Fourth Stimulus Checks Could Be Jeopardized Because Of This Effect On Economy

Americans have been eager for any news regarding a potential fourth stimulus check, and while some will soon start receiving another batch of checks in the form of the Enhanced Child Tax Credits, experts warn that too many stimulus payments to Americans could wind up having a negative effect on the economy.

While the stimulus checks and other economic recovery plans were all helpful for Americans in need during the COVID-19 Pandemic, allowing many to pay off debts and take care of essentials despite having less income, all of the plans are front-loaded, with the intention to get money to the people as quickly as possible. According to the New York Times, the downside of this is that now, economists say the consequences are coming, meaning that upcoming quarters will see a subtraction in economic growth if the private sector cannot pick up the economic burden from the government.

In addition, with the most affluent likely holding on to any of the savings they had from the pandemic (households on average saved $282 billion a month since March over $103 billion a month a year prior due to not eating out or traveling as much), there could be another economic downturn. With everything still so unknown, with the pandemic being a first-of-its-kind situation, it’s hard to see just how much things will be affected.

“We’re definitely going to see a huge drop-off in fiscal stimulus,” Nancy Vanden Houten, lead economist at Oxford Economics, said. “The question then is how well positioned is the economy to deal with that, and we don’t really know for sure, which applies to so much about this period we’re going through.”

Experts at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution state that the forecast for the economy is for things to start taking a negative turn. While government spending added 8.5 percentage points to the economic growth rate in Q1, Q2 and Q3 are expected to start seeing a slightly negative turn, before being a more noticeable downtrend by Q4 and in 2022.

Experts predicted that by 2022 Q2, fiscal policy is on track to subtract 3.3 percentage points from the growth rate, a record high number.

Of course, while there is some concern over what the previous stimulus payments could do, in addition to the potential impact of any future payments as well, that hasn’t weakened the desire for another round of checks, or the idea for automatic payments triggered if certain economic conditions are met. Lawmakers and American citizens alike have continued to call for more money, though there has already been one negative effect from the influx of spending that the stimulus checks led to in some cases—inflation.

Of course, experts who are worried about future economic health have said that the situation would have one benefit, which would be a reduction in inflation, though it still wouldn’t be for a while until Americans saw that change.