More importantly if it makes the economy stronger and prevents a prolonged downturn, it will make it much easier to raise the revenue for Medicare and other obligations in future years.

Also important to note is that as more people become unemployed, expenditures for government safety net programs like Medicaid will increase. If continued increases of unemployment can be averted, then these government costs will be reduced.

Greetings Dean,

I can't help but disagree with your assessment that potential taxpayer bailout losses are minimal because, "The government is getting assets for this money..." The government started losing money right from the beginning of 'The Asset Forfeiture Seizure Act.' This was after simply taking assets from drug criminals, assets that cost the gov. nothing. Uncle Sam wound up paying a private company to dispose of these very valuable seizures, more than the cash proceeds realized from their sale. This, of course, was after the firm's administrative charges were deducted. Why should we think it'll be any different with the bailout, especially since it's costing so much up front?

Hmmmmmm.....why is it that the government would have problems paying for social programs like Medicare. Why wouldn't say the government have a problem paying for the Department of Defense or for corporate refunds to large companies?

Yes, it will pay off in more revenues -- if it works. But the previous stimulus program definitely didn't work, and indeed went onto the deficit and national debt. If it doesn't work then it will go onto the debt and the interest will go onto the deficit and it will make things worse.

So what's the Plan B here? What if the stimulus doesn't work? (I presume that after Iraq no one in the government will ever do anything again without a Plan B.)

Tragically, "a fraction" includes such fractions as 99/100.

Dean,

When the US Navy buys an aircraft carrier, it gets a asset. But we still call it government spending. We know that it is a depreciating asset. We arenot sure how fast. It may sink during military conflict? Now the goverment is buying bank equity. It might go up in value or it may be worth zero next week. Probably best to acount for it as spending, right?

And it if wants to combat deflation it should not be borrowing that money but printing it.

Being something of a tyro in the area of macroeconomics, I have trouble understanding why people consider deflation anything but a blessing at such a time as this. We need to fund a stimulus program. We could borrow, but as Lord says, if there really are worries about deflation, why the hell wouldn't we print it? I would be much obliged if someone could explain this.

"The government is getting assets for this money and will at most lose a fraction of the $700 billion appropriated."

Really ? Just how do you know? The contents of the Fed's balance sheet regarding these assets is not known to the public.

Come on Dean, just add the $195 Billion defense supplemental appropriation that is not in the original deficit figure, along with the diversion of the $250 Billion Social Security surplus that was deposited into the general budget, yet promised in future obligations and you will arrive at nearly $1 Trillion deficit.

Even without the stimulus package, next year's budget deficit is likely to be in the range of $1.5 trillion . . . . Robert Reich 11/26/2008