A dollar spent by the government is always a dollar taken from somebody and diverted from some other activity. The only question is whether the dollar spent is more productive, or satisfies a more desperate human need, than the alternative activity would. If not, the spending is hostile to economic growth and public welfare. There is no free lunch. At best, what people call "stimulus" can only occur if the dollars spent by government are more productive than they would have been if they were allocated privately. I cannot imagine how allocating public funds to the same reckless stewards of capital that made the bad loans in the first place can possibly be a productive use of capital.
All of this would be fairly moot if it we were simply talking about 2008 and 2009. However, my impression is that as the effects of last year's surge of deficit spending taper off, we will begin to observe a more accurate and generally flat reflection of underlying economic activity.
