Mark Thoma runs through some numbers.  Of course the plan has not been announced, so I don’t have a good sense of it.  There is talk of five million new jobs, however, and that figure makes me suspicious.  There is very often a trade-off between spending the stimulus money well and spending the money to create new jobs.  For instance the better "Green Energy" ideas mostly involve hiring or reallocating skilled people who already have jobs.  Many of the recently unemployed seem to be coming from construction, retail, finance, and, soon, manufacturing.  If we spend to build up mass transit, can we cobble together a team from these people?  And do they live in the right regions, have the right skills, and have the right willingness to lay some extra Metro track?  Don’t accept the rosy scenario numbers until you see at least partial answers to these questions. 

The New Deal put many people to work in the physical construction of infrastructure; at that time the skills of labor were more homogeneous, people were more desperate for work, and it was more expected that "labor" meant physical labor for able-bodied men.

Addendum: Arnold Kling makes a similar point.

On YouTube, find it here.  The taping was about an hour long but the video is six minutes long.  The full talk started with a discussion of capitalism and morality but it ended up focusing on the financial crisis; since I don’t watch myself who knows what made this cut?

Sometimes I try to be "chatty," but that’s not really my temperament.  This time I tried to flood the interviewer with as much content as possible.

Here is a Big Think forum, with Lawrence Summers, George Soros, Peter Thiel, and Robert Merton.  There is more of Summers here.  (Why does he talk slower now?  What happened to the beloved fire hose?  Did someone give him media training and teach him to be chatty?)  Here is Thomas Cooley on whether we should change how economics is taught?

Via Greg Mankiw.  She understands the Great Depression very well.  Here are previous MR entries on Christina Romer, mostly touching on macroeconomics.  I can’t vouch for her managerial or political abilities one way or the other, but intellectually this is a very good pick.  Here is one report on the announcement.

Here is the National Journal on the work of Christina and David Romer on fiscal policy:

At the same time that Obama is calling for higher income taxes on people making $250,000 or more, the Romers have found that tax increases are generally bad for economic growth and that they primarily discourage investment — the supply-side argument that conservatives use to justify tax cuts for the rich. On the other hand, the Romers have shredded the conservative premise that tax cuts eventually force spending reductions (‘starving the beast’). Instead, they concluded that tax reductions lead only to one thing — offsetting tax increases to recover lost revenue.

Here is the MR entry on that paper, please do read it again to receive a dose of good news.  Here is Romer’s home page.  Here is her soon to be longer Wikipedia page.

I feel like I am repeating myself, but since the topic is so much in the news, let’s give it another go.  A massive fiscal policy could:

1. Generate some investments which are worthwhile on their own terms.  LaGuardia really does need another runway.

2. If the broader monetary aggregates are falling, because of either a credit crunch or a liquidity trap, a fiscal boost can keep aggregate demand from deteriorating.  Note that this is distinct from bringing about a recovery; it is limiting further downside.

3. A fiscal boost can provide a beneficial "sunspot" in a multiple equilibrium model, thereby moving everyone to the higher output equilibrium.

4. If spending needs to fall, a fiscal boost can postpone this fall.  Postponing this fall may be a good idea to prevent immediate economic destruction.  But then the fiscal policy is not really bringing about recovery.  In fact the fiscal policy is (optimally, perhaps) hindering the pace of adjustment and recovery.  Fiscal policy makes the downturn less severe but it also prolongs the adjustment process.

You’ll note that only under #3 does a massive fiscal boost in fact bring about an economic recovery.  But I do not believe that #3 is better for anything than a few good days in the stock market nor do most people rely on #3 in making the case for fiscal policy.

You might also try #5:

5. The economy needs a boost to aggregate demand and since monetary policy isn’t working any more, fiscal policy has to step in.  This is usually followed by drawing a graph with two or three curves on it.

This makes sense if it is reworded to be more precise and to be some combination of #2 and #4.  But still, a huge fiscal boost will not bring recovery because a big chunk of the problem requires real economic adjustments (the simple graph obscures this).  The economy needs to adjust out of housing, out of so much consumption, and out of various classes of associated risky assets.  Those are some pretty massive adjustments and along the way lots of major banks become zombie banks.  A massive fiscal boost won’t get us over those problems.

Just to recap: Because of #1 and #2, you might think that a massive fiscal boost is a good idea, compared to the alternatives.  But you should not argue that a massive fiscal boost will bring about or drive an economic recovery.  It is tempting to cite #5 to justify the fiscal boost but the bottom line is some mix of #2 and #4.