Here is a NYT symposium of economists, including yours truly. I very much like Andrew Samwick’s point:
If I had my druthers, the word ‘stimulus’ would be expunged from
public discussion, along with ‘bailout’ and ‘rescue.’ These words
convey the idea that, because we have so mismanaged our economic and
financial affairs, we are somehow able or entitled to conjure up
additional funds out of thin air to fix our problems.
Elsewhere, here is a passage from Megan McArdle:
Is the government going to guarantee approximately 70 million
owner-occupied homes in America against a 25% price drop? No, because
that’s $3.5 trillion dollars, if my mental arithmetic serves. Or is it
only going to give the money to the least responsible homeowners: the
ones with small (or no) downpayments, houses they could only afford at
short-term teaser rates, and a long string of missed payments? The
numbers, and the political arithmetic, don’t add up. Indeed, any such
program would positively encourage people to default, in order to get
the government to cram down their loans.
In other words, don’t spend the stimulus on the housing market. From another angle, Angus reports:
I guess I’d rather give my money to people who are going to use it to
try to make more money (i.e. save/spend it in the market system) than
give it to people who are going to use it to try and get re-elected.
And here’s more from Greg Mankiw.