The government's $5 trillion stimulus gamble mostly paid off - but missed poorer Americans along the way

• The US' $5 trillion stimulus was largely effective but left some struggling, Fed researchers said.
• Using the IRS to send checks left out 12 million people with income below the tax-filing threshold.
• Improving aid programs can drive stronger recoveries this year and after future downturns, the team said.
• See more stories on Insider's business page.

The government's bid to pad against the coronavirus recession was mostly successful, but there are lessons to learn from some key shortcomings, researchers at the Federal Reserve Bank of Minneapolis said.

Congress authorized roughly $5 trillion in spending on various economic relief measures since the pandemic began. Households received support through direct payments, a child tax credit, and expanded unemployment benefits, while businesses got a helping hand from the Payroll Protection Program and near-zero interest rates.

Economists largely agree that the various stimulus bills accelerated the recovery, but two economists found a handful of ways the policies missed their targets. As Krista Ruffini and Abigail Wozniak wrote in a working paper dated March 25: "There are several feasible adjustments that could improve the reach and efficiency of these programs in 2021."

The problem is with the delivery mechanism, specifically the Internal Revenue Service (IRS).

Sending checks through IRS and Social Security Administration infrastructure made for quick deliveries, but the agencies weren't able to easily identify the roughly 12 million non-veteran working-age Americans with income below the threshold for filing federal taxes, the team said.

The IRS created a tool for non-filers to petition for their stimulus payments, but the program still presented unnecessary hurdles. The agency should use information from other support programs like Medicaid and SNAP to identify some of those Americans and send checks appropriately, the economists added.

Similar difficulties emerged in distributing unemployment benefits. Language barriers or inadequate access to technology could've kept some populations from accessing the expanded benefits seen throughout the health crisis, the team said. Unemployment insurance claims would have been 23% higher if recipiency rates were the same throughout the state as they were in wealthier areas, the team said.

Other tenets of the support packages simply can't be evaluated yet, they added. Most states approved eviction moratoriums early in the pandemic to help struggling Americans avoid homelessness. The federal moratorium and state freezes are still in effect, but it's still too early to see whether the rules truly prevented evictions, according to the economists. Data on evictions and homes at the highest risk are scarce, as are statistics on how households covered other housing expenses like utilities.

Improving aid programs can drive a stronger recovery in the near term and avoid similar pitfalls in future downturns, the economists said.

"From a macroeconomic perspective, leaving out the most vulnerable households could have ramifications for the broader economic recovery, as these households have the highest marginal propensity to consume," they added.