Point one. We got into this in large part because of too much consumption and not enough savings. If I got a tax cut and put the money straight into savings, it would actually be a step in the right direction for the long term.

Point two. The idea that a bunch of consumption spending is stimulative is based largely on the Keynesian multiplier concept. I get a dollar from the feds and use it to buy something from you, you take that dollar and buy something from Ray, Ray takes that dollar and buys something from Sally, and ultimately that one dollar of federal spending turns into several dollars of economic activity. Did you see the multipliers that were being tossed around last year in the debate between tax cuts and spending increases? Current studies suggest that a dollar of spending has a multiplier of 1.5 to one, whereas a dollar of tax savings has a multiplier of only about 0.6 to one. Those were used to justify spending increases rather than tax cuts as the way to go. I don't know what they are teaching these days as Keynesian economics, but in my day in Eco 200 we were taught a couple of rules of thumb--the multiplier potential is about 7 to one, and generally you look for at least 3 to one to justify deficit spending because the gains have to outweigh the costs brought about by taking on the additional debt. To close the loop, 1.5 to one is a whole lot less than 3 to one. I would see the touted ratios not as favoring spending over tax cuts, but rather as favoring neither over either or both. I would say--as I said then--that what literature I've seen on current multiplier expectations was way too sketchy for me to be able to form an opinion as to exactly how reliable those estimates were. In fact, I've read everything I could find and I'm still not sure what the numbers mean.

Three, I think the day is coming, and may be coming rapidly, when our ability to borrow will be a significant constraint. There are hints that China may be starting to balk at taking on too many more T-bills. A potentially worse scenario that I see is that every time China takes on more of our debt it comes closer to being able to bring down our whole economy. Not at zero cost to them, to be sure, but at a cost that, under certain circumstances, they might consider it worthwhile to pay. At best, I would see this situation as placing some constraints on our ability to pressure them regarding issues such as North Korea. At worst, what happens when China makes their inevitable play at Taiwan (they are currently building a fleet designed to haul troops for an amphihb invasion of Taiwan)? From what I have been able to read, this was clearly a factor in the events you describe in 1937. New Deal had cranked along on borrowed funds for four years, we still had double-digit inflation but things were at least somewhat better, and there was a scare that we were reaching the limits of our borrowing capacity. We raised taxes (not actually we, since I wasn't here yet, but you know what I mean) because we were worried about not being able to borrow, and the rest is as you describe. That's one reason why I don't think the transition out of this current mode will go anywhere nearly as smothly as you foresee.

To clarify one thing, your comments would imply some misunderstanding between deficit and debt. I think you personally understand, so I'm guessing it's just a wording thing. The deficit is the annual shortfall between revenues and expenditures (like net income in an income statement) whereas the debt is the money we have borrowed to cover the cumulative effect of all historic deficits (like debt on a balance sheet). Clinton eliminated the deficit to balance the current budget (OK, technically he didn't really balance anything, he just played Enron games with social security, but so has every other president since LBJ, and none of the others even came close to balancing the budget with or without the deception), but he did not go so far as to reduce the debt. Nor was that going to happen under Shrub, no matter what had gone down. Obama is not claiming that he will cut the debt in half (he won't), he is claiming that he will cut the deficit in half (he won't).

IMO, the final analysis comes down to where do you want the money, in the government sector or the private enterprise sector. I choose private enterprise. For all its faults, both real and imagined/alleged, capitalism still comes closer to delivering economic prosperity to more people than any other system. For all the evil, greedy, malicious capitalists who will screw the little guy, there are at least an equal number of evil, greedy, malicious bureaucrats who will screw him even worse, because they are accountable to nobody and in a government monopoly environment they have no real or potential competitors. If Exxon p*$$*$ me off, I can go to Shell. If a government-run oil company p*$$*$ me off, I can be p*$$*d off--or go to jail if I try to buy gasoline somewhere other than the government-approved service station.