doctor's offices, surgical centers, and other medical facilities. Into the financial gap stepped the federal government with grants to help keep medical facilities open and operational.
Also, thanks to stimulus funds, the American Rescue Plan expanded the health insurance subsidies available through the Affordable Care Act for 24 months, and billions were spent to make sure those enrolled in Medicaid wouldn't lose their healthcare coverage.
Was it successful?
While imperfect, the U.S. may not have been in a position to deal with the number of people needing COVID-19 tests without stimulus.
Problems include the fact that wealthy hospitals often took in more federal aid than smaller, poorer hospitals. Some of those larger, wealthy hospitals also used the funds to buy up weaker competitors.
The good news is that money spent to enhance the Affordable Care Act appears to have been used wisely, playing a large role in the record number of people who have enrolled in health plans through various marketplaces.
State and local assistance
Losses suffered by state and local governments came in waves. At first, they needed money to help cover the costs of COVID-19 issues. Then, as more people sheltered at home, these governments found their funds depleted as fewer people visited museums or paid to park in public places.
Was it successful?
Again, it depends on who's answering. In addition to filling financial gaps in their budgets, some state and local governments have used the funds to address issues that might not otherwise be funded. For example, Utah, a state facing a historic drought, used part of the money to deal with water conservation, while Texas used funds to maintain a museum. Some local governments allocated funds to award additional pay to frontline workers. K-12 schools received money to help cover salaries, transition to remote learning, and upgrade building ventilation systems. The benefits associated with each decision is in the eye of the beholder.
It's safe to say that some of the $288 billion was used for its intended purpose. For example:
- $41 billion went to farmers, some of whom had to destroy their crops as restaurants, hotels, and schools closed, and they no longer had buyers.
- $59 billion went to colleges and universities to provide students with grants.
As for the rest, it may be too soon to tell. It will take time to determine how all the funds distributed were utilized and what impact they ultimately had.
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