Finally, the check that I had been anxiously awaiting for what seemed like an eternity arrived on a Tuesday, about three weeks into the nationwide lockdown. I was laid off, like millions of Americans, when my employer-a small catering company in Pittsburgh-had to shut down during the COVID-19 pandemic.
My savings would have lasted for maybe a month of rent; after that, what? Economic Impact Payment of $1,200 (EIP) was of utmost importance, for it was a bridge to cross until my unemployment benefits paycheck came rushing in. Triple Stimulus Update $1,200-$1,400 Per Adult + $500 Family Bonus.
The story I describe was hardly singular. In towns from the bustling urban to the sparsely populated rural underbelly, the Economic Impact Payments provided life support through perhaps the most extreme economic disruption any of us had known in living memory.
These direct payments, popularly dubbed as “stimulus checks,” were an unprecedented government intervention to what was likewise an unprecedented crisis, putting cash directly into the hands of ordinary citizens when they really needed it.
As I discussed with people ranging from friends and family to dozens for the purposes of writing this article, the theme recurred in countless variations: the payments weren’t enough to put everybody’s outsized financial woes into complete resolution, but then they appeared at crucial times to stop a person from being evicted, enable a family to keep their utilities on, or just to place a meal on the table when incomes had suddenly dried out.
Three years later, still with the immediate crisis filed away behind us, an examination of this gigantic economic intervention-how it worked, who it helped, what it achieved, and what lessons it could impart for other intervening situations in future-makes for a worthwhile venture.
The story of the Economic Impact Payments tells us numbers and legislation, but above all it tells of a nation reaching to catch millions of its citizens before they fell through the cracks in the wake of a global disaster.
Anatomy of America’s Direct Payment Program
When the CARES Act was passed in March 2020, most Americans were just becoming aware of the fact that the pandemic of a lifetime was about to hit their shores. As businesses were closing down and unemployment claims soared to unparalleled levels, the first round of economic impact payments were set up: mainly $1,200 for eligible adults and $500 for qualifying children aged 17 and under.
“We were entering uncharted territory,” Dr. Eleanor Martinez, economist at the University of Michigan, who studied the payments’ impact explained. In an interview on Zoom, she hastressedthe historic nature of this program. “The magnitude and immediacy of this intervention were unlike any other. Government was bypassing basically any other the safety program and depositing money into people’s bank accounts or mailboxes.”
The logistics were staggering. The IRS and Treasury had just weeks to figure out the many systems required to get payments out to the largest number of eligible Americans. They used 2019 tax returns or 2018 if there was not a 2019 return to determine eligibility and payment amount and to get direct deposit information, where available.
In the case of recipients of Social Security, Railroad Retirement, and certain Veterans benefits, the government used existing payment data. However, for millions upon millions of others, especially low-income people who were not likely to file tax returns anyway, new systems had to be created to make certain they would not be excluded.
Relief in Three Phases
After two more rounds of Economic Impact Payments, the pandemic took an intrusion on expectations. The second payment of up to $600 per qualified adult and child occurred under the Consolidated Appropriations Act in December 2020. And in March 2021, the American Rescue Plan provided a third and final payment of up to $1,400 per eligible individual, including dependents of all ages, not just those younger than 17.
Each round had its own eligibility requirements and phase-out thresholds, creating a complex patchwork of financial assistance that varied depending on income, filing status, and family composition. But these programs were not perfect, and they did help some eligible people experience significant delays while others fell through administrative cracks; despite these oversights, they probably represented the largest direct financial intervention to American households in modern history.
“As you look at the data, what’s remarkable is how quickly money moved,” said Thomas Williamson, a former Treasury Department official I spoke with who was deeply involved in the program’s implementation. “That in the first round, alone, was unprecedented for a government program on the scale. Within two weeks after the legislation passed, over 80 million payments had gone out.”
The following table summarizes the key differences between the three rounds of Economic Impact Payments:
| Feature | First Round (CARES Act) | Second Round (CAA) | Third Round (ARP) |
|---|---|---|---|
| Payment Date | April-Dec 2020 | Dec 2020-Jan 2021 | March-Dec 2021 |
| Maximum Amount (Individual) | $1,200 | $600 | $1,400 |
| Maximum Amount (Joint Filers) | $2,400 | $1,200 | $2,800 |
| Amount per Eligible Dependent | $500 (under 17 only) | $600 (under 17 only) | $1,400 (all dependents) |
| Income Phase-out Start (Single) | $75,000 | $75,000 | $75,000 |
| Income Phase-out Start (Joint) | $150,000 | $150,000 | $150,000 |
| Income Cutoff (Single) | $99,000 | $87,000 | $80,000 |
| Income Cutoff (Joint) | $198,000 | $174,000 | $160,000 |
| Total Disbursed | ~$293 billion | ~$164 billion | ~$391 billion |
| Recipients | ~160 million | ~147 million | ~171 million |
Human Effects: The Story behind the Numbers
Statistics show only a fraction of the story. I spoke to dozens of Americans from every walk of life about how payments affected their lives during the long dark days of the pandemic to truly measure its impact.
