Why Use Stimulus Packages?

Men shaking hands The idea behind a stimulus is simple: the government injects money into the economy or adjusts monetary policies to lower interest rates, etc. in an attempt to stimulate the economy's growth. There are three primary motivations such policies: to increase investments in the nation's infrastructure, to create jobs, and to spur economic growth.

Investing in Our Infrastructure
In theory, government stimulus packages help us to invest our infrastructure. The idea is that, with increased budgets and available spending, state governments can focus on projects that will a) benefit the population in the long-term and b) create jobs to complete those projects, providing the population with higher employment in the short-term. Examples of the jobs that might be considered investments in our future may include green energy, public buildings, roads, bridges and other services, and educational or youth-oriented programs. With a poor economy to worry about now, the hope is that stimulus packages will help us to invest in long-term programs that will help us down the road to improve the economy and to avoid future economic disaster.

Job interview Creating Jobs
Like I mentioned in the previous section, stimulus packaging is meant to provide a short-term solution to economic troubles as well: job creation. As different government projects are funded by stimulus money, more jobs are created to develop, run, and maintain those programs. In theory, helping people to feel more secure in their employment helps them to feel more comfortable spending their earnings, putting money back into the economy and beginning the economic healing process.

Spurring Economic Growth
As more people find employment and begin to spend their money, government should be able to collect more taxes, enjoy an increase in small businesses, and reduce its debts. With the new programs that were invested in during the stimulus, the future of the nation should, in theory, be right on track and more secure.

Whether this works practically remains to be decided. However, understanding the idea behind stimulus packages is useful for understanding one of our government's current strategies.

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