Overview of Economic Stimulus Programs

Overview of Economic Stimulus Programs

The United States government has a number of tools available to influence the economy and secure the well being of its citizens. Fiscal policy allows the government to utilize spending and tax revenue on projects the government chooses to support. The actions of the government to achieve economic goals are enacted through legislation. When the economy is slow, the government can take action through economic stimulus bills. These bills or legislation specify the allocation of funds to specific areas of need. These areas could be general in scope and their recovery beneficial to the majority of the population, or they could be targeted and specific, as in natural disaster relief.

Some applaud the use of economic stimulus legislation to assist the poor, small businesses, and those affected by disaster. An investment by the government could make a big difference to geographic areas where infrastructure has been neglected or where industry and jobs have dried up. Investment could also have an impact on socially and economically disadvantaged individuals. Critics claim that stimulus packages are a free ride for politicians. They believe that in order to pass any bill and to get majority agreement from elected officials, the packages must include what is called "pork" or special interest projects or spending, usually within their constituency. Critics contend that politicians may not act in the best interest of all citizens, but may influence the contents of legislation for their benefit or power interests. Further, other elected officials with the interests of citizens in mind may be forced to agree or make deals to get legislation passed.

The US government has used economic stimulus legislation to support those affected by the events of September 11, 2001, and more recently, to support the financial and automotive industries. Economic stimulus packages can also benefit elected officials since they can be seen as working for the benefit of citizens by infusing cash into the economy.

Basic Terms and Facts About Economic Stimulus Programs

American Recovery and Reinvestment Act of 2009 (ARRA): A government bailout program designed to stimulate the economy by investing in US infrastructure, job creation, and preservation, energy efficiency, science, and social programs.

Economic Stimulus Act of 2008: A government act to stimulate the economy through tax rebates, business incentives, and loans.

Emergency Economic Stabilization Act of 2008 (EESA): An act authorizing the US Treasury Department to take action to restore liquidity and stability to the US financial system. The program not only bailed out the financial industry by purchasing so called toxic assets, but also provided tax relief and incentives for energy conservation.

Fiscal Policy: A tool used by government to influence the economy through spending or the collection of revenue such as taxes.

Troubled Assets Relief Program (TARP): A provision under EESA, authorizing the Secretary of the Treasury to make funds available to purchase troubled assets from financial institutions.

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