Fact Check: Critics Argue Stimulus Checks Cause Inflation. Is This True?

Fact Check: Critics Argue Stimulus Checks Cause Inflation. Is This True?

A $1,400 stimulus check for each Social Security recipient is a top legislative goal for TSCL in 2024. While hundreds of thousands of older Americans have signed our petitions in support of such legislation, some critics of the idea argue that stimulus checks caused recent inflation, and another round of stimulus checks would cause inflation to climb again. Is this a legitimate claim?

Here’s some background about recent stimulus checks to help you better understand this issue:

At the onset of COVID-19, businesses across the U.S. shut down leaving Americans without the income they rely on. Congress rapidly responded by passing several massive emergency aid packages aimed at providing relief and a boost to the economy. Among other measures, that legislation included “economic impact payments” better known as “stimulus checks” for millions of eligible adults, including Social Security recipients. There were three rounds of such checks — $1,200 in 2020, and two additional payments of $600 and $1,400 per person in 2021.

Now, three years later, TSCL is again working to get another round of $1,400 stimulus checks for Social Security recipients who were hit hard by the high inflation in recent years. Some critics have argued stimulus payments during the COVID-19 pandemic fueled record high inflation and that “the needy might waste it.”

Inflation researchers recognize multiple factors caused inflation in 2020 - 2023. For example, the war in Ukraine has the effect of keeping oil and gasoline prices high because European nations are seeking oil from producers outside of Russia and driving up the price of U.S. oil. The war sent the prices of wheat products such as pasta and flour into orbit because Ukraine produces 20% of the world’s supply of wheat. Climate disasters such as droughts, wildfires, and hurricanes wiped out many U.S. crops, creating temporary shortages of certain types of produce. Avian flu led to the need to slaughter large numbers of chickens, driving up the cost of poultry products and eggs. Many factors contributed to disruption of the supply chains from 2020 - 2023.

It’s also fair to point out that COVID emergency legislation pumped more than just stimulus checks into the economy. During the same period, the Small Business Administration (SBA) disbursed $1.2 trillion in small businesses payroll protection loans. Companies could qualify for full loan forgiveness if certain criteria were met. It was troubling to learn the SBA estimates $200 billion of the loans were potentially fraudulent.

Stimulus payments are not welfare, which usually refers to programs supplying ongoing regular monthly payments. TSCL is proposing a one-time $1,400 payment. Like the previous stimulus payments, TSCL supports structuring this payment like a payable-in-advance tax refund. The payments are intended to encourage spending on essentials during times of economic distress and thus give citizens and the U.S. economy a boost.

An analysis by the U.S. Census Bureau said that the stimulus payments in 2021 were effective in significantly improving the recipients’ ability to buy food and pay household bills. Stimulus payments aren’t taxable. In addition, stimulus payments are not counted as income and thus won’t affect eligibility for assistance programs such as food stamps.

TSCL believes that targeted stimulus for Social Security recipients is good for the economy and good for older Americans. What do you think about a $1,400 stimulus payment?

Please take our poll:

  • A senior stimulus is good for the economy and older Americans, and I support it.
  • A senior stimulus is too inflationary, and I strongly oppose it.
  • A senior stimulus is for the needy, and they might waste it.  So I strongly oppose it.

The 2024 Senior Survey can be taken online at SeniorsLeague.org/2024-senior-survey.


Source: “COVID-19 Pandemic EIDL and PPP Loan Fraud Landscape,” U.S. Small Business Administration, Office of Inspector General, June 27, 2023. https://www.sba.gov/document/report-23-09-covid-19-pandemic-eidl-ppp-loan-fraud-landscape