Larry Summers works to convince Brad DeLong that the stimulus package is worth supporting.
The top two knocks against the stimulus package, Summers contends, are that it will fail to stimulate the economy yet it will further fuel our deficit. As the United States is not about to go bankrupt, Summers argues that the only negative from additional deficit spending is further reduction of national savings. Now, if the stimulus package does not work, it will be because folks saved instead of spent their stimulus check. If they save it, that will offset the incurred debt and national savings remains unchanged. If they spend it, that will stimulate the economy.
Thus, Summers concludes that the argument that the stimulus package will both fail to stimulate the economy and reduce national savings is "incoherent." Either the stimulus will work or it won't work but won't reduce national savings.
His reasoning is not irreproachable. Summers does not address timeliness—delivered too late, or if unneeded, the stimulus could overheat a recovering economy. And Summers does not calculate the relative cost of lowered national savings versus the benefit of economic stimulus, although DeLong writes "few things are worse for national saving[s] than a recession" in argument that the stimulus minus incurred debt will be a net win over a recession. But on the whole it is a solid argument, addressing the largest criticisms. Thus, even if the package is ineffectual or unneeded, as I argued, it won't do much long-run harm.
And don't forget: Hang with the cool kids and follow live Super Tuesday results this evening @vote2008.
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