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
Imagine you are making $300 a month. You’d be pretty poor, need a few roommates, eating rice and dried beans a lot, walking everywhere.
Now imagine VISA sends you a credit card with no limit. You go buy a car, move into a luxury condo, eat at fancy restaurants every day, and when the bill comes, you just take a cash advance and send in the minimum payment. You are living a lot better than you were, and creating jobs at the restaurants, so they are living better too.
That’s exactly what the government does. It borrows the money and just pays the interest – with borrowed money. Spending more than you have makes your life better, for now. The US is already spending a trillion dollars that it doesn’t have every year. Notice that no one is talking about that deficit spending, or how it has been propping up the economy. But watch what happens when a Democrat is in the White House. The GOP that created this deficit with its tax cuts for the rich will talk about nothing but the need to reduce the deficit, because they know that will kill the economy and make the Democrat look bad. Watch and see.
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