Recommended: The Stimulus Evidence One Year On

I recommend Robert Barro's article The Stimulus Evidence One Year On in today's Wall Street Journal. Barro is a professor of economics at Harvard University and a senior fellow at Stanford University's Hoover Institution, so while some people might not like what he has to say, he has credentials and data to support his arguments, which is more than most public opinions on this matter are based on.

The article is long and a bit technical, so for those not inclined to wade through the detail his conclusion is summed up in his last paragraph:

Thus, viewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.

This conclusion is not particularly surprising, even without understanding the technical aspects of the economics behind it.

When government spends money, that money has to come (eventually, at least) from taxes on individuals and corporations, and that taxed money is therefore not available for corporations to invest in new equipment and factories and research, or for individuals to spend for consumer products. Of course the government spends it instead of the corporations or individuals, but only after taking out it's "administrative costs" (paying the hundreds of thousands of government employees involved in collecting, tracking, allocating, spending, and monitoring the process, maintaining the thousands of government buildings, etc.)). That "administrative cost" is about 20% these days, or one dollar out over every five. So it's not surprising that the "government spending" so beloved of politicians is inherently less effective than private spending.