When no one buys what you produce, you lose your job (or, if you own the company, your business). The U.S. economy has suffered millions of job losses because we are not spending enough to keep everyone in their jobs. Look at Table B-1 of the BLS monthly jobs report and it's clear: every industry other than health care has lost jobs in the last year.
So in a sense, the solution is clear: more spending. Lots more spending. More spending for goods & services will put people back to work. Buy a new house (construction workers get work. So do mortgage brokers and bankers). Buy a washing machine (durable goods manufacturers get work, as do truckers who transport those machines to Sears' warehouse and from there to your basement). Go out to dinner (restaurant workers get work, as do printers who print up that new menu you're reading). Pay more taxes (school teachers get re-hired, as do the staff members we eliminated in the department).
"But, wait!" you say. "Spend more? Who, me? I can't. Pay cut, furloughs, job loss, job may be lost, 403(b) decimated, house worth less than I owe on it . . . need I say more?" You're right; you can't. And as that tense conversation at your dinner table the other night underscored, in all good conscience, you probably shouldn't run those credit cards up any further than you already have because word on the street is that your bank may be reducing your credit card limit soon anyway.
So who can spend more? Not the state or local governments -- their budgets are slashed to the bone due to declining tax revenue. Not most businesses — they are waiting for strong signs of resumed consumer spending before they pour a lot into new machinery. Not the rest of the world, which purchases our exports -- they have their own problems. Who's left? The federal government. Politics aside (and that's a big aside), what the federal government needs to do is direct money to the state and local governments. Stop the budget cuts at the state level. Stop the bleeding at the local level. Get the teachers back to work. Get the staff back to work. Who knows: They may even go out and buy a washer with that first paycheck!