Economic stimulus is a set of monetary and fiscal policies a government puts in place to energize economic activity. The goal is to jumpstart frozen credit markets and consumer spending, which helps boost the overall economy.
Economists believe that well-targeted economic stimulus is the most effective way to spur growth during a recession or slowdown. Stimulus packages should have a high multiplier effect, meaning that every dollar the government spends adds on at least $1 of additional spending. This is why programs like SNAP and unemployment benefits are considered high-impact economic stimulus, with the first dollar spent generating well more than one dollar of new spending in the economy as it ripples outward.
Another key aspect of targeted economic stimulus is that it should have the most impact on households or businesses who would be most likely to raise their consumption during a slowdown. This includes households who have already tapped into their savings or are struggling with debt. It also includes businesses whose bottom lines are squeezed by falling consumer demand.
The most recent round of Economic Impact Payments (EIP) were deposited into individuals’ bank accounts or sent to them as debit cards in 2021 and 2022. Individuals received payments based on their income, tax filing status, and family size. The total amount of EIP payments was $814 billion. This included direct deposits into personal bank accounts and EIP debit cards that could be used to make purchases at participating retailers.