Stimulus Checks Stimulate Spending by Lower-Income Americans, Make Little Difference Among Those Earning Over $75,000

The stimulus checks sent by the federal government in April and December 2020 had two goals. The first was to provide financial assistance to people whose livelihoods had been disrupted by the pandemic. The second was to encourage people to spend money in an effort to offset the economic slowdown.

See: 59% of Americans Say They Will Use Their Stimulus Money for This Necessity
Find: New Survey Finds that COVID-19 has Changed How We Think About Money

The results are in. The Opportunity Insights Economic Tracker found that households with income below $46,000 increased credit card and debit card spending by 7.9% from Jan. 6 to Jan. 9. Those with an income above $78,000 also increased spending, but by 0.2%. This is lower than the estimated spending caused by the April stimulus. Based on this, the Opportunity Insights researchers estimate that sending $1,600 to people with an income over $78,000 would cost the government $200 billion to generate only $15 billion in spending.

Make Your Money Work for You

Congress is currently debating a new stimulus package. President Joe Biden has asked for $1,400-per-person payments, but there are many considerations to negotiate, including the size of the payment for adults, the size of the payment for children and the income cutoff. Based on the data in the Opportunity Insights study, it seems likely that households with a family income of $75,000 or so will not receive a check. The first stimulus sent checks to people with an income up to $99,000, and the second stimulus went to people with an income up to $87,000.

See: When Will You Get Biden’s $1400 Stimulus Check?
Find: How Coronavirus Revealed America Is Failing Children — and Parents

If the third round of checks gets the economy moving, people at all income levels will be better off. Right now, the economy is favoring people with high incomes who can work from home and who have stock market investments, while many people with low incomes are hurting.

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About the Author

Ann Logue is a writer specializing in business and finance. Her most recent book is The Complete Idiot’s Guide: Options Trading (Alpha 2016). She lives in Chicago.

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