Popular wisdom that no one seems able to explain.

I get a tax rebate. I buy something with it–new tires, school tuition, a vacation. The place I bought it from pays their employees and suppliers. Those people buy something else with the money, and so on. Lo, money bouncing through the economy.

But what if I don't buy something? What if I sock it in a savings account or pay down a credit card balance? Then the bank gets the money, and they want to earn interest on it. So they loan it out to a person getting a home equity loan or a business looking to expand. Those people in turn spend the money (or save it, or pay down debt, or pretty much anything), and the cycle repeats. Lo, money bouncing through the economy again.

No one in this cycle is likely to buy a bridge to nowhere or pay farmers not to grow crops. But other than that it works every bit as well as if the government had spent the money itself.

Defective bridges: Some of us wanted original stimulus money spent on things like this, electrical transmission infrastructure, et cetera. Oops. The play-time platoon had other goals in mind.

Of course, there's Hope [tm], still. Things may Change [tm] once Washington and the private sector emulate the Clinton Little Rock “summit” and actually try to think of better things.

First, we have to wait for some of the play-pen platoon to return from Copenhagen, and await any stupid new goals they want to add to what they have managed to do badly so far.

Second, there's no reassurance it won't end up like a pale imitation of the Clinton summit, with people arguing largely on what kind of new taxes to levy, and how large, when not babbling in their silly way about the “investments” [sic] that have to be made in addition to those that have been made already.

The stimulus package includes funding for quite a few infrastructure projects, which should both benefit the economy next year and also provide benefits to future generations. While it may be true that much more infrastructure spending is needed, as long as Americans continue to demand high levels of government services and 'entitlements' without agreeing to higher taxes to pay for them, then long term infrastructure projects and other important but not urgent spending will continue to be delayed and delayed.

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Tax cuts reward a large number of people for doing something they were going to do anyway. My recently married son will gladly accept the 8000 dollar first time buyer tax credit on his 400K home even though he would have bought the house anyway. It will reduce the monthly payment by nearly 30 dollars a month.

As a retired corporate executive I can tell you the payroll tax savings would not result in many new hires. You base hires on the amount of work you have to do, not the amount of money you have to pay people with. The best you could hope is that the extra money might save some more people from being laid off or add to someone's overtime pay. .

The first stimulus impact was almost completely trumped by the decrease in state and local government spending. This is were we need to look to get these projects going again. Too much of the first stimulus was in low impact tax rebates which went into savings or debt reductions.