Mariah Krulich spent her first $1,200 stimulus check on necessities for her newborn: a high chair, bottles, pacifiers.
Her second check went to buying new furniture and blankets damaged by smoke after a fire at the home she was renting in Virginia forced her to move last fall. The fire — caused by a faulty bathroom fan — would have left her without anywhere to go had the Red Cross not helped her pay for a security deposit on another apartment.
“We were struggling pretty bad after the fire, I’m not gonna lie,” said Krulich, 20.
It’s only her third check — $2,800 for her and her son — that she was able to save some of. Most went toward trading up on a car that frequently broke down to a more reliable SUV that also doesn’t get stuck in the snow. The $1,000 left over she set aside for an initial payment on a house through Habitat for Humanity.
“The stimulus helped a lot,” Krulich said. “This is a great time for this to be happening for me because I’ve never lived on my own.”
Although she didn’t have much choice, Krulich did exactly what economists expected and Congress wanted in passing multiple COVID-19 relief packages: She spent the money right away.
While the pandemic has brought about a spike in unemployment and widespread economic uncertainty, disposable income has risen and consumer spending held constant through the pandemic as successive federal relief packages have poured money into the bank accounts of low-income Americans. That federal spending helped buoy the economy while offering low wage workers like Krulich a critical lifeline she would have needed regardless of the pandemic.
Krulich earns $13.75 an hour assisting adults with mental illnesses live independently. It’d be close to covering the cost of living in Virginia if she lived on her own. But with a baby, her income is far below what it takes to live in St. Louis County, according to estimates by the Minnesota Department of Employment and Economic Development.
The impact of the direct stimulus payments will be greatest in greater Minnesota, where a larger share of the population received checks from the federal government.
“Because if you give additional income to lower income households, more of that money goes immediately back into the economy,” said Monica Haynes, director of the University of Minnesota-Duluth’s Bureau of Business and Economic Research.
“That new money that’s coming into the economy will be spent in all sorts of businesses throughout the area, and then those businesses might now be able to hire more employees or increase their capacity or expand production,” Haynes said.
The so-called ripple-effects of the stimulus payments, aimed at keeping consumer spending high in the short term, could pay out dividends to recipients over the long-term.
With the necessary capital to trade-up to a reliable car, Krulich won’t have to dump more money into keeping up a clunker. And with $1,000 to buy a house with help from Habitat for Humanity, she’ll be able to keep her housing costs affordable while building wealth.
Krulich will also receive about $300 a month through the end of the year as part of the increased child tax credit in the recent $1.9 trillion relief package. That will help her protect her $1,000 in savings as well as afford groceries, clothes for a quickly-growing baby and child care. Nationwide, by some estimates the measure would cut childhood poverty in half.
“It’s going to have a very big impact on the state,” Haynes said.