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Trenton Tanabe

Mrs. Litle

ENG 121001

1 April 2021

The Effectiveness of the Stimulus Package and its’ Consequences

An economy of a nation is extremely vital to the well-being of the citizens of that nation.

All economies have cycles. These economies can fluctuate from a boom to a recession in matter

of days. There are several opinions on how to boost the economy during a recession, but one of

the most popular theories that is used is called Keynesian Theory. Others do not agree with this

idea. They present many good opinions on why this procedure is harmful to our economy. This

creates an excellent argument that is extremely controversial.

Keynesian Theory focuses on fiscal policy. Essentially, this means to help revive the

economy out of a recession, the government may increase their spending. In the past,

governments have done this in numerous ways such as creating labor programs that build roads

and parks. One tactic that is often used is called stimulus spending. In order to revive the

economy, the government will give the citizens money. This money can be a check or tax credits

that can be redeemed to lessen the amount owed in taxes. The purpose is to give the recipients

money so that they will go spend it. By spending the money, one is creating a chain that provides

other producers with more money also.

Our economy was doing extremely well before the COVID-19 pandemic. Some may

argue that it had never been better, but this all changed in a matter of weeks. Traveling was

suspended, businesses closed, and many lost their jobs. This crippled the United States economy
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for months. Many people were struggling to makes end meet, so the government stepped in and

created a stimulus package. I believe this important to research because many are guilty of not

knowing the importance of this money, or what affects it will have in the future.

The three sources included below cover a plethora of different ideas regarding the stimulus

money. One source covers the importance of the checks and why it was needed. Another source

covers the consequences of this money and how it affects our future. The last source included

goes over the data and how the money was spent. These sources cover both sides of the argument

while providing logical reasoning to support each claim.

Stone, Chad.et al. “Fiscal Stimulus Needed to Fight Recessions.” Center on Budget and Policy

Priorities, 16 Apr. 2020, www.cbpp.org/research/economy/fiscal-stimulus-needed-to-fight-

recessions.

This source begins by explaining the recession and its’ causes. After this, Stone goes on to

explain the negative effects of the recession on people, both financially and emotionally. He then

turns the attention to how to properly introduce the stimulus package and how it should be

conducted. According to Stone, the stimulus money must be distributed early on during the

recession. It also must be given to the correct individuals who will spend it quickly. He also

claims that if the recession lasts longer than anticipated, it is necessary for the government to

increase the amount that is given. He then examines the claim of this policy increases the

nation’s debt which is already enormous. Stone claims, “Concerns that the United States does not

have the “fiscal space” — due to high levels of deficits and debt — to enact robust fiscal

stimulus to minimize the human and economic costs of a recession are misguided.” He believes

that the nation’s debt should be put aside during a recession because people are suffering and
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need help immediately. This source uses past examples of the efficiency of stimulus packages.

Although I may not agree with their reasoning, this source will mostly be the opposition to my

beliefs.

Cwik, Paul. “Why Government Stimulus Is Bad Policy: Paul Cwik.” FEE Freeman Article,

Foundation for Economic Education, 8 May 2020, fee.org/articles/why-government-stimulus-is-

bad-policy/.

In this article, Paul Cwik explores the negative aspects of the stimulus checks. The main

problem he presents is politicians are the people who decide on whether to supply the citizens

with stimulus money or not. Because their job relies on people voting for them, they are not

hesitant to hand out money because this makes the voters happy. Everyone would be more than

happy to receive a check in the mail. The constituents will remember who voted for and against

the stimulus bill and may cast their vote accordingly. The question of where does these millions

of dollars come from is also evaluated. He uses an excellent analogy to explain this issue. Cwik

tells the audience to imagine a pool with one side that has less water than the other. The people

who are on the side of the pool with less water see someone pouring buckets of water into their

side of the pool, but they do not see the person getting this water from the other side of the pool.

They also do not see how much water is spilled as he carries the bucket over. He uses this

analogy to explain that the money is coming from the taxpayers. It may not be this generation but

generations to come will be the ones who repay the government. He also claims if the

transferring of the money is done correctly it can be costly. I agree with this source because it

does an excellent job of bringing the negatives to light. It presents many ideas that most people

have failed to realize about this stimulus package. I will get most of my supporting arguments

from this source.

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Baker, Scott R, et al. “Income, Liquidity, and the Consumption Response to the 2020

Economic Stimulus Payments.” BFI, 24 Mar. 2021, bfi.uchicago.edu/working-paper/income-

liquidity-and-the-consumption-response-to-the-2020-economic-stimulus-payments/.

This source uses surveys and complex math equations to figure the efficiency of the

stimulus package. The researchers involved used data from an app that was designed to help

lower income households budget. During their research, they found that spending in lower

income households after the stimulus money increased enormously. In contrast, spending in

higher income households stayed around the same amount. According to them, this stimulus

package did much better than the stimulus package in 2008. Much of the money was spent on

groceries, mortgages, rent, and debt. They found because of the stimulus money many people

were paying back loans, which gave money to the loaners. The loaners would then go out and

spend this money which further stimulated the economy. This source will be included in my

argumentative paper because it details the efficiency of the stimulus check. I plan to also use this

source as an opposition to my argument.

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Works Cited

Baker, Scott R, et al. “Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus

Payments.” BFI, 24 Mar. 2021, bfi.uchicago.edu/working-paper/income-liquidity-and-the-

consumption-response-to-the-2020-economic-stimulus-payments/.

| By Chad Stone, et al. “Fiscal Stimulus Needed to Fight Recessions.” Center on Budget and Policy

Priorities, 16 Apr. 2020, www.cbpp.org/research/economy/fiscal-stimulus-needed-to-fight-

recessions.

Cwik, Paul. “Why Government Stimulus Is Bad Policy: Paul Cwik.” FEE Freeman Article, Foundation for

Economic Education, 8 May 2020, fee.org/articles/why-government-stimulus-is-bad-policy/.

Oldfield, Jackson. Literature Review on Anti-Corruption Safeguards for Economic Stimulus

Packages. Transparency International, 2020, www.jstor.org/stable/resrep26766.

Accessed 12 Apr. 2021.