Stimulus Checks Likely Provided No Long-Term Benefit for the Poor: Study

Stimulus Checks Likely Provided No Long-Term Benefit for the Poor: Study

Dado Ruvic

The U.S. government sent out more than $800 billion in pandemic stimulus checks over three rounds of payments in 2020 and 2021. A new study finds that those payments likely provided only a short-term boost to low-income households — and, in some cases, may have made the recipients feel worse about their financial situation.

The study, authored by researchers at Harvard University and the University of Exeter, surveyed more than 5,000 Americans living in poverty. Those in the survey received either a one-time payment of $500, a one-time payment of $2,000 or nothing.

The researchers found that the households that received the cash transfers increased their spending for a number of weeks, using the money to pay bills, buy food, shop and cover transportation. But the cash had little lasting impact on spending or savings, the researchers found. “These results suggest that the cash allowed participants to spend more money, improving objective financial outcomes for the few weeks immediately following the transfer and then dissipating thereafter,” the study says.

The surveys also found that the groups that received cash also reported feeling worse about their financial situation. “We had anticipated that providing $500 or $2,000 to low-income Americans would yield positive results on the survey indices and were surprised to learn that we were wrong,” the researchers write. They add that “the data are most consistent with the notion that receiving some but not enough money made participants’ needs—and the gap between their resources and needs—more salient, which in turn generated feelings of distress.”

The bottom line: The researchers note that larger payments, perhaps distributed over time, might do more to cover people’s financial needs and thus produce more positive results — or that cash transfers coupled with other resources and services could address some of the reported feelings of distress.