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An economic crisis can begin in any number of ways, from runaway inflation, to a worldwide pandemic. Regardless of how one starts, there’s general agreement on the most effective way to fix a crisis: Throw money at it, and plenty of it.
Fiscal stimulus measures are one of the standard prescriptions for allocating funds to an economy in crisis. (Monetary policy is the other, but monetary policy measures involve considerably more esoteric ways of tossing around money than fiscal policy.)
And in a crisis people and companies spend less—a lot less—so the government fills that gap with big spending measures of its own.
The federal government has already implemented one stimulus package to cope with Covid-19 crisis, the $2.2 trillion CARES Act. Enacted in March, experts and observers alike believe that CARES effectively blunted the early impacts of the crisis, but it hardly prevented the onset of recession.
Now, as the pandemic-induced recession drags into its seventh month, another round of stimulus is being considered to help pull the U.S. economy out of the ditch. The first stimulus package has been nearly completely spent. What happens if another round of government aid never comes to fruition?
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