Maria Gonzalez, an unemployed mother of two from Phoenix, described the payment as helping catch up her rent after being furloughed from her hotel housekeeping job. “That money was the difference between keeping our apartment and being homeless” she says, that tone still rich with emotion from the trials of that time.” I paid the two months I was behind, and then my unemployment finally started coming in. The timing was everything.”
Update on the Triple Stimulus
In rural Kentucky, James Harmon used the funds to keep his less-than-adequate farm alive after his sales collapsed at local farmers’ markets. “I bought seed, feed for the livestock, and paid my electric bill,” said he.” Without that money, I probably would have had to sell off animals for peanuts. Instead, I weathered the worst months and managed to keep going.”
According to Diane Wu, a nursing student in Chicago, the payments helped pay for tuition after she lost her part-time job in a restaurant. “I was so close to having to drop out and defer my degree,” she said. “The stimulus checks meant I could stay in school. I graduated last year and now I’m working in healthcare. If I’d had to quit school, who knows where I’d be?” In a spirit of full disclosure, we’re not huge fans of how close Wu came to dropping everything.
Review on the Digital Divide
In several conversations, an unforeseen benefit emerged: the payments enabled families to close the digital divide precisely at a time when connectivity became critical. With schools and workplaces all of a sudden remote, many households were in need of upgrading their Internet applications to, say, buy computers they may not have needed previously.
“That first round of payments went toward creating a proper setting for home learning,” said Robert Jackson, a father of three in Atlanta. “We just had one old laptop for the entire family. We used the stimulus money to buy two Chromebooks and upgrade our Internet connection. Without that, my kids would not have been able to attend their virtual classes. It was not a luxury; it was something we absolutely needed.”
The situation was replicated across the country. The Economic Impact Payments promoted more than just the purchase of basic needs like housing or food; they encouraged the further adjustment of many families to the pandemic’s new realities.
Surviving Small Businesses
Some recipients channeled their payments into small businesses suffering a double-edged economic effect, helping them hold ground in local economies.
“I used mine to prepay for six months’ worth of haircuts with my regular barber,” says Michael Chen from San Diego. “I knew Diego, the owner, was really hurting under the reduced capacity rules. He got the money when he horribly needed it, and I was going to get haircuts eventually anyway. It just felt like the right thing to do.”
Similar stories popped up across the country: people buying gift cards to favorite restaurants, paying for future services, or just making purchases they might have put off to help local businesses survive.
Economic Impact:
Persevering from a Deeper Recession
It’s a commonly held view among economists that the Economic Impact Payments, enhanced unemployment benefits, and other measures of pandemic relief have kept the economy from sliding into a much deeper and more severe recession.
“The data is very clear,” explained Dr. Sophia Williams, economist from Columbia University, when I interviewed her for this article. “Without these direct payments, we would have seen dramatically higher rates of food insecurity, evictions, and utility shutoffs. The payments didn’t just go to individuals; they effectively stabilized whole communities by keeping consumer spending afloat at a time when it would have otherwise collapsed.”
The University of Michigan research has shown that the first payments produced significant increases in household spending, particularly among the poorest and least liquid households. Within the first three days of payments, increased spending varied from 10% to 20% compared to levels prior to the pandemic.
Most immediately, it is for food, household goods, and bills, indicating that it is meeting the needs of living rather than being saved or spent on nondiscretionary consumption. This was somewhat inverted in later payments, where more stable households began saving a larger proportion of the funds.
Consequences for Poverty Alleviation
Perhaps most surprisingly, research by the Center on Poverty and Social Policy at Columbia University found that the whole package of fiscal measures, including the Economic Impact Payments, actually decreased overall poverty in the course of the pandemic-more than ever, destroying the very institution of the economy.
“This is historically unprecedented,” said Dr. Williams. “In every previous recession, poverty would rise sharply. In the coronavirus recession, the expansion of government assistance not only prevented an increase in rates of poverty; it actually lowered them below pre-pandemic levels temporarily.”
Particularly for the third round of payments with the Child Tax Credit expansion boosted along, the two programs combined reduced monthly child poverty rates by more than 40 percent during their peak periods of implementation.
Implementation Challenges and Criticism
Those are some of the achievements therein; however, there have been serious challenges and criticisms in the rollout of the program.
The process of delivering payments to those people who do not usually file tax returns has proven elusive. Very limited knowledge among these individuals received with IRS “Non-Filer Tool,” since most of them, mainly the needy, suffered long delays to receive payments or did not receive them at all.
“The reliance on tax infrastructure created inherent blind spots,” said Regina Thompson, an advocate with a community assistance organization in Detroit. “The people who had the hardest time accessing payments were often those who needed them most – people experiencing homelessness, very low-income elderly people, those with disabilities, and others disconnected from mainstream systems.”
