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This is the notion that a reduction in consumption causes a bad economy -- this sentiment permeates the thinking of Keynesians and Krugmans (ie, every Washington politician, save perhaps one, and every mainstream economic pundit).
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Lest I be accused of setting up a strawman:
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Buy now: why Uncle Sam must put everything on sale
October 26, 2008by FT
by Laurence Kotlikoff and Edward Leamer
The demise of financial titans and the incessant warnings of economic Armageddon have unleashed a tidal wave of asset sales across the globe, eviscerating trillions in personal wealth. Stock prices are now low enough to bring back some buyers, but the contest between fear and greed remains undecided.
The same defensive mentality that allowed the sale of equities at fire sale prices threatens to cause a sharp drop in consumer spending, which accounts for 72 per cent of US GDP. If this happens, the economy will slide into deep recession.
We need to put a halt to self-fulfilling prophecies of doom. The key is realising that recessions are usually consumer cycles, not business cycles. They’re driven by weakening demand first for homes, then for consumer durables, and finally for non-durables and services. As consumers stop spending, businesses stop investing, and the economy “recedes”.
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This underlying assumption, that recessions are caused by you refusing to rack up credit card debt, undergirds every Keynesian and Krugman "remedy" for the economy. Hence, according to the Keynesians and Krugmans, it's good if you spend $1,000 on a useless hole in the ground, but 10x better to spend $10,000 on a useless hole in the ground.