Krugman may not have agreed with the stimulus package as it was, but he does agree with the highly questionable fundamental idea that the point of a stimulus is to increase aggregate demand, which in theory increases production. It is the rationale that the World Wars helped numerous nations out of depressions through massive government spending. Setting aside the questionability of what impact war spending had on economic recovery - the vital mistake I see us making is failing to recognize that the kind of spending they are talking about is only effective when put to productive use. Creating a job for the sake of employing someone, or producing a product for the sake of production (yes, that is worded awkwardly) does nothing if those goods and services are not produced to meet a demand that already exists in the market.
Sure, improving that highway might benefit the individuals that are employed to build it, and the people paying for it will have a nice new highway to use, but unless the utility that highway provides is higher than the costs of production, it doesn't make sense to build it. It is like people in Wisconsin complaining about us turning down $800 million in federal money to build a high speed rail. Because the money is coming from the government, they treat it like it is free and act like we turned down a free high speed rail. If that were the case I would agree - however, if a private company came in here and offered to build a high speed rail from Madison to Milwaukee for the low price of $800 million, I feel the average person would feel the utility they would receive from that train would not be worth spending that sort of money considering the cities are already connected directly by interstate, only a 70 minute drive and taking the bus is dirt cheap.
Stimulus plans will always fail because they are built upon flawed concepts.
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