what is pump priming 
pump priming is a type of action taken to stimulate an economy usually during a recessionary period such as through government spending or reductions in interest rates and taxes the term pump priming is derived from the operation of literal pumps which had to be primed with water so in order to function properly pump priming assumes that the economy too must be primed to function properly once again in this regard government spending is assumed to stimulate private spending which in turn should lead to economic expansion pump priming effectpump priming involves introducing government funds into a depressed economy in order to spur growth increased purchasing power can then prompt higher demand for goods and services the increase in demand experienced through pump priming in turn leads to increased profitability in the private sector which assists with overall economic recovery pump priming relates to the keynesian economic theory named after noted economist john maynard keynes which states that government intervention within the economy aimed at increasing aggregate demand can result in a positive shift within the economy this is based on the cyclic nature of money within an economy in which one person s spending directly relates to another person s earnings and that increase in earnings leads to a subsequent increase in spending the use of pump priming in the united statesthe phrase pump priming originated from president herbert hoover s creation of the reconstruction finance corporation rfc in 1932 which was designed to make loans to banks and industry this was taken one step further in 1933 when president franklin roosevelt felt that pump priming would be the only way for the economy to recover from the great depression through the rfc and other public works organizations billions of dollars were spent priming the pump to encourage economic growth the phrase was rarely used in economic policy discussions after world war ii even though programs developed and used since then such as unemployment insurance and tax cuts may be considered forms of automatic pump primers however during the financial crisis of 2007 the term came back into use as interest rate reduction and infrastructure spending were considered the best path to economic recovery along with tax rebates issued as part of the economic stimulus act of 2008 at the onset of the covid 19 pandemic the u s government adopted a number of fiscal and monetary measures that can be seen as a form of pump priming this included cuts to interest rates and the implementation of various relief programs which distributed stimulus money to individuals businesses affected sectors among others pump priming in the japanese economysimilar to activities used within the united states japan s prime minister shinzo abe and his associated cabinet approved a stimulus package in 2015 equivalent to 29 1 billion in hopes of invigorating the strained economy the goal was to increase the gross domestic product gdp of japan by 0 7 by the end of the year 2016 as in the u s the japanese government engaged in activities that can be seen as pump priming during the covid 19 pandemic this included quantitiative easing measures the issuance of zero interest loans and funding for relief programs 