The $ 1.9 trillion American Rescue Plan enacted in March, as well as a $ 900 billion pandemic relief package approved in December, have a large initial burden. They were created to get money quickly.
But one consequence of that strategy is that fiscal policy in the coming quarters will detract from economic growth.
Financial experts mostly project that the economy, with strong labor market momentum and huge amounts of savings stifled by households, will be strong enough to keep growing despite the disappearance of the fiscal impulse. To avoid an economic downturn, there must be a large pass-through of demand driven by the government to the private sector.
There is no modern precedent for such large changes in the sums that the government is injecting into the economy. And there is a risk, recently recognized by a senior Federal Reserve official, that if pandemic-era savings are disproportionately held by the wealthy, they will keep that cash instead of spending it.
Most Americans eligible for stimulus checks totaling $ 2,000 per person have already received them. Treasury Department said this month that $ 395 billion of that cash is now being sent.
While unemployment insurance payments remain high, that spending is also shrinking as people return to work, and supplements to those payments are scheduled to expire in September. Much of the rest of the spending was short-term and focused on things like launching vaccines; or it will be spent very gradually, as in an expanded child tax credit and grants to state and local governments.