I'm getting the occasional question from my friends about the stimulus and as far as their thinking takes them they cannot but see the stimulus doing at least "something," thereby boosting GDP, lowering unemployment and helping the stock market. Yet at the same time, they intuitively know spending (what are we at now?) $4 trillion to stimulate the economy must have a drawback, if for any other reason if all it takes is stimulus to get the economy going then why don't we "stimulate" ourselves to incomes per capita of $250,000? Ergo let me explain.
Yes, there will be an initial "bump" in economic factors coming from the stimulus if for any other reason it will be on paper. Again, if the government pays one group of unemployed people to dig a ditch $400,000 and another group of unemployed people $400,000 to fill it back up well not only did you lower unemployment, but you've created $800,000 in GDP. Of course, you didn't produce anything of value and have not improved standards of living for the masses, but such minor technicalities does not concern the Obama administration, additionally you should quit being so damn racist for questioning "Him." Regardless, the point is this is only a paper gain, much like the paper gains people had on their houses and Dotcom stocks, they weren't real.
That being said, as we move the beans in this country from one pile to another, this will show up in economic numbers as some kind of production or growth, even though there are no more beans. This "improvement" in these numbers will then help fuel a(nother) sucker's rally in the stock market.
The question though is when does the other shoe drop? When does this charade end?
It doesn't have a definitive end, but rather a long, dragged out end.
You see, all we're doing today is taking money from the future (via borrowing) and spending it on ourselves today. We're taking money from the future in the hopes of giving ourselves an economic boost now to help make that future more vibrant. However, we are achieving the opposite. In borrowing today, yes, we will get that little paper boost, but that's all we'll get. We won't have a brighter economic future, but rather a more burdensome future. All we've done is loaded future generations with additional debt that will slow down the economy. You have to consider it like the conservation of mass law; mass must be maintained. You can't take mass from one entity, put it somewhere else, and then some how that mass "magically" grows. You still have the same amount of mass. The same with economic growth; we've pilfered economic growth in the future to bring it home here today, and the consequences are going to be quite predictable;
Higher average unemployment in the future
Lower productivity (this is more of a criticism of the generation that voted Obama in than a consequence of the stimulus)
Lower GDP growth
Higher average inflation
Ergo, the best way to describe this is the Battle of the Bulge. Hitler had more or less lost the war. The underlying fundamentals of the war had sealed Germany's fate, but Hitler wanted to do one last "hurrah" and make one final, desperate offensive. The problem was, just like this stimulus, it was bound to fail. Germany did not have the resources nor air superiority to make the Battle of the Bulge succeed, just like American does not have the economic wherewithal and work ethic to make good on all the money we're borrowing from babies' mouths and foreigners.
So enjoy the temporary victory while it lasts. The economic Allies known as "reality" will still run us over.