The U.S. Federal government passed the CARES Act on March 27th, 2020. This stimulus package was exceptional both in size (over $2 trillion in allocated funds) and in the speed at which it was implemented. A major component was a one-time transfer to all qualifying adults of up to $1200, with $500 per additional child.
Using a large-scale survey of U.S. households, we document that only 15 percent of recipients of this transfer say that they spent (or planned to spend) most of their transfer payment, with the large majority of respondents saying instead that they either mostly saved it (33 percent) or used it to pay down debt (52 percent).
For those who had to decide whether to pay off debt or save their stimulus payment, higher-income individuals were more likely to save than pay off debts. Those with mortgages or renters were much more likely than those who were financially constrained. Survey also asked respondents whether transfer payments were likely to affect their labor supply decisions. Ninety percent of employed workers who had received a stimulus check reported that the transfer had no effect on their work effort.
Johnson, Parker, and Souleles (2006) documents that in the first quarter post-payment, households spent between 20%-40% of the rebate. Durable purchases and especially car purchases also increased substantially in the quarter after receiving the payments increasing the total consumption response. Sahm, Shapiro, and Slemrod (2010) find that only 20% of respondents used the stimulus checks to mainly increase spending, while more than half of the respondents mainly wanted to pay off debts.
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