Whoops, sorry about the double-post! My computer crashed and I thought my 1st hadn’t gone through so I rewrote the whole freakin’ thing! The second post also has a few errors in the first post corrected (such as the 2003 total discretionary spending official estimated number) and a more complete analysis.
The answer to your first question, as someone like Krugman would probably explain it (only he’d do it much better), is that when you are having a recession, you have slack in the economy and that is when government spending or tax cuts can actually help stimulate the economy. When the economy is going full tilt, such stimulation doesn’t really work…besides which, Alan Greenspan would is playing around with interest rates in order to manage the economy, i.e., the tradeoff between growth and inflation.
It is more questionable whether you can use spending or tax cuts to do other things to help the economy more long term. For example, some (especially liberal economists) would argue that government investments in things like infrastructure and education would do this. Supply-siders would argue that cuts in marginal tax rates, especially of the wealthy, would do this. As far as I know (and Krugman, who is actually an economist says the same thing I believe), there is very little if any real empirical evidence to support the supply-side notion. (Clearly at the extreme of very high taxation, you can choke the economy but no evidence that we are in that regime.)
Of course, the other disadvantage of long-term tax cuts as opposed to short term ones is they exact a heavy ongoing price in terms of the government budget and the deficit.
As for your second question, note that I said “better way to get bang for the buck” which does not translate into your extreme statement of “money in the hands of wealthy people does not participate in the economy”. Rather, it reflects the idea that poorer people spend a large fraction of each additional dollar they get whereas the rich tend to save or invest more of it. In a recession, what you need to do is to create more demand. Sure, you eventually want more investment, but businesses won’t invest in lots of new stuff just because they have more money if they don’t think there will be the demand for their products.
Another point is that, while there is precious little evidence that trickle-down economics works, it seems fairly likely that percolate-up economics will work. I.e., if you give a poor person money, he’ll go out and spend it and it will eventually be likely to end up in the hands of a wealthier person…who can then go ahead and invest it. In this case, however, two things seem better:
(1) he’ll see more demand and thus have more reason to invest it expanding his business.
(2) in the meantime, you’ve put more money into the hands of poor people who some of us think have more need for the money than the rich folks.
A lot of his outbursts seem rather scripted. I’d guess that he figures a lot of people like to see him beat up on some of the guests, as long as it’s not someone who is generally respected. I’ve seen him interview Susan Sarandan and Jeanine Garafolo (lefties of a high dgree) and keep it very civil, so there’s no doubt that he doesn’t simply “have it in for the left”. But he doesn’t have much patience with lawyers, as Debaser pointed out.