The COVID-19 pandemic has had a significant impact on most Americans. But the U.S. government stepped in to offer a wave of three stimulus payments, increased unemployment benefits and other forms of financial assistance that may have lessened the overall economic impacts of the pandemic. These stimulus packages started with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which passed in late March 2020.
The effectiveness of these stimulus programs has been a hot topic of political debate, as some Republicans argue these handouts slowed job growth, and Democrats say they’ve helped spur the economy.
In the summer of 2020, the University of Michigan’s Poverty Solutions Research Center launched an ongoing study to track the impact of the government’s relief efforts. This study analyzed how stimulus payments and other government programs run through May 2021 helped stabilize Americans financially and mentally.
Below, we cover the highlights of this study and how each political party may use the data.
During the COVID-19 pandemic, hardships have been virtually unavoidable for many, as wages tightened, jobless rates increased and businesses shuttered. But with the injection of cash payments from the federal government, the study found hardships stabilized. These stabilizations came immediately after the payments but waned as the months wore on.
From April 2020 through December 2020, the study found the payments from the CARES Act — a $1,200 per adult and $500 per child stimulus payment, plus $600 in extra weekly unemployment payments — helped level off rising hardship rates.
These rates remained stable through October, despite the $600 in extra payments expiring in July. The study believes this extended stability was due to savings from the CARES Act’s payments and falling unemployment rates. In August, President Trump’s executive action, which gave unemployed Americans an extra $300 per week, likely also played a role in stabilization.
According to the study, the stabilization ebbed in November, when COVID-19 infections rose, resulting in the economy slowing once again. During this time, food insecurity increased 25%, and overall financial insecurity increased 20%.
In December 2020, Congress passed the COVID Relief Bill. Then in March 2021, Congress passed the American Rescue Plan Act (ARPA).
The COVID Relief Bill included $600 payments for each tax-paying adult and child. It also renewed the $300 weekly unemployment payment increase.
ARPA added more cash, giving each adult taxpayer another $1,400 in stimulus payments and $1,400 per child. ARPA also extended the $300 unemployment payments through August 2021, though many Republican-led states cut this benefit early.
According to the study, the December 2020 bill and the March 2021 bill brought about sharp decreases in insecurities again. The most heavily impacted group were households earning $25,000 or less per year, but the overall hardship reductions spread across a wide range of incomes.
Here’s how each key measure of insecurity dropped with the two latest stimulus bills.
Food insecurity was on the rise from October through December 2020, but the COVID relief bill in December 2020 resulted in a drop from 13.7% of households reporting insecurities to just 11.3% between December 2020 and January 2021.
The percentage continued to fall through April, with the biggest change being a 1.9-percentage-point decrease following the passage of ARPA in March. Altogether, food insecurity fell 41% between December 2020 and April 2021.
Financial instability followed the same path as food insecurity, dropping by large percentages with each COVID stimulus bill passage. However, there was a 0.8-percentage-point uptick in February.
Overall, financial instability fell 43% from December 2020 to April 2021. The Americans most heavily impacted were households making $25,000 or less, but those making $50,000 or less also felt relief.
Housing hardship didn’t see the same near-immediate impact financial instability and food insecurity saw from the stimulus payments. After the December 2020 package passed, the housing hardships — those who are late on their home payment — remained relatively steady between 10.8% and 9.6%.
Following ARPA’s passage, the study showed a sharp drop to just 7.4% in April.
Mental health steadily improved as each stimulus bill passed. The survey asked participants if they’ve experienced any of the following in the past seven days to measure mental health:
- Feeling nervous, anxious, or on edge? (Anxiety)
- Not being able to stop or control worrying? (Anxiety)
- Having little interest or pleasure in doing things? (Depression)
- Feeling down, depressed, or hopeless? (Depression)
Of those surveyed, 68.6% answered “yes” in December 2020. This percentage dropped sharply after each COVID bill passed, landing at 53.9% in April 2021.
How politicians view and present this data will depend on which side of the aisle they sit. Democrats see this data as an easy win for them, as it shows the stimulus payments helped reduce hardships and improved mental health.
This data may even serve as the platform Democrats stand on when pushing for additional stimulus payments.
However, Republicans could pass some data off as anecdotal or not specific enough to prove stimulus funds were the reason behind the surges. They could also point toward a surging stock market and the jobs that returned under the Trump administration.
The insights from the University of Michigan’s study shed light on the financial hardships and relief that came from the stimulus payments and other benefits. As the university continues to track the impact, it could prove an important piece of data in the future of relief legislation.