A Wild and Crazy Way to Stimulate the Economy

Okay, so with everyone freaking out about spending (including Germany's totally insane request for all governments to cut spending), and with the World (save South America) still in economic doldrums, and with long-term unemployment booming, let me add my two cents.

First, cutting government spending right now is madness.  There are three reasons to cut government spending: 1) Inflationary pressures, as in there's too much money in the economy and prices are going up; 2) High interest rates - Government is crowding out private investment by increased spending; or 3) No one will lend the country any money (See Greece).  Right now, NONE of these reasons exist.  Inflation is nonexistent (and deflation is still a threat), interest rates are low, and we still have countries willing to give the US money (and given the fact that we have the world's most powerful military, no one is really going to cut us off). 

Given that a national economy is a mix of consumer spending, business investment and government spending, cutting government spending when consumers and businesses aren't spending is a recipe for economic doom.  In fact, the Great Depression was extended by several years when FDR decided to cut government spending.

That said, I don't necessarily like the idea of having people on unemployment for as long as they are.  Unemployment payments are, by their very nature, temporary solutions.  Right now, unemployment benefits are stretching 99 weeks - almost two years.  And so, I don't think we can continue to go down this path.  Moreover, many of these long-term unemployed are long-term unemployed for a reason - the jobs they lost are, most likely, gone forever.

But that doesn't mean that we should lose hope.  I have one of those wacky, no-one-will-ever-consider-it ideas.  Let's give these long-term unemployed individuals small business loans of $10-$20 thousand dollars (or more, depending).  Give these people the capital to start their own business.  Now, most of the money, without question, will go down the drain.  But even if one-tenth of one percent of the loans actually works out, it'll be worth it because for that short period of time, we will have hope.

In the meantime, the U.S. should invest heavily in infrastructure improvements, and encourage local governments to streamline their regulatory processes.  Anyway, that's my idea.  Your thoughts?

So, how do we stimulate the economy?