1) Bailouts and stimulus plans must be financed.Since very little of the spending contained in the stimulus plan currently under consideration in the Senate is likely to result in projects that make more productive use of the money spent than if that money were put to use by the private sector, it makes sense to say that the stimulus plan won't be very stimulative, if at all. While there may be projects contemplated by the plan that turn out to increase the economy's efficiency and productivity (e.g., new and cheaper sources of energy, new infrastructure), those gains are likely to be negated many times over by waste, fraud, and the inefficiencies that are notoriously present in every government undertaking. Not to mention the fact that the plan involves hundreds of billions of transfer payments that simply take money from one segment of the economy (generally from those producing the cash flows necessary to fund the transfer) and give it to another segment of the economy (generally to those deemed by politicians to be lacking the cash flows they should otherwise be enjoying).
2) If the financing takes the form of additional government debt, the added debt displaces other uses of the same funds.
3) Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses.
John Cochrane, another eminent economist, has written an excellent (but rather long) explanation of the logical fallacies behind all stimulus plans.
The argument against the stimulus bill is founded on a bedrock of logic. As it stands today, the stimulus bill is nothing but a gigantic waste of the economy's resources, and thus is likely to do more harm than good. More and more distinguished economists are making this point, and public support for the plan can only decline from here.