Interesting Perspective On Federal Economic Stimulus Package From Hoisington Investment Management (Watch Out For Deflation! ...yes, "DEFLATION")

From a recent article presented by John Mauldin in his "Outside the Box" weekly, Van Hoisington and Dr. Lacy Hunt write:

"Fiscal Policy would seem to be undisputedly supportive for the economy with Treasury's $110 billion in rebate checks and a Federal budget deficit that is approaching a record $500 billion. But that is not the case. The Treasury does not $500 billion in its checking account to cover the deficit, nor even the lesser amount for the rebates. The Treasury has to raise these funds by selling debt securities to the private sector. Credit availability may be thought of as a pie. When the Federal sector, which is the economy's premier borrower, takes more of that pie, fewer dollars are left for the private sector. Thus, deficit financing crowds out funds that would have gone to private uses. With the exception of the Federal funds rate, in the first half of this year, virtually all money and bond yields rose, a clear sign that the deficit usurped funds for the private sector. This has had the impact of slowing, rather than stimulating economic growth."

This makes for an interesting debate. Is it all politics? Does the government really lack the economic understanding to do what's best for us at this point, even if misjudgements that got us here were made in the past? Or is this perspective simply inaccurate? What portion of those rebate checks work back into the economy, stabilize personal finances, or help somebody avoid a foreclosure, etc?