Some Stimulus Skepticism

The issue of how big the stimulus should be is something I've been wondering about lately. Over the last 15-20 years I've become more a little more skeptical of the government's ability to create effective and efficient programs, of its ability to intervene in society and in the economy without there being large, unforeseen consequences. It's not that I think that government stimulus is wrong, it's just that the economic, political, social, and cultural forces that the government is interacting with here feel too complex and uncontrollable for things to go as planned.

Regarding this, Megan McArdle, economic blogger over at the Atlantic has a good post:

I'm becoming extremely concerned about the stimulus, for the following reasons:

1) Where is the strong evidence that the kind of truly massive stimulus people like Krugman are pushing for will do anything but provide a very temporary respite before the economy slumps back, more indebted and no better off than before? The chief complaint about the two historical examples we have, the Great Depression and 1990s Japan, is that such stimulus was not sufficiently tried.

2) What about the permanent income hypothesis? If we make the stimulus spending temporary, I presume we have the same problem we do with tax cuts--rational consumers will save most of the extra income. If we make it permanent--that's a different, but bigger, problem than we have now.

3) We are a nation of net dissavers, which contributed greatly to the bubble. Can we really prolong this?

The last point is key, it seems to me. Eventually, we'll have to pay for the massive debt we've been and are incurring -- it's unavoidable. Is the stimulus simply postponing a prolonged belt-tightening? The idea is that the stimulus fixes a situation that has become a crisis, putting us in a place, afterwards, where we can be austere and save, but do it in a more gradual and less harmful way. I agree with this in general -- I think a large stimulus in necessary -- but, the question is, for me, can the public, and the government, be counted on to behave this way once the crisis is over in a few years? Instead us doing the saving that we need to do will we just go back to our spendthrift ways and the whole thing starts over again?