The Common sense economics test

Here is a simple question that I find useful in evaluating the political rhetoric coming out of Washington.

What is the root of our current economic problems:

1.  Are there not enough products or services for people to buy?
Or
2.  Is there not enough money in peoples pockets to buy products?

Each time some politician floats some notion about how to "create jobs and get our economy going" you should ask which (if either) of these two problems that solution will address.

For example -

1.  Cutting Corporate taxes -  Relevant data - American Corporations have been making record profits the last couple years and are sitting on big piles of money.  Will giving them another tax cut cause them to suddenly start hiring?  Is it possible the reason they aren't hiring is because they know there aren't enough consumers to buy more products?

2.  Cutting the deficit by cutting the size of Government -  The same data as above that suggests companies aren't hiring because there aren't enough consumers with money to spend also seems to undermine any claim cutting government is going to somehow boost the economy.  Common sense says what this will do for sure is take more money out of the pockets of more potential buyers - from private company employees who get laid off because the company lost a Government contract, to Government workers laid off because their agencies budget got axed.  A balanced budget is a goal we should strive for, but doing it right now would be like tearing out an "extra" wall in your house in the middle of an earthquake.