1. Let's start with the recession. During the recession, jobs were bleeding out by the hundreds of thousands a month. With less people having a job, the government has less income from taxes whether income, payroll etc. When less people have jobs, people spend less so sales taxes declined. In short, less taxes were paid to the government. Now, Keynesian economics states that when the private sector stops spending, there needs to be an infuse of money from somewhere to keep the wheels of the economy going. This infuse of money can come from tax cuts/refunds so the private sector gets to keep more of their own money and hopefully they will spend to jump start the economy, or from the government directly injecting money into "projects" such as roads, railroads, bridges etc. Of course either way cause the government to run a massive deficit because while income from taxes have declined, the government must spend to keep the economy from going under completely. The idea is the government will run a temporary deficit to "stimulate" the economy back to the positive, and once the economy recovers then income from taxes will be restored and government spending can decrease bringing us all back into the black again.
While in theory, this sounds well and good there are problems. Giving tax cuts may give money back to the private sector, but no one can control if people will spend or not. More likely, people still won't spend because even though (for example) I may get a big tax refund check, if I don't have a job anymore I will probably save that money so I can pay bills. This will apply to business as well, big or small (business spend money essentially by hiring and restocking inventory). Essentially, fear is the overriding factor that controls if people will spend. Let's say the government tries to inject money through "public projects" instead. The problem here is the government can't actually create jobs. Such "public projects" are temporary and really does not do anything to facilitate economic growth. In the end, the 8 million jobs we lost can't simply be put onto government payroll.
Suggestions: Don't cut taxes. For wealthy, middle class or lower class. Instead, government money can go directly into low interest loans to help create a sustainable economic foundation. For example, I read another person's idea for restarting America's steel businesses. The government loans are not meant as a government take over, but rather as infusing money and then letting the free market utilize it. Given, there are a few requirements that needs to be met as well. The bureaucracy needs to be cut down dramatically. While I believe in regulations, the number of hoops that businesses have to jump through make it really difficult for money, time and energy to be used efficiently.