Stimulus Payments: Ways They Could Be Hurting the Economy in 2022

Stack of 100 dollar bills with illustrative coronavirus stimulus payment check to show the virus stimulus payment to Americans.
BackyardProduction / Getty Images/iStockphoto

The massive stimulus payments made by the U.S. government in 2020 and 2021 in response to the coronavirus pandemic were a bit of a double-edged sword. On one hand, the payments helped prevent the American economy from falling into a deep recession and helped send the stock market to fresh all-time highs shortly after an initial sharp selloff.

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On the other hand, they were a contributing cause to some economic ills that are only now jeopardizing the economic recovery. Here’s a look at some of the unintended consequences of the financial stimulus that some say saved the American economy.


In the early days of the pandemic, the economic risks were hugely tilted towards a depression. For months, workers were forced to stay home and many businesses shut down, with some never to reopen. In that environment, stimulus was desperately needed in the pockets of individuals and businesses alike. According to the San Francisco Fed, without stimulus “…the economy might have tipped into outright deflation and slower economic growth, the consequences of which would have been harder to manage.”

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U.S. Census Bureau data seems to support this, as 11.7 million people were moved out of poverty in 2020 thanks to the stimulus. But while most experts agreed the initial stimulus payments were needed, as they continued later in 2020 and into 2021, many recipients just used them to pad their bank accounts.

A study by the Federal Reserve Bank of San Francisco estimated that the stimulus added as much as three percentage points to the inflation rate by the end of 2021, as too much money was chasing too few goods — a classic inflationary scenario.

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Rising Consumer Debt

Although in the initial stages of the pandemic consumers used stimulus money to pay down debt — to the tune of an $83 billion reduction in credit card debt — those trends have since reversed. Now that the direct stimulus programs have ended, Americans are right back to their old ways.

Total household debt, which also includes auto loans, home mortgages and student debt, hit a record $15.84 trillion at the beginning of 2022, and the New York Fed, among others, expects credit card debt to keep rising above current levels of $841 billion.

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According to Ted Rossman, a senior industry analyst at, “There’s a good chance that Americans’ total credit card balances will soon reach a new record high, marking a sharp reversal from the precipitous drop that occurred in 2020 and early 2021.” The marked difference between consumer credit card spending in 2020 and 2022 is a clear example of how the stimulus payments affected the economy.

Unfilled Job Openings

One of the most curious labor statistics during the 2020-2022 period is how total unfilled job vacancies initially fell at the onset of the pandemic but have since skyrocketed to near-record levels. In the midst of a powerful economic expansion, unfilled job openings more than doubled since Q2 2020.

While part of this could be due to workers’ reluctance to take jobs while COVID-19 is still lingering, and some may be due to older workers retiring, there’s no denying the role that stimulus payments have played in keeping American workers home. Between multiple rounds of stimulus checks, forgiveness of student loans, expanded child tax credits and extended unemployment benefits, many workers simply don’t need to return at the present time. 

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Contrary Views

Not all politicians, economists and financial pundits agree with the belief that the stimulus payments triggered the current inflationary crisis. Former presidential candidate Andrew Yang, for example, has said that the stimulus payments were too low and short-lived to generate the current inflation readings, which are the highest in 40 years. As Yang told CNBC, “Money in people’s hands for a couple of months last year — in my mind — was a very, very minor factor, in that most of that money has long since been spent and yet you see inflation continue to rise.”

Yang isn’t alone in his beliefs. Austan Goolsbee, an Obama-era economic adviser, told the New Yorker that inflation is “…a global phenomenon. It’s not primarily coming from U.S. stimulus,” noting that the European Union recorded 7.5% inflation without paying out any stimulus checks.

The Bottom Line

It’s all but certain that the stimulus payments in 2020 and 2021 helped jump-start inflation, but they are not the only cause. Supply chain shortages and the war In Ukraine are two more of the many factors that are likely keeping inflation high.

The stimulus payments had other effects as well, both positive and negative, with the greatest benefit likely being that they kept the U.S. out of an extended economic contraction at the onset of the pandemic.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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