Stimulus checks have been wildly popular among Americans facing a pandemic and rising inflation. Although the National Bureau of Economic Research (NBER) hasn't officially declared a recession, one expert has said that an economic downturn of that proportion could "likely" prompt another round of relief.
Tara Sinclair, an economics professor at George Washington University, told MoneyWise that stimulus payments during times of recession have been "a common policy in the past" and would "likely" be part of a federal response should a recession be declared.
But Sinclair warned that now would be a "terrible" time for stimulus checks to be going out to Americans. In fact, she said it could even exacerbate the nation's existing problems.
"If we stimulated the economy even further, that wouldn't get us more economic growth, that would instead, very likely, just get us even more inflation," she said.
Sinclair's comments echo concerns raised by the Congressional Budget Office back in September of 2020, when the nonpartisan federal agency forecasted that COVID stimulus checks could have long-term effects like inflation.
In a report, the CBO said that the debt caused by those relief payments would "increase the risk of a fiscal crisis" and allow for a possible scenario where "investors lose confidence in the U.S. government's ability to service and repay its debt, causing interest rates to increase abruptly, inflation to spiral upward, or other disruptions to take place."
The Federal Reserve, which, at the time, had said it would welcome the upward pressure, is now scrambling to control inflation without triggering a recession.
While last quarter's gross domestic product (GDP) report found that the U.S. economy had shrunk for a second consecutive quarter—a loose definition many use to define a recession—the NBER has not officially made a recession call.
Under the bureau's definition, a recession is classified as "a significant decline in economic activity that is spread across the economy and that lasts more than a few months," which can take months for the NBER to determine.
A number of states have already begun issuing stimulus checks to residents in response to skyrocketing inflation, but there have not been similar efforts on a federal level.
Californians are set to receive as much as $1,050 as early as October, while parents in Florida have already begun receiving $450 checks per eligible child.
Sinclair said that while sending out relief might be "needed in a tough recessionary time," she hopes to see Congress work on incentivizing the private sector "so that we can get those goods and services that we want."
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Katherine Fung is a Newsweek reporter based in New York City. Her focus is reporting on U.S. and world politics. ... Read more
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