So, maybe you've heard: the economy looks like it might be headed for the tank. You may have also noticed that there's an election this year. That means it must be time for a stimulus package on Capitol Hill. No one up there wants to head into reelection with rising unemployment, a rash of foreclosures, and falling incomes on their hands, without at least looking like they're doing something about it. So there's a rush on the Hill to get a "stimulus package" out the door to help boost the economy ASAP.
Cynicism aside, I think this is a good thing. People are suffering, and if the government can do something about it, why shouldn't they? It sometimes seems like heresy these days, but I tend to think it's what we pay them to do.
The problem is that some of the stimulus proposals floating around, including ones by our green friends (see Josh Dorner's post for example), are not very good stimulus policies. It's not that any of these ideas are bad. Most of them are downright good. Excellent, even. The problem is that almost none of them can be remotely classified as stimulus.
Here's the problem, or at least one of them: Since World War II, the average recession has lasted just 11 months. Add the fact that it takes a fair bit of time (anywhere from 3 to 6 months) before we even recognize that we're in a recession. Add still more time to decide what to do about it, and more time on top of that for whatever we decide to do to actually have an effect, and you see the problem. Even for the quickest policy approach, we could be solidly 7 months into an 11 month recession before we can have any impact.
There is a very short window for policy to stimulate the economy. If we don't act fast enough, the policy won't take effect soon enough to help anyone. If we're late enough, the policy ends up hitting the economy when it's on the upswing, and instead of smoothing out the business cycle, we end up contributing to it.