There are concerns that the stimulus plan's $789 billion price tag is too large. To pay for it we will have to borrow the money, adding significantly to the government's debt load. But without a stimulus, the depression would undermine tax revenue and fuel more government spending, producing even larger deficits and debt burdens.
It is fortunate that we are still the global economy's triple-A credit; even though this calamity began in the United States, global investors still prefer the safety of U.S. Treasury bonds. We will thus be able to borrow the money at record-low interest rates.
Indeed, my most significant criticism of the current stimulus plan is that it is too small.
Our struggling economy will produce nearly $1 trillion less than it is capable of this year and will underperform again by at least as much in 2010. The $789 billion in spending and tax cuts to be distributed over those two years is not going to fill this expected hole in the economy. I would thus not be surprised if policymakers are forced to consider a second stimulus plan soon.
Nonetheless, when combined with other aggressive policy steps, including efforts to shore up the financial system and stem foreclosures, this fiscal-stimulus plan will go a long way toward relieving the current economic crisis.
(for the stimulus discussion)