Mike Moffat begins with the question: What are the key ingredients of fiscal stimulus?
The theory behind fiscal stimulus depends on three basic factors. As we will see, in practice it is difficult to have more than two of these met at any one time.
It seems to me that given the U.S. political process all three requirements ("not crowding out, be quick, be cost-effective") are likely to be missed.
And Mike concludes:
Fiscal stimulus works very well in mathematical models where all real world difficulties are assumed away. They tend to be popular with politicians, who get a justification to spend money, and economists with little life experience outside of academia. When we consider the stumbling blocks that occur in practice, the stumbling blocks that are ignored in the mathematical models, fiscal stimulus looks far less attractive.
