Why not let the economy recover on its own and return to an appropriate level of consumer spending that is backed by the production of goods and services?

What if, through productivity gains from technology, and globalization that drives wages down to low levels (and forcing unemployment to remain high), consumer spending CAN'T return to the levels known prior?  Not to say the answer is more government, but there is no guarantee the solution is less government.

I am fairly confident that consumer spending will not reach the level is was at. Less government will be better however then more government.

With less government, there is a high chance spending will not recover. With more government, it's guaranteed.

You guys are far too pessimistic.

During a credit driven asset bubble the average standard of living of everyone in the country is artificially raised in a similar fashion to how an individual’s standard of living can artificially be raised by building up large credit card balances. Eventually the credit driven asset bubble bursts and the average standard of living of everyone in the country is lowered below where it should have been like an individual’s standard of living is lowered when they have to pay down the balance on their credit card.

This state does not last forever, and as the problems work there way through the system, technology is developed and productivity improves the economy recovers to a more tolerable level; once again, in a similar fashion to how an individual’s life improves as paying down the principle of the debt and getting a raise/better job lowers the burden of his debts.Inevitably, the standard of living of everyone will return to a level justified by the fundamentals in the economy and this will (typically) be as good or better than the artificially elevated level caused by the credit driven asset bubble.

Depends how long it takes.

We as a country were living above our means. So, now we have to live below our means (although government is trying to prevent that, but that's another story).

If we live below out means long enough, we will then be allowed to live at our means. At our means, whatever that is, is never going to be the same as above out means. If it was, we never would have lived above out means.

EDIT: The reason I sad "depends how long it takes", is because if it takes 50 years, our means in 50 years will be more then "above our means" now. This is what you were saying, but for what your saying to happen, takes decades.

The credit card balance can be defaulted on if you claim bankruptcy.  What about the negative social implications of a melt down in the economy?  The bottom feeders will be hit the hardest by the economy going down. The wealthy will have their huge fortunes decreased in value but the bottom 20% will have nothing. Unemployment rates hit the lower and middle classes the most who need a job in order to survive. Capitalist economic system is nothing more than Economic Darwinism and a vicious dog-eat-dog world. 

It could take 50 (or more) years before Americans were truly living within their means; but after 10 to 20 years the economy can grow enough so that people’s standard of living is higher than it was during the bubble even though they continue to live below their means.

Hypothetically speaking the government could help with this, it’s just not likely that they will help with this. Much like taking out a loan to pay for a valuable education, the government could spend money on projects where the direct financial benefit was greater than the initial investment; and the recurring benefit was greater than the maintenance costs. Essentially, if the government produced something of value which required a comparatively low continuing investment to maintain the benefit the economy will recover more rapidly.

Unfortunately, most government spending is directed towards projects with little economic value, projects with maintenance costs above their recurring value, and/or towards paying people to add no economic value to the economy; and (as a result) the economy is forced to recover far slower than it would.

The Defense Budget spending needs to be drastically reduced. Slash the Defense spending and bring the troops back. Trillions of tax payers money has been wasted on two wars in the Middle East.  Pension funds have been raided to fund these Middle East wars. Still chasing ghosts in the desert for almost 10 years and will continue on forever.

Not that I completely disagree, but the defence spending is far from the worst spending of the US government. A large portion of military spending goes towards research and development or products that are based on emerging technologies; and this moves these emerging technologies from being too expensive to be used for practical purposes into the range where they can be made into commercial products far faster than they would otherwise. Technologies like GPS are so common today that maintaining and improving the infrastructure is cost effective from a commercial standpoint, but without massive military based spending to develop the technology and build the infrastructure it would have never existed.

Many (if not most) of the technologies that are at the core of new products and services today found their initial applications in the military; and if funding to this is cut I’m not certain whether the products of the future will develop in such a timely fashion.

<table style="width: 90%;" border="0"><tr><td><strong>HappySqurriel said:</strong><br /><table style="width: 90%;" border="0"> <tbody><tr> <td><strong>numonex said:</strong> <p>The Defense Budget spending needs to be drastically reduced. Slash the Defense spending and bring the troops back. Trillions of tax payers money has been wasted on two wars in the Middle East.  Pension funds have been raided to fund these Middle East wars. Still chasing ghosts in the desert for almost 10 years and will continue on forever.<br><br></p> </td> </tr> </tbody></table> <p><br>Not that I completely disagree, but the defence spending is far from the worst spending of the US government. A large portion of military spending goes towards research and development or products that are based on emerging technologies; and this moves these emerging technologies from being too expensive to be used for practical purposes into the range where they can be made into commercial products far faster than they would otherwise. Technologies like GPS are so common today that maintaining and improving the infrastructure is cost effective from a commercial standpoint, but without massive military based spending to develop the technology and build the infrastructure it would have never existed.</p> <p>Many (if not most) of the technologies that are at the core of new products and services today found their initial applications in the military; and if funding to this is cut I’m not certain whether the products of the future will develop in such a timely fashion.</p></td></tr></table><br /><br />