The Perpetual Bubble Economy - The New York Times
Wealth is the present value of expected cash flows at some discount rate. If you reduce those cash flows by single-handedly reducing economy-wide spending (as the government can do), then the only way to prop up wealth is to drive down the discount rate with which it is computed. This causes wart-like inflations in the prices of long-term assets (e.g. housing), and distortions away from real production (since no one is buying stuff) towards financial intermediation (since you have to go to greater lengths to get any return on your savings).
The Fed’s bond-buying program put $1.02 trillion per year into the economy ($85 billion per month). But this was mostly a numerical fudge, lowering the discount rate and making everyone feel richer. The money to do it was effectively borrowed from everyone who held US currency.
Instead we could directly borrow the same $1.02 trillion each year, and use it not to juke the stats but to build roads, bridges, schools, high-speed rail, airports, the electricity grid, research centers, national broadband, the space program, …. The spending would drive up wealth by directly increasing short-term cash flows and the resulting economic capacity (in human capital and infrastructure) would raise long-term cash flows as well. The incremental debt service at low rates would be less than the national returns generated on that spending, and much less than the national wealth those returns produce. In recessions at least, deficit spending pays for itself.
The barrier of course is political. It is well established that the government, through the Fed, is the lender of last resort. An equally arms-length body may be needed to ensure that during economic hardship we can count on the government to be the spender of last resort as well.