The problem I have is that both suggestions address the symptoms, but neither addresses the root cause. If the flow of money is the life blood of an economy, then the US is bleeding profusely. I'm refering to things like the trade deficit which has grown since 1976 to peek at $700 billion in 2008 or approx 3% of GDP. Hording in corporate balance sheets is another example. So what good would any action to stimulate consumption do if the beeding continues. Look what happen to the recent stimulus, $800 billion did not last very long. All these actions are temporary. I hate to be so pesimistic but if it took 35 years for US companies to export manufacturing to point where the US Economy no longer employ enough people to support consumption. I expect it will take a very long time to reverse this, especially if governments continue to ignore the root cause keep giving the patient more blood.

John Cardillo is completely correct. The ideas put forth are nothing more than another stimulus - in fact the original stimulus included a withholdings tax cut of $400 per person for 2009 AND 2010. That money largely got spent by recipients and was no doubt helpful in the short term but the effect has already petered out and as John points out it does nothing to deal with the root problems in the economy. Moreover, the authors speak of payroll taxes as if they are nothing more than another federal revenue item when in fact these taxes go to fund Social Security and Medicare. Since it is widely accepted that both of these programs will be bankrupt before mid-Century unless something is done to fix the imbalance between collections and obligations, the authors are presumably proposing that we shift the burden of funding the programs toward the supposedly well-to-do (try living like the rich do on $250K a year on either coast) and toward financial institutions which are rebuilding capital and reducing leverage by increasing their cash balances (exactly what these institutions should be doing to avoid a repeat of the financial crisis). In the end, then, I am actually quite shocked at how vacuous and transparently political are these so-called "fresh ideas," especially given the reputation of the lead author.

Just a technical correction -- we can't have a double dip recession because we haven't come out of the first one, despite all of the happy talk out of Washington and attempts to manipulate data to show that result.

"Republicans may rail against increasing taxes on any American, but the complaints of the wealthy, in today's economic climate, will have little credibility among middle-class voters."

Patently false. Clearly, middle-class voters are very sensitive to the complaints of the wealthy about increased tax burdens. They are part of the foundation of the Tea-Party movement, which is largely composed of middle-class voters, and who will decide this year's elections.

Every tax cut helps, but I’m afraid American consumers will simply spend their tax cut at Wal-Mart who will restock their shelves from Chinese freighters. There is a deep structural crisis in what generates jobs, consumer and capital spending. Small and large businesses in the United States arbitrage labor costs in several ways: 1. Promote for worker visa programs, 2. Employ undocumented workers, 3. Offshore/outsource the work. All three options circumvent the "overhead" of taxes for Social Security, Medicare, Unemployment, Disability, Liability, Payroll, OSHA, FMLA, EEOC, etc.

Unless we scale back all spending , waste and inefficiencies at every level of Social Security, Medicare and Defense, I don’t think a payroll tax cut will be enough to address our problems, much less encourage the opening of small businesses.

To optimize return on the investment, a new firm will have to incorporate in Delaware, Wyoming or Nevada and move the manpower-intensive operations to the Southern states that have the lowest government spending footprint and relatively low labor union participation. No one is going to willingly come to Wisconsin, Oregon, Hawaii, Louisiana, Washington, New Jersey, Illinois, Connecticut, Vermont, California, Florida, Arizona, Alaska, New York and Nevada because of budgetary crisis and the potential of higher taxes.

If no one will cut spending, then there will be pressure to protect our products and services by tariffs. The Republican Party are captives of the Chamber of Commerce element who seek to optimize free trade and will lobby against any tariffs or restrictions. The Democratic Party for the most part are captives of the identity-politics element and will seek to expand suffrage for its base and will lobby against any restrictions on immigration, legal or illegal, therefore allowing employers to arbitrage labor costs.
Since cutting spending is not politically viable for either party, budget gaps will remain and therefore legislative uncertainty on tax rates will remain. Investors will price in that uncertainty and like water, flow to the path of least resistance.

