Most of the time, the government is spending money in order to accomplish something specific like build an aircraft carrier or give food to a poor family or maintain a national park or run a prison. If you can build that carrier cheaper, you’re saving the taxpayers money. And that money is thereby freed up for private consumption or investment, and the economy as a whole will thank you. But when you’ve got a substantial output gap and conventional monetary policy can’t pick up the slack, so you decide to try fiscal expansion, then you’re looking at a different situation. Safeguarding taxpayer dollars can’t be the priority when your policy objective is to spend money in order to encourage idle resources to be put to use. In the present circumstances, spending less money just means more unemployment.
The point of the stimulus bill is to stimulate the economy. It would be fine to ask whether the present bill is the best way to do that. Does it get the multipliers as high as it could? Does it deliver stimulus quickly? But it is another thing entirely to ask whether we couldn't manage to scrape by for another year without resodding the capitol mall.
Kierkegaard once wrote: if you are given a task and a certain amount of time to complete it, normally it is a good thing if you complete the task ahead of time. But this is not true when the task is: to occupy yourself productively for a day. In that case, if you appear at noon, saying: look, I finished ahead of schedule!, you only show that you have missed the entire point. Likewise, if your task is to get as much money into the economy as quickly as possible, it is not a good thing to say: look! I got all the things you asked for at half the price!
That is the thing that is seen. What is not seen is everything you could have gotten if you hadn't been wasting money like a profligate. If you get all the things that you asked for at half the price, then you have just as much as you have already spent still left over to spend on other useful things. The same money, a wider range of stimulus, more useful results. Instead, on the Yglesias-Hilzoy view of the world, we would develop the same amount of debt but through a narrower selection of stimulus projects and would therefore have received fewer definite benefits. If you want to spend, you want to spend; but waste is waste whatever you want to spend. To take the Kierkegaard example, if your goal is really to occupy yourself productively for the day, you've failed if you only occupy yourself till noon. But you've also failed if you spend much of your time occupying yourself unproductively.
This is all basic Bastiat (PDF). Napoleon tried to stimulate the economy by having people dig ditches then fill them in again. Pretty much all he really did was waste the time of a lot of hard-working ditch-diggers who could have been doing serious projects rather than being alienated from their now-useless labor.