Forget all your theories and equations, it is now possible to simply measure the performance of government economic stimulus, and various attempts to boost consumer demand.
We can look at the 1930’s, the 1970’s, we can look to Japan in the 1990’s, we can look at Europe, and our present situation.
It is not possible for the government to stimulate aggregate demand enough to do anything but put us farther into debt. And consumer oriented tax cuts and one time rebates have almost no stimulative effect.
For the simple reason that such money has nearly no velocity. Middle class people who get a few extra hundred bucks don’t ususally invest in high tech firms, or found new companies with that money.
Inflating the economy, or flooding the financial markets with loose money and low rates also does no good, and some harm.
The only thing that has been proven to work is low marginal tax rates, low capital gains rates, spending restraint, and a lower and streamlined regulatory burden. Coupled with sound money policies, and sound lending policies. There will always be a up and down business cycle, but these policies make the highs less bubbly and the lows less severe.
That is it in a nutshell, It might not be romantic, but that is what works, period.
I now declare that all economics are over, everything further is simply fine tuning. Keynes is Dead! Get over it!