Where does the money for stimulus payments come from?

Posted at 6:31 AM, Feb 01, 2021
and last updated 2021-02-01 06:31:17-05

(WXYZ) — Another week brings another round of stimulus check talks with Democrats and Republicans in Washington planning to meet on their plans for COVID-19 recovery.

If you've ever wondered where that money comes from, you're not alone? Does the government just print the money, or does it come from taxes, or is it borrowed? Our Scripps National Correspondent Joe St. George is taking a look.

The U.S. Mint headquarters in Washington D.C. is quite literally the building in charge of printing money. But when it comes to where stimulus and unemployment money comes from, the printing press or U.S. Mint actually isn't involved at all.

In order for Congress to pass these trillion-dollar laws that eventually gets you money in your wallet, the Treasury Department has to borrow money.

Unlike you or me, the treasury department can borrow as much as they want. They can borrow money from private investors, foreign entities and other governments.

Basically, the treasury department issues a bond or a note, that is really an IOU, promising to pay back the money with a little bit of interest one day. But the biggest buyer of these IOUs right now is an entity called the federal reserve. They have the power to create money.

But, again they aren't printing anything. Instead, they are typing a number into their computer, and like magic, a digital currency is borrowed by the treasury department. All that borrowing gives the treasury department the ability to issue those stimulus checks.

So is there a risk to all this? There is a word that scares economists. The word inflation. That's when there is too much money in circulation and there aren't enough goods. That's when money becomes nearly worthless like in some third-world countries.

Now, economists don't believe we are at a risk for that right now, as long as all this is managed correctly and our economy is still producing more than we owe. And while all of this may sound complicated. That's how getting a stimulus checks works.

Additional Coronavirus information and resources:

View a global coronavirus tracker with data from Johns Hopkins University.

See complete coverage on our Coronavirus Continuing Coverage page.

Visit our The Rebound Detroit, a place where we are working to help people impacted financially from the coronavirus. We have all the information on everything available to help you through this crisis and how to access it.