Paul Krugman has a timely NYT column on deficit spending, and how it **might** be okay. (If it works!)
Krugman's right on the debt numbers, but besides the additional political hazards he mentions there may be others.
1. The U.S. Housing market has not yet, definitively, found its bottom. Foreclosures resulting from the meltdown of a year ago are just now hitting the pipeline. Home equity loans have been a source of money that has been used to 'stimulate' the economy for quite awhile now - in a period when America's relative economic competiveness is declining. This a borrowed money is not on the government books, but it definitely does effect the overall financial 'credit rating' of the United States.2. Subsidizing housing (and commercial property!) values with the deficit is a downward feedback loop. Spending deficit money to prop up the equity of property owners will not work, long term.
3. Who are we bailing out? If we pour good money after bad supporting the very people and practices that created the problem in the first place at the expense of honest blue collar America we are subject to a spectrum of problems, of which the least may be political.
