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A Bad Argument Against the “Stimulus” Plan

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As regular patrons of the Cafe know, I oppose the “stimulus” plan.  But I want here to flag a popular argument against this plan that is not valid.

I’ve encountered several persons who argue that, because only a small percentage of the stimulus funds have actually been spent so far, the stimulus plan cannot be credited with whatever economic buoyancy we’ve seen lately.

I believe that this argument is incorrect.  A good Keynesian can (and should) point out that the very expectation that such massive government expenditures will happen goes a long way toward relieving the economically depressing anxiety of consumers, employers, and investors.  That the spending hasn’t actually happened yet is less significant than the expectation that it will happen.

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