It is no secret that Americans spend more money than ever just to survive. The price of gasoline, groceries, and clothing has been on the rise for months, while wages have not kept pace.
Many Americans are requesting a fourth stimulus check due to the escalating inflation. The last stimulus check to reach consumers’ bank accounts was authorized more than a year ago, and the increased Child Tax Credit has been ruled out for this year, so it has been a while since Americans have received federal aid.
However, a fourth round of stimulus is unlikely to solve the inflation problem. In fact, former Amazon CEO Jeff Bezos recently cited stimulus policies as a significant contributor to the current economic crisis.
Have stimulus policies hampered progress?
At a time when unemployment was rampant and COVID-19 vaccines were in short supply, the Biden administration authorized $1,400 in stimulus checks in March of last year. At the time, a stimulus round appeared justifiable, as consumers desperately needed relief due to their inability to find or maintain employment.
The issue, however, is that injecting additional funds into the economy at a time when supply chains were struggling created a mismatch between spending power and available goods. In the months following the expiration of the last stimulus bill, it was therefore not surprising that the price of everyday goods began to rise.
Meanwhile, supply chains have not yet caught up sufficiently to meet consumer demand. As a result, living expenses have been on the rise since last year, and many Americans now struggle to pay their essential bills.
Adding insult to injury, a significant portion of the population lacks emergency savings. Consequently, consumers run the risk of incurring debt at a time when interest rates are rising, thereby making the debt more expensive.
Bezos blames stimulus funds
Recently, Jeff Bezos issued some pretty harsh commentary on the inflation situation, attributing the rising cost of living to stimulus policies. He is quoted as saying, “The administration desperately attempted to inject even more stimulus into an already overheated, inflationary economy, but only Manchin saved them from themselves.”
This comment refers to the Build Back Better bill, a massive spending bill that stalled in the Senate earlier this year due to the opposition of West Virginia Senator Joe Manchin. Manchin has been criticized for obstructing efforts to keep the enhanced Child Tax Credit in effect through 2022, as the credit was a significant component of the spending bill in question.
However, giving families extra money this year could exacerbate the issue, just as another round of stimulus checks could cause a similar problem. Consequently, although Americans may be disappointed that stimulus funds are off the table, the reality is that they have the potential to prolong inflation and do more harm than good.