Sarmad, > An economy that has spare capacity can pay back its deficits from added production. The capacity is already there.
The capacity to make what? More gas-guzzling SUVs from Detroit? More homes in areas where no one is going to move to?
We've been living in a consumer-driven economy for decades now. Fueled by easy money from numerous sources, but most recently the real-estate boom, we as a nation have been collectively living outside of our means.
Now we're tightening our belts, and if we're honest with ourselves, we'll find that there is a lot that can be tightened. But the message coming out of Washington once again is "Spend like there is no tomorrow!" In other words, they are once again trying to postpone the day of reckoning.
Hence when you say that the problem is consumer demand, you are more correct than you realize. What's the solution? Artificially boost the demand once again, or start painfully working off the excesses of this consumer-driven economy?
To an insensitive elitist jerk like me, the answer is obvious. But it will never be politically viable, so instead we're going to do what we do best: postpone the inevitable. And that's assuming a measure of "competence" from the current administration (since incompetence ironically means we'll face the inevitable sooner).
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