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
Short answer: they don’t. It’s debt spending.
Unlike the average person or company, governments often don’t worry about running a balanced budget. It’d be great, but the reality is that *debt-spending* (spending money they don’t actually have) is the way a lot of governments stay in operation. Basically, it’s like running up your credit card and never paying it off.
For example, at present, the US is over $21 trillion in debt. (That’s 21 thousand billion.) Would your credit card ever let you run up a debt like that? Absolutely not, but that’s because as an individual person, you’re unlikely to A) ever be able to pay that off, and B) will probably die long before that could even have a chance of happening, meaning that debt will be unpaid forever. Governments, however, are a different case. Their annual income is in the trillions of dollars, and the US government has been around for over 240 years, so it’s expected to still be around 240 years from now. It’s a safer bet that the money will be repaid… eventually.
So, governments are essentially writing those stimulus checks against money they don’t have. It’s like charging stuff to your credit card when your bank balance is zero; you’re just pushing that debt to the future to use the money right now.
Latest Answers