The Economic Stimulus Package

So the basic idea is that the economy is heading into (may already be in) a recession. Personally, I think we're already in it. The subprime crisis and global credit squeeze has really shaken up the markets. Stocks (not including short term jumps due to interest rate cuts) are falling, volatility is very high, and people are not borrowing and lending as much. The Fed decides to cut rates substantially in an attempt to soothe the panic in the markets. This may be a short term solution, but it really does not alleviate long term problems. Next, the government decides to implement an economic stimulus package, which involves giving around $150 billion in tax relief and other incentives to roughly 120 million homes in the U.S.

Isn't there something fundamentally wrong with this picture? Does this not exacerbate the huge deficit that we currently have? A study was recently conducted by Joseph Stiglitz (a Nobel Laureate and Columbia University professor) and Linda Bilmes (a Harvard University budget expert) claiming that the true cost of the Iraq war will be around $1 - $2 trillion dollars. That is about 15% of our entire GDP! With these kinds of budgetary atrocities and the consistent depreciation of the dollar, is it really possible to help the economy by spending more money?