Who had increased spending power exactly? I was under the impression the stimulus was mainly directed towards people who had suffered wage loss due to covid.
Some of the money went to folks who lost jobs. A lot of money also went to business owners who were supposed to use it "to not lay people off". Many probably didn't even need the money but took it because "free money". The number of business owners who bought new "toys" (i.e. cars, boats, etc.) or second and vacation homes during a time of supposedly difficult financial times is daunting...
Think about this: the cost to write off outstanding college loans is ~$350 billion. This amount was accumulated over a few decades. ~$700 billion was given to business owners in under a year...
One of the powerful things about the stimulus is that it was undirected—that money (I no longer recall the precise amount per household—$1200? $2000? somewhere in there) was just given to every household in the US.
Well ... if you think about it the additional spending power was sitting somewhere right? People lost their jobs because other people weren't spending. The people who didn't spend, kept their money. Then the people who laid off workers, kept their money. The government added money to close the spending gap. It's a perfectly reasonable policy, HOWEVER I know that in Australia definitely (and probably in the US) it was very poorly allocated, so people and firms who really shouldn't have had any extra income were granted it and some others who really needed it, didn't get it.
On balance, increased government spending adds net financial assets to the private sector and increased taxation removes it.
So did the government need to just "tax back" the money it spent into the economy? Maybe in some ways, but certainly not from the people it gave it to and maybe not at all. BECAUSE during the time when there was a recession avoided by stimulus, the population also grew so there should have been some economic growth during that time anyway.
As such, probably, what should have happened is that the government should have done things to ensure that the (very few) parts of the economy that benefit wildly from lack of competition and dysfunctional markets (like food, energy and housing) didn't accumulate all of the growth that should have been more evenly spread around.
In Australia, we need the government to build roughly 100,000 public houses per year, and we need to dramatically increase net migration to achieve that; but since we're an economy dominated by religion, mining, finance, real estate and insurance that's unlikely to happen. We actually have a horrible housing crisis in this country because of the dramatic increase in single person households as a result of relationship breakdowns over covid and the tendency away from share housing in young people (who can afford it!), as well as an explosion in dwellings used only as short term rentals.
In the US you probably have many of the same problems. The inflation reduction act did some of the work to improve things but it took a while to get it through because Manchin and Sinema fucked the recovery for everyone (as Bernie said: "give us more democrats").
This is the best discussion on inflation I've seen:
Think about this: the cost to write off outstanding college loans is ~$350 billion. This amount was accumulated over a few decades. ~$700 billion was given to business owners in under a year...