The purpose of a government stimulus is to use strategic government spending to revive a stagnant or contracting economy. The biggest stimulus package ever put together by the U.S. government was the American Recovery and Reinvestment Act (ARRA) of 2009. This act, signed into law by President Barack Obama in February 2009, earmarked $831 billion in federal funds to be put toward measures aimed at pulling the nation's economy out of the deep recession that began in December 2007. Like most government stimuli, most of the ARRA's spending was in the form of tax cuts or rebates, expanded unemployment benefits and infrastructure spending. When executed properly, all three measures have the potential to increase the number of jobs in the private sector.

Tax cuts and rebates put much-needed cash into the pockets of struggling citizens, who then put some or all of it back into the economy by spending it. When someone has an extra $300 thanks to a tax rebate, and he uses this money to buy his child a bicycle, this benefits the child, the store that sold the bicycle and the manufacturer that made it. Because people such as this father now have money to spend, the stores sell more and the manufacturers produce more products to sell to stores. The stores hire more workers to handle the increased sales volume, and the manufacturers hire more workers to make products. Government stimuli in the form of tax cuts and rebates, as this scenario illustrates, increase private-sector employment by boosting consumers' purchasing power.

Though it sounds paradoxical that paying people not to work can create jobs, expanding unemployment benefits has a effect similar to providing tax cuts and rebates. Without unemployment assistance, out-of-work citizens have their purchasing power reduced, often to zero. This renders them unable to spend money at local businesses, which suffer in turn due to reduced sales. When businesses sell less, their revenues decrease; they compensate for this lost revenue by cutting payroll and laying off workers. If losses are particularly bad, the business goes under, putting everyone there out of work and adding to the unemployment snowball. By expanding unemployment benefits, the government helps individual citizens get through a rough patch and helps the businesses where these citizens spend money keep their revenues up, enabling them to maintain robust workforces.

Infrastructure spending is the third way in which government stimuli increase the number of jobs in the private sector. Spending money to build and repair roads and bridges helps ensure that goods make it to market as efficiently as possible; this keeps costs low for businesses. Spending less to procure goods and materials means businesses have more money to expand, and expanding usually involves hiring more workers. Additionally, federal and state governments frequently contract with private-sector companies to help with infrastructure projects. When a company lands a big government contract, it has an immediate need to hire employees to handle the work.

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