Federal stimulus would worsen inflation, experts warn

While several states are sending out stimulus checks and other forms of financial aid to residents to try to combat the sky-high prices of everything from groceries to gas thanks to record inflation, no one should be expecting money from the federal government any time soon. However, experts warn there is good reason for the federal government not to send out a fourth round of stimulus checks.

While the stimulus checks have been a tremendous help to many struggling early in the COVID-19 pandemic, allowing many to stay afloat or get out of debt because of the extra money, they have also been used as part of the The problem comes down to what caused high inflation in the US. The demand that extra cash would create on top of a still-constrained supply chain around the world would only drive prices higher.

“Stimulus checks would increase demand,” Jason Furman, a Harvard economics professor and former chair of President Obama’s Council of Economic Advisers, told Forbes. “Right now, however, supply is very limited, so any additional demand would only result in higher prices.”

Josh Bivens, director of research at the Economic Policy Institute, agreed with Furman, stating that product supply remains an issue, so the government doesn’t need to find a way to boost demand like it originally did during the pandemic and money better spent on it to find ways to solve the problems in the supply chain.

“We don’t seem to have a demand generation problem today. People (including businesses and governments) are spending heavily, so we don’t need to increase aggregate demand,” Bivens said.

This isn’t the first time experts have warned that additional stimulus support would only compound the problems many are now facing, thanks to inflation, which rose to 9.1% in June. In fact, some even warned in 2021 that the chances of another round of payments would be “pretty slim” as stay-at-home orders cease to exist and stay-at-home people force an economic downturn.

While federal controls are not considered likely, several states have instead sent other forms of aid to their residents to help them battle the higher prices they have faced at the grocery store and at the gas pump. Through various relief programs, budget surpluses, and other methods, states such as California, Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Minnesota, New Mexico, New York, South Carolina, and Virginia have sent or approved future payments between the ages of 50 and $850.

When the state stimulus checks were sent out, those who were eligible for all three received a total of $3,200. They received $1,200 in the first round of checks approved by then-President Donald Trump, as well as $600 in a second round before the end of his presidency. President Joe Biden approved the third and final check for $1,400 in his first few months in office.


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https://www.ibtimes.com.au/federal-stimulus-aid-would-make-inflation-worse-experts-warn-1836065?utm_source=Public&utm_medium=Feed&utm_campaign=Distribution Federal stimulus would worsen inflation, experts warn

Fry Electronics Team

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