The flaws of the argument have been stated though it does illustrate several issues with the economy.

As was pointed one of the important aspects of this scenario was that money was circulating through the economy. For whatever reasons you want to attribute it most of the people in that town were recieving money for their labor.

That was the scary part of the credit crunch a few years ago. If credit stopped flowing then money would stop circulating and the economy collapses. One of the things that helped turn the recession of the 20's to the depression of the 30's was that the government policies put into place tightened the money supply and the economy collapsed. FDR's efforts to put money into the economy were marginally successful but when the money stops circulating at such a large level it is almost impossible for the government to infuse enough cash into the system. It really was not until WWII that the government was able to put enough money into the economy to get things circulating. The wars we are fighting today are being done at a higher tech level than previous wars. Some of the manufacturing that is going towards the war is not even being done in this country. As a result even going to war as a traditional method of re-starting an economy is not working. As a matter of fact think what the unemployment rate will be as we shrink the military down as these wars draw to a close.

The June employment numbers should be instructive to both parties now negotiating the budget deal. Unfortunately from the rhetoric I have heard it did not.

The Republicans think the anemic job numbers supports their position that revenue cannot be touched because of the fragile economy. What is being ignored is that the private sector actually produced 150,000 jobs. Not enough by any means but enough to show the private sector is producing jobs despite the "burdensome taxes and regulation". The job losses that offset the private sector growth came from the public sector as states and to some degree the federal goverment cut spending by cutting workers. So trying to stimulate the economy by only reducing debt will increase unemployment especially over the short term.

The Dems on the other hand are failing to see that the public sector has become too large a part of the economy. You could increase the tax rates back to the Clinton years and while it would soften the blow, the cuts in government spending would still need to be made. Holding onto a few seats in the House or Senate because the public is on your side in not reducing the larger entitlement programs shows a lack of leadership and a lack of vision. In the long term too large a government creates a lopsided economy that cannot be supported by a smaller private sector. The looming crisis in Social Security is an example of that situation.

We need a comprimise in the short term to keep this economy lurching along. In the long term both sides need to come up with policies that will transform our economy away from being such a service based economy to one that produces goods in a competitive global based economy. That is not going to be easy while the country remains so polarized on issues that have nothing to do with economic policies. Listening to the talk this week I have little confidence we have leaders that can rise above the polarization or a Congress that do so either. If you saw the movie the "War of the Roses" then you know what I mean when I say that right now both sides are hanging onto the chandilier.

My two cents....