It is partly a comment on John Cochrane's essay. The critics focus on John for this comment:
First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both1 . This is just accounting, and does not need a complex argument about “crowding out.”But if you read the whole essay you see that there is a lot of very good stuff in here. Including a very important diagnosis of what the real cause of the crisis -- essentially an excess demand for US Govt Debt (bonds and money). People have fled private debt for public debt because of a sudden explosion of risk aversion. In this setting aggregate demand is low precisely because people want to hold more public debt. Cochrane argues that fiscal stimulus potentially could work in this situation, but he points out that once people's preference return to normal we are going to have a lot more public debt outstanding than we can handle. So his preference is for policies that can be reversed when needed:
In sum, there is a plausible diagnosis and a logically consistent argument under which fiscal stimulus could help: We are experiencing a strong portfolio and precautionary demand for government debt, along with a credit crunch. People want to hold less private debt and they want to save, and they want to hold Treasuries, money, or government-guaranteed debt. However, this demand can be satisfied in far greater quantity, much more quickly, much more reversibly, and without the danger of a fiscal collapse and inflation down the road, if the Fed and Treasury were simply to expand their operations of issuing treasury debt and money in exchange for high-quality private debt and especially new securitized debt.This is a much more subtle argument than the first quoted paragraph suggests. It shows that one should always read the whole essay.