My view has been, for at least since about 2009, that we have entered a period of slow growth driven mostly by demographics. I think 1.5% GDP growth is the new normal. People are tapped out in terms of spending and you've got a lot of baby boomers stepping up their savings to prepare for retirement. That's not necessarily a bad thing but it does reduce growth. I think the events in 2007/2008 were watershed events for many people because they suddenly had to face the risks they were taking. Heck, even Bernstein now advocates a much lower stock exposure than he did even 5 years ago.
It's important to get the unemployment rate down but I think that is mostly structural and related to reduced consumer spending. I think the structural changes also make inflation very unlikely in the next few years and the bond markets seem to support this view. Those that fear rampant inflation caused by the Fed's actions fail to recognize that all the money the Fed has created are only filling the hole created by the housing collapse.
And, while the debate about how much the government should interfere in the economy is interesting, I think it is becoming increasingly irrelevant. There are essentially two ways the government can stimulate the economy - through fiscal policy and through monetary policy. Fiscal policy means more spending or tax cuts and that is difficult with such high debt and deficits already. Monetary policy, besides apparently not working effectively right now, will have an enormous drag for many years as the Fed gradually withdraws the money it has put in over the last few years.
I heard an interesting statistic a few days ago. The last time interest rates were so low was right after WWII and it was 14 years before the Fed was able to begin raising rates. We are in a similar position now with high unemployment, huge debt, and low interest rates that can't be reduced any more. The way we got out of the mud back then was through major infrastructure projects like the interstate highways system. The baby boom and flight to the suburbs helped. But we have none of that now and realistically few prospects for that kind of thing.