If there are roads and bridges that the federal gov't is responsible to maintain, and they need to be maintained, it should be done. But if we do it under the guise of stimulus, you're going to see a whole bunch of perfectly good road signs replaced by new, prettier ones, because, well, we've got money we NEED to spend (to "stimulate the economy", aka "buy the peoples' votes with their own money"). Spending money just to spend money is only good for the people who spend the money, not the people whose money is spent.
Early in econ classes, probably macro, you learn about the government money multiplier. When the gov't spends money on roads, the road workers go out and spend the additional money on haircuts, and then the barbers spend that money on steaks, and then the butcher...etc. The initial govenment spending is then multiplied as it ripples through the economy. Yeah!
Most students get suckered into buying this. Fortunately, a very few will think to ask where that money came from to begin with. The answer is that it was taken out of the economy. The doctor who was taxed to pay the road worker will now not spend that money on haircuts...etc. In the end, there is no magic money multiplier, because the supposed wonderful effects are offset by the negative effects no one ever wants to mention (not to mention gov't waste, corruption, and fraud). But on the bright side, instead of the spending decisions being dictated by the invisible hand of a free people, they are dictated by the iron fist of gov't.
Fortunately, we have Republicans who can stimulate the economy with a free market approach by giving money ("back") to the people to spend as they choose. Sounds good. They did this under Bush at least once. Remember those $300 tax "rebate" checks? Well, I don't. My income was too high (or as I prefer to refer to it, I paid too much in taxes) to qualify. People who paid nothing in got "rebates", those who paid too much got nothing. This was done for a reason. Give my money back to me, and I will save it, not spend it. Give it to someone who can't or won't save it, and it will be spent (see wonders of money multiplier above). Great, free market redistibution of wealth. Totally unfair, but at least it allows the government to "stimulate" the economy by taking the money I wasn't going to spend and giving it to someone who will.
Of course, once again we're ignoring half of the equation. When you give me back my money and I put it in the bank, it doesn't just sit there. It gets leant out, wait for it, stimulating the economy [comparison of the relation between the government money multiplier and the wonders of fractional reserve lending omitted, as my stomach has had about enough of this Keynesian aggregate demand nonsense for today]. Or it doesn't, because it was taken away and given to someone else. Once again, the government can't just create free money to stimulate the economy [technically, I should use the word "wealth" and not "money", that's another discussion]. What it gives, it also has to take.
No matter how many times Paul Krugman completely and utterly presents only one half of the discussion, TANSTAAFL.
Don't get me wrong. I'm not saying that the government can't take actions that will stimulate the economy (preferably just getting the bleep out of the way), I'm saying that there is no magic. Lowering taxes would stimulate the economy by letting the people spend more of their own money, but is that really stimulus or is it just doing less to impede economic output in the first place?