Debates Over Targeting
Arguments arose regarding whether these payments should be targeted. Some economists and policymakers argued that the thresholds for income were too high, allowing the payment to go through to households that had, in their view, not experienced heavy financial disruption. Others argued in favor of wide payment coverage because of difficulties with the administration of more-targeted approaches and uncertainty about who might need help as the pandemic evolved.
Martha Rodriguez worked at home as a software engineer during the pandemic. “I felt guilty about getting the check at first,” she told me. “My income didn’t really change, and I felt like others needed it more. Then I used it to support local restaurants that were struggling, ordering takeout several times a week. I like to think it helped those businesses survive.”
That strikes at the very heart of a Central Design Tension: Was it targeted relief for those devastated by pandemic-related hardship? Or was it broadly meant as an economic stimulus sustaining consumer spending throughout the economy? It functioned in both modes, but the arguments about which should weigh more are still on the table.
Worries about Inflation
Some economists observed that the stimulus payments, particularly the last round in 2021 and 2022, helped contribute to increasing inflation levels as recovery showed its effects in the economy. Others, however, argued that inflation development was rather global and the results of supply chain disruptions, variations in consumption patterns, as well as other pandemic effects.
“The debate on inflation is rather murky,” Dr Martinez told me. “Stimulus payments did boost aggregate demand, but to attribute inflation primarily to checks from government is quite an oversimplification of the reality this multifaceted global phenomenon is.” Supply constraints, production challenges as well as shifts in consumption patterns all played large roles.
Lessons for Future Crises
Lessons from Economic Impact Payment in preparation for future economic crises are several.
The swiftness of the early response proved that direct government payments could be instituted immediately and in a very rapid manner. Important challenges regarding access to certain specific populations show the need for better systems to identify and quickly reach all possible eligible recipients.
According to Williamson, placing one clear lesson would be that administrative infrastructure is built before crises hit. “IRS and Treasury did incredible work, given the shortsightedness they faced, but the rollout could have been even more effective with better systems already in place,” Williamson told me.
It has also caused experience that simplicity in program design is worth it. The very nature of the payments, with a certain dollar amount part of easily verifiable criteria attached to payments, compared with the more complicated needs-tested programs, allows for implementation in a fairly short time.
Need to make your system more resilient
Many experts advise that the event should cause a re-evaluation of America’s safety net systems more broadly. These extraordinary measures provided by the Economic Impact Payments are only partially a reaction to an overwhelming surge in claims due, in many cases, to the limitations of existing unemployment insurance systems.
“The pandemic exposed fundamental weaknesses in our economic security infrastructure,” explained Dr. Williams. “Stronger automatic stabilizers—programs that expand automatically without any new enactment during economic downturns—would have allowed for much faster, far more predictable responses.”
Some economists and policy-makers have advocated for making direct payments a regular part of future responses to recessions but automatically activated by economic indicators rather than requiring new legislation every time one occurs.
It has been almost three years since the first Economic Impact Payment was sent to the bank accounts of Americans-a program that remains today both a historic economic intervention and a case study in crisis response.
For millions of Americans, including Maria, James, Diane, and countless others I spoke with, payments were more than just financial assistance; they were a psychologically relieving moment amid a significant upheaval of uncertainty. That help was coming made the impossible feel at least somewhat manageable, if only for a time.
Going forward, the discourse about direct government payments has indexically shifted. The miraculous has drawn several lines over which conversation moved; all of a sudden, it is part of the big conversation. Whether other policymakers would view this in the face of future crises is left to fate, but surely the Economic Impact Payments have etched a new standard against which future relief efforts will be measured.
FAQS:
Are Economic Impact Payments currently being sent out?
No. All three rounds of Economic Impact Payments have been completed. The IRS is no longer issuing these payments.
Still, is there any chance that I can receive a payment I was eligible for but never received?
You might qualify to claim a Recovery Rebate Credit with your tax return if you were eligible for the payment but did not receive it or it was less than what you were entitled to receive.
Income-taxable were these Economic Impact Payments?
No. The Economic Impact Payments were not taxable in nature and were not required to be reported as income on the tax returns.
Did receiving payments affect my other benefits?
Economic Impact Payments do not count as income in assessing eligibility to federal benefits like SNAP, Medicaid, or housing assistance.
Are there going to be more stimulus payments in the future?
At the moment, there are no plans to put any future Economic Impact Payments into effect. If additional payments were to be made in the future, Congress would have to pass new legislation.
How can I verify if my payments were accurate?
The amounts you received are confirmed in IRS Notice 1444 for the first payment, 1444-B for the second payment, and 1444-C for the third payment; these documents are also available for tax filing.
Did immigrants receive Economic Impact Payments?
Lawful permanent residents and certain other immigrants with valid Social Security numbers were eligible. In later rounds, mixed-status families (with some members having and some having not) became eligible.