On Saturday, March 6th, the Senate approved the $1.9 trillion coronavirus relief plan in order to fight off the worst economic situation since the Great Depression. This package includes checks to individual households, unemployment insurance, and so on.

What is the stimulus for?

Wendy Edelberg and Louise Sheiner did a breakdown analysis of the package to see how the economy in each category will be impacted. They found that in the $1.9 trillion, $750 billion are used for federal spending such as aiding the state and local government or containing COVID, $600 billions are spent to families for direct aids, $400 billions are sent to families suppering from the financial crisis, and $150 billions are given to support small businesses.

Pros of the stimulus

According to the breakdown analysis, the stimulus package is created for boosting the whole economic growth in all areas by providing support to many suffering from COVID. When people have more money, they are more motivated to spend them which can help boost the economic downturn during the pandemic. This stimulus can also help more individuals who in need for the money because many people lost their jobs because of the pandemic.

Cons of the stimulus

It is good that the government is providing support for the individual in need, but at the same time, many are worried that this is too much support which may lead to inflation. Since the government is sending out money, more money will be printed which can lead to a rise in general prices so the currency will not worth as much. When American dollar worth less, but other currency remains the same, such as Chinese yuan, then American will need to pay more dollars to purchase the same number of yuan as before. Therefore, if this stimulus package leads to inflation, the economy in America will not look good as well compared to the economy globally.

Is inflation going to happen?

Personally, I do not believe this situation will happen because of two main factors. One, there are many policies or tools the American government can use to prevent inflation from happening. Two, COVID is a global pandemic so other countries’ economies will not recover that quickly as well.

Federal Reserve Chairman Jerome Powell made a clear statement related to my first reason. He clearly states that the central bank has tools to deal with the rise in prices if needed. The Fed has also been doing great in controlling the prices and interest rates for a long time as well. Moreover, this stimulus package can only end the economic crisis sooner but cannot promise the economy to be back from normal. People still need to feel safe spending the money instead of just having the money which is my second reason for arguing inflation is not likely to happen. With the stimulus package the unemployment rate had fallen to 6.2 percent from its peak of 14.8 percent during the pandemic. Needless to say, there is more the government need to do to help the economy from recovering.