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If we have big time cuts, which we really need to make any significant progress in reducing the overall debt, theoretically the private sector will have more confidence in the government, firms will expand and hire more people, and the tax base should expand producing more revenue. But this also implies the government will keep out of the way (i.e. we need better regulation, not more regulation) and not make it so difficult for small businesses in particular to start-up/grow/make a profit.
I didn't say there weren't excesses. Unfortunately you can't rely on people to do the right thing, police themselves, and consider others. It is a fact of life that every bit of the waste, mispurposing and graft are beneficial to someone. So what we look at is the most powerful will keep their perks and the least powerful will not. It has nothing to do with cutting deep enough that everyone will suffer. People who buy their votes with those perks will not let them be cut.
They might have more confidence but the people who are out of jobs and safety nets will not be spending cash. The expansion will take time. Even when the numbers were better in our state the last few months companies held on to their cash and did nothing. People who are in those jobs that are cut aren't going to go out there and find other work pronto- look at the unemployment rates. They probably will also not be the people that the private sector are hiring. They will be tightening their belts and cutting what they spend. Who is going to buy the product the private sector is producing?
Do you think it's only a function of demand? Sure businesses are sitting on a lot of money, but they have to do planning if they hope to survive for long and more importantly to make a profit. With Congress writing humongous laws like Health Care Reform that are filled with provisions and regulations that don't even kick in for a couple of years, businesses (especially smaller ones that can't afford a bunch of corporate lawyers) are dealing with a lot of uncertainty. It's safer for them to hold tight for now and wait and see how things shake out before investing that money to hire new people and expand. It's not strictly a demand issue.
Exactly how much more was the government spending on repairing the infrastructure when the revenue situation was good? My guess is not much if any. Repairs don't secure votes the way that new spendy projects do.
Can't speak for other states but our area has been a beehive of infrastructure construction from the stim pkg- bridges, road repair, intersection/lights etc. Can't drive anywhere without running into it.
And the Wisconsin economy was enriched by millions and millions of dollars spent (in a large part) by non Wisconsinites.