He believes that they are not:

Why do I think this is unnecessary? The entry and exit of firms driven by innovation and the development of new products can be part of a full employment equilibrium, that is, cycles are not needed to clear out old firms and spur innovation.

I think he's right. I examine the data and discuss the argument in more detail here: Are recessions good for the economy?

Great paragraph from Winterspeak:

I think they oppose the stimulus because it does not "stimulate". When the "stimulus" was first touted, it was rejected because it was too slow, and the money was targeted towards political interests, not households, and therefore would not help the economy. Here we are months later, and the stimulus has come too slowly, and has gone to political interests, not households, and how not helped the economy. Unemployment is nearing 10%, and continuing to rise. If the Obama tries to get another stimulus, it again will be too slow, and send money to political interests, not households. Critics were right the first time, and they are still right.

But don't tell that to Paul Krugman:

Fiscal expansion bothers people because it violates the dogma that government is the problem, not the solution, whereas monetary policy has become accepted as a mainly technocratic thing without political implications.

That must be it Paul. It would explain why that folks in favour of a "statist" policy such as raising gas taxes are also in favour of stimulus. Well, that is except for me and Mankiw and dozens of other economists.

I sometimes wonder how on earth did this guy win a Nobel prize? But then I re-read his early work - it is truly Nobel worthy. Has Paul Krugman become the economics equivalent of Willie Mays with 1973 Mets, falling down in the outfield while trying to make a play?

From Justin Fox:

I wonder if Congress could enact some sort of contingent stimulus legislation: If the unemployment rate passes 11%, then $XXX billion goes to some predetermined range of programs. If it doesn't, then the money remains unspent.

Naaah, that'd be too sensible.

I am always hesitant to disagree with people who are likely smarter than me, but I think Justin's idea is far from sensible. It gets the timing of the issue wrong - he might as well be saying "If we get into a car accident, then we'll put on our seatbelts". Stimulus spending needs to be made well before the economy bottoms out. That is, it needs to be based on leading indicators. Unfortunately, the unemployment rate is a substantially lagging indicator.

A follow-up to a post from earlier today. From The Economist:

AS CRITICS of the administration's stimulus policy have intensified their attacks, arguing that continued poor economic performance means that fiscal policy has failed, defenders of the policy have been at pains to point out that not very much of the stimulus package has yet found its way into the system. Perhaps 10% of the total resources of the bill have been deployed, and most of the boost from stimulus will be delivered between now and late 2010.

The last sentence should end with 'at which point the economy will have already been in recovery for 18 months'.

The reason that we can conclude fiscal stimulus is not working is not because "continued poor economic performance means that fiscal policy has failed". It is just as easy to argue that the economy would be much worse in the absence of fiscal stimulus. There are just too many confounding factors to rely on just GDP figures.

We can conclude that fiscal stimulus has not worked because the entire argument about how fiscal stimulus works is incoherent and ignores real world facts