I understand that it is better for individuals to have money to spend in the market, but I don’t understand how the government get the stimulus money. If people are making less and paying less in taxes (plus tax cuts), isn’t the government low on cash too?
Bonus: how insulated are government jobs during economic turns?
In: Economics
In short: the central bank makes more money by issuing bonds. People buy those bonds with money upfront and get repaid over time with interest. We can basically keep doing this for a long time provided:
1. our economy is growing over the long term,
2. we pay our bonds on their schedule,
3. we maintain social order, and
4. we collect taxes
If any of those four things stops happening, then the interest rate on our debt will go up, meaning it’s more expensive for us to borrow. But right now, it is essentially free for us to borrow money, so it’s borderline irresponsible for us *not* to do so, even excluding the incoming economic meltdown from COVID-19. There are so many infrastructure projects and other responsible investments this country could be making with a trillion dollars of free debt that would pay themselves back and then some that we’re just not doing.
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