Economics
Stimulus Package
A stimulus package refers to a set of measures implemented by a government to boost economic growth during a downturn. It typically involves increased government spending, tax cuts, or other policies aimed at stimulating consumer spending and business investment. The goal is to revitalize the economy and create jobs by injecting funds into various sectors.
Written by Perlego with AI-assistance
Related key terms
1 of 5
3 Key excerpts on "Stimulus Package"
No longer available |Learn moreContemporary Economics
An Applications Approach
- Robert Carbaugh(Author)
- 2016(Publication Date)
- Routledge(Publisher)
Taxes on dividends and capital gains. Corporations distribute a portion of their profits to stockholders in the form of dividends. Also stockholders may benefit from increased corporate profits by realizing capital gains—that is, an increase in the price of a share of stock. Reducing taxes on dividends and capital gains would increase the returns to stockholders. This, in turn, encourages households to supply more funds to corporations to be used in new investments in factories and equipment.- Tax simplification. Another potential source of efficiency gains lies in simplifying the tax system. For example, the tax code is almost 3,000 pages long and businesses and households must deal with about 480 tax forms to file their federal taxes. A simplified tax code would reduce the time and effort needed for tax preparation, thus freeing up resources to produce other goods and services.
Therefore, economists agree that a proposed fiscal policy must be evaluated in terms of its short-run effects and long-run effects.economics In Action
Presidents Bush and Obama Implement Fiscal Stimulus Programs to Combat Recession
Following six consecutive years of expansion, the U.S. economy peaked in December 2007, beginning a recession that continued throughout 2008 and 2009. Policymakers moved quickly in 2008 to address the economic downturn. Although the Federal Reserve cut its key interest rate to help stimulate the economy, it was felt that monetary policy alone would not provide sufficient stimulus. Past expansionary monetary policy had decreased interest rates to under 1 percent, thus limiting the ability of the Federal Reserve to further cut interest rates.In February 2008, Congress passed and President George Bush signed the Economic Stimulus Act. It was designed to provide temporary (one-time) tax rebates to those lower- and middle-income individuals and households who would immediately spend it. About $113 billion was dispensed, which amounted to about 0.8 percent of GDP. Under this Act, the Treasury mailed checks ranging between $300 and $600 to taxpayers filing as individuals. Individuals who earned $3,000 (the minimum under the Act) received a $300 check; those who earned between $3,000 and $75,000 received a check for up to $600. The Act also authorized businesses to deduct 50 percent of the cost of investment equipment installed during 2008 from their 2008 taxes.
eBook - ePubThe Inequality Reader
Contemporary and Foundational Readings in Race, Class, and Gender
- David Grusky(Author)
- 2018(Publication Date)
- Routledge(Publisher)
Figure 73.1 combines spending on the first two items into a single category, direct income assistance and services. In the first two years of the stimulus program, spending on this category represents by far the largest component of the federal response. Understanding the composition of the response is key to understanding how the stimulus succeeded in pushing the economy toward recovery. As I argue below, the Stimulus Packages enacted in 2008 and 2009 contained both standard and nonstandard responses as compared to prior recessions. Understanding the scope and mix of the packages points us to a broader understanding of how and why the government response was crucial for heading off a much deeper crisis.Standard ResponsesIt is not unusual for the government to accelerate spending on public infrastructure projects during a recession. Congress also often provides temporary tax cuts to stimulate consumption and business investment when the economy is weak. It did so again in this recession. In fact, the tax cuts in the American Recovery and Reinvestment Act (ARRA), mostly for households, account for about 45 percent of total stimulus spending in 2009 and 2010. In addition, Congress nearly always offers extensions of unemployment benefits when joblessness is high. It did so in this recession too.The most important protection American workers receive when they are laid off is unemployment insurance (UI). Newly laid-off workers are typically eligible for up to six months of UI benefits after they lose their jobs. By the standards of other industrial countries, the six-month limit on benefits is rather short. Of the 21 richest industrial countries, 15 provide jobless benefits that last a year or more. Unemployed workers in these countries receive much better social protection if their unemployment lasts a long time. Unemployment protection lasts longer in the United States when the jobless rate soars. When a state’s unemployment rate rises above a certain threshold, workers in that state are supposed to receive additional weeks of benefits, with the number of extra weeks linked to the increase in the state’s unemployment rate.
eBook - ePubThe Politics of Persuasion
Economic Policy and Media Bias in the Modern Era
- Anthony R. DiMaggio(Author)
- 2017(Publication Date)
- SUNY Press(Publisher)
According to Keynesians, during times of economic decline, consumer demand is increased and the economy stimulated by increased government spending on programs such as public works and tax cuts for working and middle-class Americans, which are funded through deficit spending. As the father of demand side theory, economist John Maynard Keynes advocated government intervention following economic crashes via policies such as the reduction of loan interest rates offered by the Federal Reserve and increased government investment in infrastructure through public works spending, as a means of reducing unemployment. 2 Newly employed Americans would use their earnings on consuming goods and services, thereby increasing economic growth. The 2009 stimulus was an example of Keynesian economics, because it included substantial spending for public works and infrastructure, in addition to tax cuts directed toward working and middle-class Americans. Competing Ideologies and the Stimulus The stimulus was debated in a heated environment due to public anger over growing unemployment, economic stagnation, and growing government debt. The Congressional Budget Office (CBO) estimated that, by injecting close to $1 trillion into the economy, the stimulus would increase economic growth by between 1.2 to 3.6 percentage points in 2010. The CBO projected that from 1.3 to 3.9 million jobs would be created within the same period, and the unemployment rate would decline by between.7 to 2.1 percentage points
Index pages curate the most relevant extracts from our library of academic textbooks. They’ve been created using an in-house natural language model (NLM), each adding context and meaning to key research topics.
