A piece on how consumers are reacting to the recession got me thinking about fiscal stimulus and the Big Picture:

(...)this is a realignment of savings and borrowing to real income growth. The subsequent contraction is already causing a re-allocation of labor and capital and will continue to do so for awhile.

As for fiscal stimulus, I see this primarily as an efficiency/equality tradeoff. Company failures create an immediate and concentrated cost, offset by a long-term and diffuse gain. Allowing too many firms to fail would promote diminishing returns of efficiency at the cost of equality, which can be inefficient in of itself (Ref: income equality vs. GDP growth discussions). Debate and action with regards to this trade-off will be furthermore skewed by political incentives to favor the immediate and tangible outcomes.

Private individuals bear the cost of corporate failure at a rate equal to gap the between x, the speed of at which labor conditions change and y, the speed at which labor can re-allocate.

Government policy with regards to creative destruction in global business cycles (stimulus policy) and to industry-specific trends (trade policy) should strive to reduce this cost in order to maximize long-term growth. Most governments implicitly recognize this imperative, but often choose to try and retard the speed at which labor conditions change, rather than increasing the responsiveness of the workforce.

Conclusion: Fiscal stimulus is useful economically and very useful politically but not necessarily the best way minimize personal costs or promote long-term growth.