Bush and Paulson are talking up the need for economic stimulus. This usually means more government deficit spending, one way or another. Don’t these guys understand that when the hole gets too deep, the first thing you need to do is stop digging? That maybe, just maybe, the route to a sound economy is savings and investment, not debt and consumption?

What will it take to lay the ghost of Keynes?

Edit: Coincidentally, an excellent piece by Steve Roach in the Financial Times points out the same issue:

As home prices move into a protracted period of decline, consumers will finally recognise the perils of bubble-distorted saving strategies. Financially battered households will respond by rebuilding income-based saving balances. That means the consumption share of gross domestic product will fall and the US economy will most likely tumble into recession….

…. Washington policymakers and politicians need to stand back and let this adjustment play out. Yet the US body politic is panicking in response – underwriting massive liquidity injections that produce another asset bubble and proposing fiscal pump-priming that would depress domestic saving even further. Such actions can only compound the problems that got America into this mess in the first place.