This is an excerpt of a paper I have been working on about the controversy of the stimulus package in 2009. Feel free to comment and share your own opinion on the ideas presented in the excerpt:
The very idea of a stimulus plan was destined for failure. The theory behind Keynesian economics has been losing credibility. Many economists concur that the theory of large governmental spending as a means of increasing aggregate demand to be a myth. Economists now believe that there is a certain amount of money in the American economy and in order to inject money into the economy via government spending, money has to be taken out of the economy. This can occur in various ways. In 2009, the majority of the funds for the stimulus package came from domestic investors buying treasury bonds, which served to increase government debt. There are two important issues with this action. First, even if the economy did grow in the short term, the large amount debt would then need to be paid off in the form of increased taxes or the printing of more money, which causes inflation. Secondly, absorbing private funds for governmental spending takes away money that is available for the private sector to invest in projects which are demanded by the free market. Examples of this include short-term businesses such as road construction and infrastructure renovation. Another significant shortfall of the 2009 stimulus package involved the tax cuts to individuals which were specifically designed to boost demand. In the midst of a bad economy, wary consumers are not going to spend the money they receive as a result of tax cuts, but are rather inclined to save the money in case their situation worsens. During this time, network news reporters and economists remarked that savings went up for the average American. This is in direct opposition of what the creators of the stimulus package intended.