The idea is called Keynesian economics -- I think, it's been a while since macro -- that the way to get out of a recession is to get more people buying and working. But that's hard; the fewer people are buying, the more stores have to lay people off, so the fewer people can buy... and etc. In general macro economists believe the only group with enough buying power to turn that pattern around is the government, which can spend billions. Ideally they'd just give money to the lowest percentile of earners, who are least likely to save it and most likely to spend it, but for some reason people frown on the idea of handing out cash to the homeless. (I'm being very sarcastic there, sorry.) So instead the government spends on things like infrastructure and green energy that will require workers (in America) who will be employed and therefore buy things, which will turn the economy around. It takes a while. This is the general formula FDR followed with the New Deal, if that helps
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I understand the stimulus bill better than than the bailout, but I'm pretty sure NO ONE completely understands the bailout, which is why everyone is wringing their hands.
So the stimulus is doing three things: giving money to actual people in the form to tax breaks, unemployment and stuff like food stamps funding, giving money to state governments so that they don't have to raise taxes or lay off more people, and paying money into infrastructure projects - like green energy and the high speed rail - in order to create more jobs and get money moving again.
Erm, in theory. It may be that the eventual price of these projects and the higher taxes that will come with them down the road will push the economy back down again. That's what the detractors say, anyway. Those who support it believe that the infrastructure projects will ultimately lead to more efficiency and savings - like computerized medical records and education reform - in the long-term that will outweigh the inevitable price.
I don't know that it will work, but I try to have some faith that there are actual smart people mixed in with the regular politicians, and hopefully it won't all fail. I know there's a lot of stuff in it that won't provide immediate relief, a lot of stuff that is mostly "we have been fucked over by a Republican congress for way too long and here's all the shit we've been trying to do but couldn't," but maybe it will work.
Part of the problem right now is deflation. Prices are going down, but that means pay is going to go down, too, and there's just not enough money circulating because everyone is freaked. Part of the idea behind the stimulus is to get money moving again.
But that's just big picture, and may not be accurate at all.
well, at least part of the idea is that the stimulus bill, by funding government projects that require hiring, creates a lot of jobs. jobs create solvency and spending, which makes the economy better.
(think about the fact that we're often taught that what really pulled us out of the great depression was all of the government job creation that resulted from WWII.)
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So the stimulus is doing three things: giving money to actual people in the form to tax breaks, unemployment and stuff like food stamps funding, giving money to state governments so that they don't have to raise taxes or lay off more people, and paying money into infrastructure projects - like green energy and the high speed rail - in order to create more jobs and get money moving again.
Erm, in theory. It may be that the eventual price of these projects and the higher taxes that will come with them down the road will push the economy back down again. That's what the detractors say, anyway. Those who support it believe that the infrastructure projects will ultimately lead to more efficiency and savings - like computerized medical records and education reform - in the long-term that will outweigh the inevitable price.
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http://www.recovery.gov/
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Part of the problem right now is deflation. Prices are going down, but that means pay is going to go down, too, and there's just not enough money circulating because everyone is freaked. Part of the idea behind the stimulus is to get money moving again.
But that's just big picture, and may not be accurate at all.
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(think about the fact that we're often taught that what really pulled us out of the great depression was all of the government job creation that resulted from WWII.)
past that i'm not really an economist either.
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