Stimulus vs..... what exactly?

I think it's important to remember some things about the liberal and conservative proposed responses to our current economic doldrums. 

Liberals argue for Keynesian stimulus, i.e. government deficits through higher spending on infrastructure a la FDR and the New Deal.  The theory is that this will put people back to work by stimulating demand, since lack of demand is the key problem in the current recession. 

Conservatives argue that the above is wrong, that government spending can never replace private sector spending in efficiency, and therefore running up these huge deficits is a terrible burden on future generations. (Of course, deficits were seen by Republicans as no problem at all during the good times of the mid-'00s when conservatives were running things, but we'll leave that for another day).  Instead conservatives are arguing for lower taxes, balanced budgets, and fewer regulations on business.

The Liberal argument is that deficits are needed now, due to the unusual situation we're in, but in the long term liberals agree with conservatives that government should strive toward a balanced budget when things return to normal.  In other words, deficit spending is a temporary measure, not a philosophy for all times.  Conservatives, on the other hand, are proposing the same policies during the recession that they propose during booms- lower taxes and less regulation of business.  There is literally not a smidgeon of daylight between their proposed policies now and their proposed policies in 2004 when things seemed to be going well economically.

So Conservative philosophy seems to be that governments shouldn't do anything different during a recession and slow recovery than it should do during a boom- government is seen as getting in the way in both cases.  That means that in our recent crisis, government would have been best to leave everything alone and let the market work it out.  Like Herbert Hoover did in 1929.

Now maybe it's true that Keynesian stimulus, in spite of all the historical evidence in its favor, doesn't work. Maybe conservatives have a point in saying it will make things worse.  But what do conservatives have to propose that we do?  Every plan their politicians put out seems to rely on government doing less- but it's pretty clear that government doing less will doom us to many more years of glacially paced recovery, or a double dip recession.  Conservative plans basically concede that we're stuck with that, the markets have to fix it, and the People will just have to live with 9% unemployment for years until the Invisible Hand works it out.

Keep in mind that "getting out of the way" is a passive plan, and will yield very slow results.  There's just no way to picture the economy moving into overdrive quickly because taxes go down again (making our deficit worse, by the way).

It's amazing that an economic agenda that was completely ascendent from 2001 to 2007 and produced the worst period of growth during any expansion, followed by the worst recession in 70 years, still has a huge number of adherents after such complete factual discreditation.

Oh, one more thing: Barack Obama is now essentially endorsing the conservative plan of austerity.  Here's Krugman yesterday.  Yes, he favored stimulus in the worst days of the crisis, but now he's buying in to the need to cut back government spending in the face of 9% unemployment.  FDR did the same thing in 1936- pulled back on the stimulus too soon, leading to another recession.  I hope it doesn't take WW III to get us out of this mess.