Stimulus Update: This Number Is Proof That It's the Wrong Time to Send Out Stimulus Checks

Those checks might seem necessary -- but here's why they're not.

Inflation has been rampant since 2021, and it's forced many Americans to make difficult choices. For some, that meant moving to a cheaper home to avoid landing in credit card debt. For others, it meant paying bills late and damaging their credit scores in the process.

Given how much inflation has soared, many Americans have been wondering why on earth lawmakers haven't intervened with a round of stimulus checks in 2022 when they were clearly willing to be generous in that regard in 2021. But the answer really boils down to the state of the economy -- and that of Americans' finances.

Stimulus checks weren't needed this year

Stimulus checks are a common response to an economic slump and rampant unemployment. But that hasn't been the case in 2022. If anything, consumer spending has held steady this year and the labor market has expanded. And based on those conditions, it was hard to justify bringing stimulus discussions to the table.

But more so than that, another reason stimulus checks weren't in the cards this year is that Americans on a whole haven't needed them. Bloomberg reports that during the fourth quarter of 2019, U.S. households held about $1 trillion in cash. By this year's second quarter, that total had jumped to $4.7 trillion.

If that number seems unbelievable, remember that many Americans started off 2022 flush with cash for a couple of reasons. First, personal spending declined in many households during the pandemic when lockdowns were instituted and then encouraged.

Secondly, lawmakers were extremely generous with stimulus aid during the pandemic. They approved not one, but three separate rounds of stimulus checks, the last of which was authorized in March of 2021.

And it's not just stimulus checks that hit bank accounts during that time. Lawmakers also expanded the Child Tax Credit, thereby helping a lot of families boost their personal cash reserves. They also enhanced unemployment benefits to the point that many people who lost their jobs for a period of time during the pandemic actually came out ahead financially.

Because Americans had so much cash this year, it basically negated the option of sending out stimulus funds. And frankly, that's not a bad thing. Had lawmakers issued stimulus checks this year, it probably would've made the issue of inflation even worse. So in a way, those eager for a stimulus check can be thankful lawmakers didn't go that route.

Coping with inflation

While Americans on a whole saw their cash reserves increase over the past three years, not everyone landed in a better position in 2022 than before the pandemic. But unfortunately, lawmakers have never really been able to find a way to issue pure need-based stimulus checks. And so while there are families out there that are struggling due to higher living costs, the task of isolating those in need of a near-term windfall is probably beyond the capabilities of lawmakers and the IRS.

What this means is that consumers who are struggling may unfortunately need to tough out these next few months until inflation levels start to moderate. We already saw the annual rate of inflation dip in October compared to September, and that's a positive sign. It doesn't mean rampant inflation is over, but it does mean that those desperate for a stimulus check might manage okay without one in the end.