Once one recognizes that the US is contending with structural as well as cyclical problems, then it is clear that a move to sustainable trend growth requires something other than the standard countercyclical stimulus. In order to achieve balanced sustainable growth the US will have to increase savings (relative to income and consumption), increase investment relative to income, and increase the production of tradable goods versus nontradable goods. However current US policy has consisted of efforts to stimulate private consumption (decrease savings), increase public dis-saving, subsidize consumption of nontradable goods (housing) all coupled with perfunctory calls for exports to double.
Which is why
the US does not face a simple choice between lower fiscal deficits and idle resources on the one hand, and temporarily higher deficits and trend growth with full employment on the other.
The first step toward enlightenment is to see that the accounting balances are everywhere and always binding. As long as the US has a substantial current account deficit, over time either fiscal deficits explode, private deficits explode or the economy crashes. In the short run, the main danger is an economic crash, so maintaining stimulus is essential, but in the longer run there is no solution without a structural shift.
The second step is to see that the interlocking constraints facing the US (and other deficit countries) are primarily driven by shortfalls in competitiveness, not national savings behavior. This follows from empirical examination of the channels through which the different variables affect one another. In particular, differences in interest rates due to savings–investment balances have little to no effect on trade balances, as I showed a few years back. So the structural solutions for the US have to focus on policies that demonstrably increase exports and reduce imports.
The third step is to inquire into why it is that the US has systematically adopted policies that have eroded its trade position over time. This opens the door to political economy. A very rough sketch of my view can be found here; I hope I have the chance to develop it further at some point. For now, it is enough to say that the economic crisis has not yet brought about the political shifts we would need to see in order for a different, more sustainable path to open up.