More on that stimulus effect

Earlier, I've approached the idea that somehow the mere fact that government spends money makes it "do more economic work" than money spent in the private sector--more or less, the Keynesian idea that there is somehow a multiplier effect.  To put it mildly, it's absurd that money will do more work just because Uncle Sam's name is on the purchase orders.  It goes through the same banks, gets spent at the same stores....in short, the economy has no way of knowing that the money was stolen taxed from the taxpayer before being used for Uncle Sam's pet projects.  Hence, there is no Keynesian multiplier effect.  As Lott's column indicated, the opposite is closer to the truth--money spent on debacles like PBS, NPR, Solyndra, light rail, and so on does less work for the economy because it's not the taxpayer's favored use for the money.  Hence, there is less incentive to do other things that benefit the economy.  (say, like drill oil wells)

One might object, however, that since so much of the money is borrowed, that what we're doing is impeding not our own economic growth, but rather China's.  Well, let's consider that idea; Chinese companies use their profits to either build their own companies or invest in "safe" securities, more or less.   We sell the safe securities here; what is the flip side?

Well, China buys immense amounts of capital and raw materials from the United States, Japan, and elsewhere.  So what happens when we sell bonds to fund fifty billion dollars worth of trolleys that nobody will ride, or to fund tax cuts for people who buy firetraps electric cars?

Simple; the U.S. taxpayer still takes a hit because honest companies don't get those orders for capital goods.    Hopefully someday government spending decisions will have a little bit more emphasis on "ROI" than is currently the case.