States with agricultural output, energy reserves, mineral deposits or transportation hubs will be the only ones left that produce any commodity or service of value. Those states will generate enough tax revenue to pay for social services, but will have to be wary of how much they tax, lest they make their product overpriced on the world market. The generation coming of age in this decade will have to accept that nothing lasts forever, no one owes them a middle class lifestyle and to save for a rainy day.

A trade war or real war, where retaliatory sanctions and embargos of critical defense minerals or products is only business environment I can think of where political momentum to re-impose some kind of Smoot-Hawley regime and the US can undergo a form of Latin-American-style “Import-Substitution Industrialization.”

This recession will be permanent and true reform will have to come about via a system shock or outside intervention. One scenario is if US Treasury bond holders form a creditors’ cartel and threaten a boycott of further T-bill purchases until an IMF-style Structural Adjustment Program is accepted by federal and state governments. If democracy still exists, such austerity measures will fail legislatively but time will be on the side of global capital. Each week that government checks bounce and food stamp cards do not beep is another week where the populace contemplates that getting ten cents on the dollar is better than getting nothing.

Great idea. Why doesn't the government just create a few incentives for people to SAVE money, so when the next big recession comes around, people won't lose homes, cars, etc. With a bunch of liquid cash floating around in American bank accounts, the government won't have to bail out the big guys anymore, although, i would argue the only reason they we're bailed out was to keep the interest group donations coming.

At heart, Roubini is a Keynesian. He wants to spend the tax increase on wealthier Americans partly on pure stimulus with the worker SS tax cut, which will probably serve only to pay down more debt,m and partly on 'job stimulus' by cutting employer contributions, likely to have a marginal effect.

The solution is to go where the demand is: energy and commodities. America could be building 50 new power plants inside of six months if environmental objections were dismissed. And we're sitting on vast amounts of resources of all kinds, similarly blocked by environmentalists. And we're starting to hear about more food riots around the bend, while vast areas of productive land lie fallow. We aren't creating enough jobs now to keep up with the expanding labor force - we are losing ground every month. Other things, such as environmental concerns, are much more important, clearly.

Its one inexorable dip to the bottom of the barrel, baby. And, that, incidendtally, has been the intention all along.

He cannot possibly be this politically naive, can he? What planet is he on? The President lacks the power to do this now and will have even less next year. A solution that requires more "progressivism" is not a solution. Back to the kitchen, Nouriel! Large strokes may be needed, but they will have to chop at all -- not just some -- and do so in the same way at the same time. Are there no others?

Because of the political impasse ALL of the Bush Tax Cuts will expire, causing a stampede out of the US stock market to cash out any Capital Gains in 2010, before the rates double on Jan 1. The more steeply progressive the tax rates are the more poverty there is in any country. Raising tax rates on investors and the income of the investing class is a huge job-killer. When rates are raised revenues go down. California and Michigan have proved that that is exactly what happens in a situation like this. The ridiculous 'incentives' that are described in this article are an example of top-down economic micro-management by people who think of themselves as more wise than the rest of us. As the second leg down occurs there will be huge bond defaults, my own home state of Cali leading the pack. A desperate government will pour even more funny money into the system, another economic nostrum used by leftist witch-doctors which always fails. We've only had half of Hope And Change. The fun half. No more fun.

Wow! What a concept! A payroll tax cut for business and individuals? I think that was high on the Republicans list when Obama and the Democrats decided to pass the massive wasteful corrupt stimulous bill that did nothing but grow the size and cost of Government, and fill the pockets of the special interests. If only they had listened. Now nearly two years later Obama and the Democrats have left us with a mountain of debt and 9.6% UNEMPLOYMENT! If we are to stop the decline of our nation we have to go to the polls in Nov and fire every Democrat on the ballot!

Whatever the merits of this proposal, it won't happen. Obama no longer has the ability to get the votes for it.