California and several other states are sending out inflation relief checks, but some economists say they could further fuel rising prices
On Friday, the Federal Reserve's preferred measure of inflation showed that prices are still rising, up 6.2% in August compared to a year ago. The central bank is tasked with keeping inflation under control, which it can do by raising interest rates. Unfortunately, higher rates can create economic pain for Americans by making it more expensive to borrow money. The Fed raised its benchmark rate by three-quarters of a percentage point for the third time in a row earlier this month.
Jason Furman, a Harvard professor and former economic adviser in the Obama administration, has also argued that the payments in California, one of the biggest programs, could contribute to rising prices. "As such these inflation relief payments will export inflation to the rest of the United States -- with some showing up in California too," FurmanStill, politicians are eager to sell the payments as a helpful benefit to taxpayers in a midterm election year.
"Unfortunately the stimulus checks are more of a tool to push a political agenda," said Lucy Dadayan, a senior research associate with the Urban-Brookings Tax Policy Center, where she leads a project on state tax collections.What's more, it could put state budgets -- many of which are seeing"At this rate, I think we are going to see state budget deficits this fiscal year," Dadayan said.
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