How economic stimulus packages reduce unemployment

According to the CCH Group (2008), the Economic Stimulus Act of 2008 provided stimulus payments to individuals and several incentives to businesses, thus creating numerous job opportunities. Some of the incentives included a 50 percent depreciation allowance for purchases made in 2008 and an increase in the provisions for small business expensing limitations on tax years (tax rebates) with effect from the year 2008. With such measures, business organizations had more opportunities to hire more staff in order to enhance their productivity.

Through the provisions of the Economic Stimulus Act of 2008, tax incentives are provided to low and middle income investors in order to stimulate their business investment (CCH Group, 2008). In addition, the act provided an opportunity for further investment through an increase in limits imposed on mortgages entitled for purchase by government-supported entities, thus increasing flexibility in creation of self-employment opportunities.

In the context of low and middle-income earners in the United States, the stimulus package of 2008 came as a boon to averting further losses of jobs and income as a result of lay-offs necessitated by the global economic recession. This is because the package targeted an increase in employment opportunities, insurance coverage and a reduction in poverty (CCH Group, 2008). The effectiveness of the 2008 economic stimulus plan was praised because it was aimed at directing money to those who spend it quickly, thus increasing investment in various sectors.

In addition, the stimulus package was aimed at boosting consumer demand and bolstering economic growth through increased productivity in various areas of production (CCH Group, 2008). The plan to extend unemployment benefits and increase funding for lowly paying investments to individuals provided a guarantee for job creation and preservation of the already existing jobs in the middle-income classes.

This is because it provided an assurance that people would earn some income, thus adding impetus to economic growth. Perhaps this is the reason why the provision to extend unemployment benefits to individuals was considered one of the most effective measures in the plan. In this regard, even the high expenditure involved ($1. 64 in stimulus for each dollars spent) was considered inconsequential to the economy given the other benefits that would accrue from the plan (CCH Group, 2008).

Overall, most provisions of the Economic Stimulus Act of 2008 were aimed at ensuring that the United States economy creates a benign environment for creation of employment opportunities, or at least provides some income for the unemployed. It also provided an avenue to protect existing jobs by the required incentive. On the other hand, the American Recovery and Reinvestment Act of 2009 that was assented to by president Barack Obama aims inter alia at expanding unemployment benefits (House Appropriations Committee, 2009).

The provisions of this act are of higher magnitude than those in the Economic Stimulus Act of 2008 whose focus was on tax rebates. In addition to providing remuneration incentives to employees, the American Recovery and Reinvestment Act also protects employees though measures such as insurance cover and protection of the employees from harassment by their employers to ensure that people in employment hold onto their jobs (House Appropriations Committee, 2009).