Why the Stimulus Failed, Part Two

I recently explained why government stimulus spending must fail. Tim contested my argument, but I will show why it stands.

The basic flaw with stimulus spending is that, in order to spend a dollar into the economy, government must remove a dollar from the economy, which renders spending a zero-sum transfer of resources.

Tim challenged these basics by asserting that not all money is contributing to economic activity, so utilizing “idle” dollars for government expenditure would avoid the zero-sum critique and raise national income. There are three reasons this is wrong.