Consumer spending burns through inventory. Until that inventory is gone, the retail, manufacturing and transportation sectors are depressed. When its gone, they all revive.

Government spending is not more or less stimulative than private spending. The point is that when private spending falls below the level necessary to achieve full employment and/or full capacity, only the government can make up the gap in GDP. One of Keynes key insights was that when private spending falls below a certain level, it can get stuck there--in effect you have a private economy that stablizes at the lower level. The Republican panecea of decreasing wages due to excess labor supply will not increase gross economic activity because the people making less have less to spend.

I have no idea what you mean when you say that government cannot expand except by destroying wealth. In a recession, government expands by borrowing from the capital markets and printing more money. The latter is okay when deflation is a risk. The former is okay because, in a declining market, the demand for capital is depressed anyway. I have not heard anyone talking about raising taxes.

Additionally, the "we'll have to raise taxes later to pay for this stuff" talk is Republican neo-classicist nonsense. If we don't get the economy going now, tax revenues will fall as it spirals downward, which will require the government to do the same thing its doing now--print money and borrow--to an even greater extent.

See my reply to your comment above.

The point isn't that government spending is more or less stimulative than private spending. The point is that gross private spending is in a death spiral and only increased government spending can fill the gap between what the private economy does and full capacity.

Some things are more stimulative than others. Food stamps are very stimulative because 100% of the money gets spent on real stuff. Unemployment benefits are very stimulative because they are a fraction of the beneficiaries regular income and thus are more likely to be spent than saved or devoted to paying down debt. Rebuilding bridges is more stimulative becuase it puts people to work who would otherwise be on unemployment tothe extent that raising their wages above what they would get on unemployment is less stimulative, because it gives them extra money to devote to debt service or savings, that is counteracted by the fact that, in addition to allowing workers to by groceries, the government is buying concrete and steel, employing people in those sectors, and in the transportation sectors to move it from plant (or dock) to job site.

Tax cuts are less stimulative because they mostly go to people who already have jobs, whose incomes have not taken a hit, but who are scared by the turmoil and thus more likely to increase savings and/or pay down debt.

Increased savings increases availible investment capital, which is moderately stimulative, but debt payment does not really increase abailible capital in times of economic distress because all it does is reduce the sea of red ink on the lender's books due to uncollectable debts.

Additionally, availiblility of capital due to increased savings does not in and and of itself increase private investment in a down cycle. If you're in retail with a lot of unused inventory, you have no need to borrow to buy more. If you are in the manufacturing sector, you are not going to borrow to build a new plant or finance new production when you are yourself sitting on unsold inventory and, in any case, are not getting any orders due to your customers' unsold inventory. In any business, few are going to borrow to expand until they see a bottom and can predict when demand will go back up.

What increased savings due to tax cuts in a down cycle can do is marginally decrease the rate the government has to pay to borrow, but that's not immediately stimulative.

Cute. Liberals caused the fake crisis to achieve liberal ends while Paulson and Bush were nominally in charge.