Will Obama’s Stimulus Plan Work?

Indeed.

Barack Obama and his congressional allies are gambling that the largest public spending program since World War II and a new round of tax cuts will pry the U.S. economy from the recession’s iron grip and avert another Depression.

But what if they’re wrong?

Some conservative economists say that additional stimulus may only prolong the grief at best, triggering runaway inflation down the road and resulting in an even more bloated federal bureaucracy.

“I think the economy will recover regardless of what Washington does. But the long-term effect here will be to reduce the standard of living of the next generation because they will be saddled with all this debt,” said Chris Edwards of the libertarian-leaning Cato Institute.

Even without the new spending proposed by Obama, the U.S. has a $1.2 trillion budget deficit this year, he noted. “If that isn’t already enough of a Keynesian stimulus, what is?”

Early 20th-century British economist John Maynard Keynes argued that the government should intervene to avoid depressions by increasing its own spending and controlling interest rates. President Franklin D. Roosevelt based many of his New Deal spending initiatives on Keynesian theory.

But not all economists and politicians subscribe to that world view.

While there is broad support for some kind of major stimulus, the skeptics offer this as Exhibit A: The trillions hurled at the problem last year by Congress, the Bush administration and the Federal Reserve have yet to yield many tangible results.

Unemployment continues to climb, reaching a 16-year high of 7.2 percent in December and is expected to keep on rising through 2009. U.S. manufacturing remains in a serious slump. The decline in consumer spending in late 2008 is expected to continue.