The government ramped up spending this year in response to the sharp downturn in the economy. It wasn't just a recession, but a depression - not a great depression, but a depression none the less. Not only did consumers drastically cut spending, but businesses also reduced investment, and it is investment that sustains the economy. Consumer spending may drive businesses to invest more, but it is the investment that actually drives the purchase of capital equipment, new buildings, R&D, training, new ventures, etc - things that employ people. And when investment shriveled up, the economy was seriously injured.

In the absence of some kind of stimulus to re-start the economy, it would have entered into a downward spiral. The government had to do something to reverse the direction, because the more the economy headed south, the less money businesses wanted to invest. I don't believe they made the most efficient or effective choices for the stimulus program, but that is to be expected as the result of the political process. However, now that the economy has bottomed out, the government should shift gears to a different mechanism for driving investment that will sustain the economy.

We don't want the government to decide what to invest in, we just want it to give businesses the proper incentives to invest. So let's increase the investment tax credit to something radical - say 50%. Not a deduction, but a credit to be applied to the tax bill that is equal to half of a company's investment in R&D, capital equipment, education, health care - any expenditure we want to encourage. In combination with this very generous credit, we should increase corporate taxes to at least 50%, if not 60%, so that businesses don't hoard their profits. Let them distribute their profits as dividends if they have nothing to invest in (that double taxation of dividends should be eliminated to encourage the distribution of profits to where they can be recycled into the economy), but corporations should be given three options for using their profits: 1) they can re-invest them; 2) they can distribute them to their shareholders (who should be given the same option of re-investing dividends without paying taxes); or 3) pay taxes on them.

I would bet most companies would choose option 1 or 2, which would reduce the need for the government to spend so much money on stimulus programs. the choices of how to invest those profits would be left to those with the ideas and resources. If they choose to hoard their profits and pay taxes, well, the government can use the money.

Or option 4

hoard the profits in the Cayman Islands and not pay taxes on them.