I have been, in my short political life, generally a proponent of fiscal conservatism. I also listen to Rush / Hannity every day, so I hear anti stimulus package remarks for the majority of the day.
Why I think it will work
The recent tag line they are using is that if we took all the money from the rich, it still wouldn’t pay for our debt. That point is 100% true. However, creating money and spending it, if you are the government, actually can.
Imagine the scenario of the government handing out money for public transit. In this transaction, every single piece is taxed. Government gives money to company A. Company A pays corporate taxes on it, and all of their employees required pay taxes on it. The supplier for the construction materials and vehicles also pays taxes. Their employees, who also pay taxes, probably buy things for their families. They also pay taxes when they receive their paycheck, and again when they pay sales tax.
In addition, people who could not previously afford transit may now be able to get to work. This creates more productive citizens, and a larger supply of workers, allowing companies to product goods at a lower cost. The houses knocked down for right of way decrease the supply of homes on the market. The decreased supply of homes, combined with the increased value of living within reach of public transit, revives that housing market. There are so many advantages in this idea.
If you can create projects which the majority of money will be spent in a manner in which the people involved will spend the majority of it domestically, the economy will grow without actually losing money.
Inflation to the rescue
The other aspect of this, is that inflation is not inherently evil. When our dollar is strong, or even gaining against foreign currency, it is a better idea to hang onto it. If our currency starts losing value, this would be a great boost to the ailing real estate market. In order to fight inflation, you have to invest in assets rather than holding cash so that you grow with the inflation. Inflation also decreases imports as foreign goods are not as affordable as domestic goods. This will create a boost of manufacturing as people will need to invest to keep their value, and the demand for domestic goods would increase.
In short, not everything is black and white, so just question what these guys say. These ideas have not traditionally worked before, because the world has never seen this level of worker productivity. We can now produce more food than can be consumed, more cars than can be driven, more houses than can be lived in, and more computers than can be operated. The world has changed since the previous economic models where derived.
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