There is economic reasoning to argue that stimulus packages, aka deficit-funded government spending, can speed up recovery in times of a recession or a depression. Recessions, Keynesians and others argue, are caused by a lack of aggregate demand – something the stimulus packages make up for. But what I find most annoying about something like a stimulus package is that regardless of its results, both sides can claim victory.
Take the most recent stimulus. Unemployment has hit higher than Obama’s economic team said it would with the stimulus. This seems to be logical grounds for anti-stimulus folks to claim that the stimulus didn’t work. But no. People like Paul Krugman and Joseph Stiglitz argue instead that there wasn’t enough of a stimulus.
Take the opposite situation. The economy rebounds tremendously. We’re back at full employment and everyone is happy. This seems to be logical grounds for pro-stimulus folks to claim the stimulus worked. But no. Opponents like Greg Mankiw or Gary Becker could merely say that this recovery would have happened regardless of the stimulus.
Unfortunately, it seems that when it comes to macroeconomics, the sheer inconclusiveness of pretty much everything makes the policy debate that much more frustrating.