The arguments in support of the effectiveness of the stimulus reminded me of an old South Park episode about the gnomes that were stealing underwear in South Park. Their purpose? The gnomes had an elaborate 3 step plan...
Step 1: Collect underwear
Step 3: Profits.
It's too bad the gnomes could not figure out what was step two.
Which brings me back to the liberal argument in support of Obama's stimulus plan. According to the left-wing economists, the federal government was to subsidize multiple state and local "shovel ready" projects, and help them to stave off the budget crunch and save the government jobs. And liberal economists were supposed to calculate how many jobs were "saved" or "created" by this government spending (which as is well-known was done in a way that would make astrologers look respectable scientists).
It was also agreed that a massive portion of the spending went to projects that the state and local governments would have probably never started in the first place in good times, let alone in the times of severe recession and the drop of revenue.
But it's quite clear that the liberal
A true economist would ask another obvious question - what will happen to the economy when the federal money is all spent? The federal government cannot continue borrowing 2 trillion dollars every year - it's unsustainable. Will the projects be stopped in the middle? Will the policemen, teachers and road workers lose their jobs? Did the state and local budgets reduced their deficits from 2008 and 2009 by cutting spending and thus prepared for the eventual cut off of the federal funds? Or, what is more likely, they greatly expanded spending and raised taxes in 2009 and in 2010 - and became more addicted to the government largess?
So, what will be the empirical test of liberal theory? One obvious sign of failure of the stimulus package is a double dip recession. In this case, it would be obvious that the stimulus only prolonged the recession at the great expense to the US taxpayer, and made the second recession much worse. A second sign would be high inflation in 2010-2012, which would demonstrate that the stimulus money was mal-invested, and that the taxpayer was screwed. And if we have both - high inflation and a recessions (the infamous stagflation) - then we surely know the liberal economists are indeed cartoon characters - or they are illiterate.
If the liberals are right, we will see fast job creation and fast GDP growth for the next 5-6 years. But the chances of that are minuscule - and even the liberal economists now realize that.
In all fairness, it's all quite simple to any individual who familiarized himself with the basics of economic theory and heard about the broken window parable. And I am not even talking about the real deep stuff - like the Austrian Economic Theory.