Stimulus Checks 101

If you are like most people in the US who have filed or paid taxes, had previously been employed and/or received retirement benefits, you should be receiving a stimulus check from the US Treasury due to the Covid-19 crisis if you haven’t already. To better understand what this payment represents, let’s briefly explore the government’s purpose and intentions for this “free money.”

Supporting the economy and people in need

In short, the stimulus check (referred to as an “economic stimulus payment”) is an actual check or payment sent to every US taxpayer by the US Treasury to help provide them with spending money that they can use for any purpose. It is called an “economic stimulus check” because the purpose behind the check is to spur consumers to spend these funds to help keep the economy fluid and functioning. It is not intended as a gift from the government to every taxpayer; it is actually a concerted effort by the government to help keep the economy afloat and hopefully help the country avoid a severe economic downturn or depression much like the US has experienced in years past.

Why is this necessary?

A severely depressed economy brings with it major job losses and high unemployment, and these conditions can bring with them significant detrimental impacts on our economy and our population as a whole that can last for years. “Stay at home” orders put in place by the federal government and many states’ Governors have severely impacted retail, manufacturing and the restaurant industry by prohibiting them from serving their customers directly. As a result of these orders, many small businesses face an imminent threat of going out of business entirely due to lack of customers and sales activity. This void in activity not only impacts business owners both large and small, it also impacts the employees themselves, and forces many to seek unemployment benefits to be able to pay their rent, auto loans and utilities among other important essentials.

Good intentions can bring favorable outcomes

To be clear, the government’s intention in providing this “extra money” to consumers is essentially for two primary reasons: 1) to help financially support consumers during this downturn, and 2) to assist them in continuing to purchase items like food and other goods that retailers, restaurants and other service companies need to survive. When consumers spend these dollars, this extra spending serves to support our economy because when the merchants are able to keep their doors open, they can continue to pay their employees’ wages and collect sales taxes, much of which is returned to their local governments and communities. Local governments rely on sales taxes to fund essential services like police and fire protection to name just a few.

Will the stimulus checks work as intended?

The hope is that the stimulus checks will work as intended as they have worked in the past. In fact, most people can likely recall the country’s most recent financial crisis back in 2008 when the U.S. economy entered a severe recession (i.e. aka The Great Recession) triggered by hedge-fund trading in risky derivatives on Wall Street which brought down many financial institutions, banks and the US housing market. Stimulus checks did indeed help the economy recover from this situation, however, the prolonged extent of this current crisis raises serious concerns.

For example, for the month or April, unemployment figures are projected to hit 15.0% or higher, and the damage will continue to rise if businesses are not able to reopen soon. Yet as dire as these numbers may be, many experts still express hope that this downturn will quickly recover as economic activity was fairly strong well before Covid-19 arrived at our borders.

F&M Bank considers ourselves as part of the family in the communities we serve. As such, we want you to know that we are still open and are here to support you and your families as we all continue our quest to put this pandemic behind us. Stay strong and above all, stay safe!

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published on 05/28/2020