Originally posted by malcr
So - Wipe clear personal debt for free with one condition : you are not allowed a credit card or loan for 5 years (this will also act as a brake on peoples credit habit, banks will hate that - oh shame!)

This would # with small business start ups and consumer demand in general.

Also tax cuts can and do create consumer demand - especially if aimed at the lower and middle classes. Any Keynesian would tell you that lower taxes go hand in hand with higher government spending to raise aggregate demand and bring a nation out of recession or other times of low economic activity.

The problem has been that governments are reluctant to implement the other side of the theory - government spending is supposed to be lowered and taxes raised during the boom years to stabilise the economy so that it doesn't bubble, eliminate the deficit and pay down the debts incurred during the downturn. Most governments (such as the USA and the UK) were running large deficits even during the boom. Now these same governments are faced with having to both try to stimulate growth and reduce that deficit - not an easy task by any means as they require directly opposite approaches.

This is why fiscal policy has been tightened considerably (to try and eliminate the deficit) whilst monetary policy has been loosened considerably with QE (to try and stimulate lending and thus consumer demand in the economy). However the banks aren't actually lending the money, people are saving more money because confidence in the economy is generally #e and people are expecting to lose their jobs. A year ago (and until fairly recently actually) I was in the 'cut, cut, cut' crowd. At this moment in time I support greater government spending to try and prevent stagflation and to fuel another boom before we go cutting again.

Without lowering our deficit to GNP ratio, our economy is doomed. Moreover, with the global economy as it is, we are probably doomed no matter what our policies are here in the U.S. If the Euro fails as recent events indicate, it will be many years before the world economy, including ours, rebounds. So, most of your theories depend on a multitude of factors which you may, or may not, have considered