@bwall I took one econ course in grad school in 2008. I remember having an urgency to study because the economic world was falling apart at the time! Economics is hard to separate from politics, and I've lived in interesting times as the proverb goes.
It's hard to solve a demand problem in an affluent society without doing stupid, destructive things like creating a car culture instead of public transit, or subsidizing loans for coastal real estate that gets destroyed during hurricanes, increasing the amount of packaging used for everything, or running ads to remind seniors to ask their doctors for the non-generic brand name version of a drug they might not need. In other words, U.S. policy and culture are already pushing us to do many things more wastefully because somebody else's paycheck depends on it. The Anti-mustachain Wall of Shame has more examples. I don't think the Japanese were willing to subsidize stupidly excessive consumption/waste.
Consumers might consume even more if their take-home pay was increased, but to accomplish that we'd have to 1) lower their retirement savings rate which just borrows from future demand, 2) reduce their taxes, which requires the future monetization of government spending, 3) reduce their healthcare expenses, which will cost jobs and campaign donations, 4) have them unionize and bargain for higher wages, which can drive non-service industry work to other locales, or 5) increase productivity, which is easier said than done. So not many choices other than borrowing from the future or redistribution of wealth to spendier hands.
Immigration, legal and illegal, has helped the US not be quite the demographic basketcase it would be otherwise. This is arguably more important than a low birthrate or aging citizenry, because as long as the population keeps growing, the economy/monetary base will likely keep growing in the long run.
All that said,
1) The U.S. is cracking down on immigrants. If this effort succeeds at deterring immigration at any significant level (debatable), expect an accompanying drop in aggregate demand growth.
2) The taxpayer defunding of public universities over the past 2-3 decades plus bureaucratic bloat means young people now typically graduate with debt the size of a small mortgage. The service of this debt by itself means money is no longer available for purchases. The thin margins earned by student lenders hardly make up for the lost economic multiplier effect of people who are postponing large purchases like cars and houses, or even postponing household formation.
3) Housing loan subsidies and zoning rules have pushed up home prices to absurd levels in many metro areas. Sellers who leave HCOL areas earn a profit that is probably spent quickly, but buyers must make higher payments for decades which reduces their purchasing power for other things. The next buyer will have to spend an even greater percentage of their income. This reduced spending capacity is probably only partially offset by the seller's spending or profits earned by lenders.
4) Young people today are different than the boomers or generation X, who valued big houses, big cars, and a generally high-consumption lifestyle. What young people are consuming more of is data and electronics, which even if you buy the latest iPhone every year and use Verizon for your data plan comes out to a lot less than the operating costs of an SUV or the bills for a house. Student debt is part of this story, but living through the GFC might have had a similar effect on Millennials as living through the Depression had on the WW2 generation. They might be cheapskates for life, which would have disastrous effects on the economy, regardless of what the supply side does. Cell phone obsession is a relatively cheap hobby, although Apple is working hard to change that. If they fail, what new industry will make up for the collapsing demand for McMansions and Range Rovers?
5) Digital addiction is about to become a big deal, economically speaking. As Salesforce CEO Marc Benioff said, Facebook is the new cigarette. Yet smokers wouldn't spend
an average of 7 hours per day* looking at their packs of cigarettes and being distracted from productive pursuits for longer than a few 10 minute smoke breaks. What would it mean if an entire generation passed through the economy whose education, social skills, ability to focus, and perhaps IQ** were worse than the previous generations? The productivity gains from work applications like email, spreadsheets, and databases are behind us, and it is not clear how employees using Instagram or watching YouTube videos at home and work are increasing their productivity.
My best ideas to increase aggregate demand are:
1) Subsidize the treatment of addicts: Once recovered, their productivity soars, they pay back the costs of rehab through taxes, and societal costs (prisons, blight, crime) are reduced. Do this for a few million people and the economic needle moves.
2) Steepen the tax brackets: It's a well known fact that poor people spend their entire paycheck, while billionaires hoard all they can (Trump even shorts his contractors!). If the tax burden was shifted upward, productive activities like infrastructure projects, college scholarships, basic research, and public health initiatives could boost the velocity of money and aggregate demand.
3) De-subsidize housing and deregulate zoning: The experiment failed. Implicit government guarantees for mortgages improved affordability for a while, but eventually raised the price of housing to the point that ridiculous amounts of capital are required to buy in most large metro areas. This bubble has already delivered one financial crisis and is set to do so again. Also, force places that have used zoning as a way to constrain local real estate supply like California and New York City to allow construction of affordable high-rise housing units.
*
https://www.cnn.com/2019/10/29/health/common-sense-kids-media-use-report-wellness/index.html**
https://www.journals.uchicago.edu/doi/pdfplus/10.1086/691462