The financial crises is that the banks hold loans that are not being repaid.

Unless you think the US government will not be able to print money to repay its debt the two cases are very different.

500 Million Americans will lose their jobs!

I think the real divide between economists isn’t over different macroeconomic theories but over underlying differences in philosophy and ideology. So where does that leave you, the curious, intelligent, non-economist citizen?

I disagree, slightly, with this:

I think the disagreement among economists is really over which of these two scenarios is closest to reality. The federal budget is about $3 trillion. Is the next $500 billion or so money well spent or money squandered?

I think it's more "if we can do all the 'good' stimulus, is that enough?" and "if it's not, what do we do ... give up or pull in some from the other category?"

It comes down to whether your fear of a real crash is high enough to warrant messy spending.

(stimulus is so last month, bank nationalization is the new black.)

If you believe (as I do) that the the country's economic issues are structural and very long term, those problems being:

1. A 40 year trend of transfering resources and the buying power of the national income to government (govt taxes and spending), which is empirically not optimal (to be charitable), and GDP minimizing. Said another way: an ever increasing dead weight on the productive sectors of the economy that is reaching critical mass. (Oh, and a freight train called Medicare coming down the tracks.)

2. Depending on what Obama actually does, an increase in taxation on the wealth producers.

3. A diminished reservoir of future GDP increasing brainpower, because of an educational system that is simply a mess, not to mention polluted with big government ideology.

4. For the first time in my lifetime (age 50) a real competitive threat to the US - from the BRIC's. (Excepting Japan, circa 1982, which proved an illusion.)

5. No macroeconomic event or asset class rising in value to facilitate people living beyond the country's true economic means or protecting government from economic reality (See: the death of inflation (1980's); See: stock market increases ( 80's into the 90's); See your house (the 90's into the 2000's)

Then.............

The only way out is (who was that actor who admonished us in those 80"s commercials??) "the old fashioned way, to earn it."

That is: innovation, productivity increases, successful investment, risk taking, hard work etc.

And now we look at the "stimulus" package, and general public sentiment. In reality, a mismash of somewhat worthy expenditures (20%?) and garden variety pork. And a further public reliance on government. See #1, above.

That does not appear to be a prescription for robust GDP and job growth. And since public policy takes years to change, and an economy as large as ours a long time to shift.....I'm talking 10 years of slog if we are not careful.

10 years at least.

I'm more amenable to using government spending (borrowing) to mitigate abrupt changes from irrational borrowing to irrational hoarding.

But what makes the government borrowing any more rational--i.e. sensible--than what private consumers and businesses were doing? Is the government really acting as a benevolent social planner that we see in the economic literature, or is it the product of self-interested politicians who can be influenced by special interest groups?

I'm more amenable to using government spending (borrowing) to mitigate abrupt changes from irrational borrowing to irrational hoarding. But a lot of this longterm stuff should be packaged separately, like the energy program.