The economy foundered partly because we were too dependent on debt to finance current consumption, and that was unsustainable. But burning some $825 billion on fiscal stimulus, as President Obama proposes, means more of the same. We will be borrowing money to prevent a decline in our current standard of living. That money will eventually have to be paid back, which will require a decline in our future standard of living.
One defense of the stimulus package is that it will finance needed investment in infrastructure and other public goods. Unfortunately, government spending is particularly prone to waste because governments, unlike private companies, don't have to worry about going out of business if they spend unwisely.
This round of spending is sure to be even more wasteful than the norm. Why? Because the government is in such a hurry to get it done, making it harder to vet projects properly. So the return on investment will be lower than usual, and maybe negative.
All this federal spending is supposed to stimulate the economy. But plenty of reputable economists are doubtful. And even if the old-fashioned Keynesian approach is sound in theory, it is probably useless in practice. The Congressional Budget Office says only 7 percent of the infrastructure money requested by Obama will be spent by September. Less than half the highway funds would be spent in the next four years. Most of the outlays will come after they are no longer needed.
But practical realities are no match for our desire to keep living beyond our national means. We spent our way into this mess, and it's too tempting to think we can spend our way out.