Depending on our
Marginal_Propensity_to_Consume domestic goods, the amount of money spent on a given time, will have a multiplier effect due to the original injection of dollars, and the remaining transactions (known as steps 2 through infinity) provide the
multiplier effect.
Here is a very very very very basic example of a Keynesian multiplier effect, that is semi representative of our economy in the US:
In one year, unemployment has jumped 2.7%. According to
Okun's Law, a 1% rise in unemployment equates to a 2% loss in GDP. So we have a decrease in GDP (income) of around $740 billion from January of last year. Full employment GDP (market equilibrium) is probably in the 3% ranges.
Most people would think,
"hell our stimulus package is greater than the GDP shortfall, so we are gonna be ok."
But we forgot about the multiplier effect. Say for instance that our marginal propensity to consume domestic goods is 50%, giving a multiplier of 2. From steps to through infinity (when the money stops trickling), an additional $740 billion of economic activity (GDP) occurs (assuming there are no leakages).
Does $1.48 trillion sound like it possesses the sheer quantity to overt asset liquidation? Consider the consequences of 10% unemployment, or $1.9 trillion in GDP shortfall. This money does not filter into the system until the end of the summer, when they plan spend something like $150 billion tops by the end of 2009. By that time, unemployment could be higher than 10%...
Missing the mark is really bad, even worse than going way over the shortfall, because it will fail to turn the tide, and could lead to higher prices (stagflation). But that is not the worse possible consequence of this fake ass stimulus.
This money has to come from somewhere, and it forms a zero sum game with private investment. More and more money flowing into the treasury to pay for this endeavor equates to less and less investment in the private sector. Private sector innovation creates greater worker productivity, and higher standards of living.
Future generations will be far more harmed by the crowding out of private investment, much more so than this big debt number that has eclipsed $10 trillion.