Dichotomies abound

President Obama said many things in his Feb 24 speech. Here are two passages that I found interesting (my italics, and the quotes  came about a minute or so apart):

And though all these challenges went unsolved, we still managed to spend more money and pile up more debt, both as individuals and through our government, than ever before.

In other words, we have lived through an era where too often, short-term gains were prized over long-term prosperity; where we failed to look beyond the next payment, the next quarter, or the next election.

...

The concern is that if we do not re-start lending in this country, our recovery will be choked off before it even begins.

You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.

Whoa! First, borrowing too much is what caused all this; and then to get out of it, we have to start lending and borrowing all over again!  The very thing that caused the economy to tank is what we need to do to un-tank it? I'm not an economist, but that doesn't seem right does it? I know you can use fire to stop forest fires from spreading, but this is like going shopping to prevent people from buying stuff.

Now let's say this actually does make economic sense. I have two questions:

1. How confident are we that lenders won't do the exact same thing they did before, since they know that they're judgment-proof and will get bailed out anyway? (Yet more irony that the Feds will have to borrow $$ to do this!)
2. Has America gotten smarter in the last six months? Is the citizenry now impervious to those moronic ads? Did we spike the fluoride in the water supply over the holidays?

Because if the answer to these questions is "no," then what makes us think that the result will be any different this time?

A data point: the highest poverty level for a family of four in the United States is $26,500, which is in Alaska (amazing BTW that the poverty level in Alaska is $5,000 more than that average in the "lower 48").  Let's say we triple that and round up to get to $80,000. Now what if the Feds said that as of today and through the rest of this calendar year, we will stop withholding Federal tax from every household that earns $80,000 or less?

Maybe the ceiling needs to be higher (say $100k), or whatever the right number is to equal the amount of money we were going to spend on this stimulus anyway.

How much more "cash flow" might this create?

I know this doesn't help small businesses who need credit lines to help with cash flow, and we clearly need to solve this.

But for the consumer, I wonder if this might do more than enabling bad lenders...