DEFINITION of 'Stimulus Check'

A Stimulus Check is a check sent to a taxpayer by the U.S. government. Stimulus checks are intended to stimulate the economy by providing consumers with some spending money. When taxpayers spend this money, it will provide a boost to retailers and manufacturers and thus spur the economy.

BREAKING DOWN 'Stimulus Check'

Stimulus checks have been mailed out to taxpayers on several occasions. These checks will vary in amount according to the taxpayer's filing status. Joint taxpayers received twice as much as those filing singly. Those who had unpaid back taxes saw their stimulus checks automatically applied to their outstanding balance.

How Stimulus Checks Work

The last use of stimulus checks occurred when the U.S. economy entered a severe recession after the financial crisis of 2008. The government sent out checks in 2009 to those with at least $3,000 in qualifying income from, or in combination with, Social Security benefits, Veterans Affairs benefits, Railroad Retirement benefits and earned income. The checks amounted to:

  • Eligible individuals — between $300 and $600

  • Joint filers — between $600 and $1,200

  • With eligible children — an additional $300 for each qualifying child

Did the stimulus work to help pull the economy out of its tailspin? The Washington Post looked at nine studies and found that six of them concluded that "the stimulus had a significant, positive effect on employment and growth, and three find that the effect was either quite small or impossible to detect."

The Congressional Budget Office found that the stimulus checks, along with other measures to jumpstart the economy, had by 2011 created between 1.6 million and 4.6 million jobs, increased real GDP by between 1.1 and 3.1 percent, and reduced unemployment by between 0.6 and 1.8 percentage points.

The full stimulus package worked by "Providing funds to states and localities—for example, by raising federal matching rates under Medicaid, providing aid for education, and increasing financial support for some transportation projects. Supporting people in need—such as by extending and expanding unemployment benefits and increasing benefits under the Supplemental Nutrition Assistance Program (formerly the Food Stamp program); purchasing goods and services—for instance, by funding construction and other investment activities that could take several years to complete; and providing temporary tax relief for individuals and businesses—such as by raising exemption amounts for
the alternative minimum tax, adding a new Making Work Pay tax credit, and creating enhanced deductions for depreciation of business equipment."

Critics contend that the stimulus added some $1 trillion to the deficit and simply shifted economic activity that would have happened anyway.

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