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In a comment on Krugman's The History Of Capital Gains Taxes, AlanDownunder said:

There is an argument for taxing capital gains at a lower rate when capital formation is a problem but not when capital formation is THE problem (all that surplus cash looking for debtors - any old debtors)

I thought the comment was a nice way of pointing out that "all that surplus cash looking for debtors" is the problem.

Surplus cash, looking for debtors, is not spending-money. It is money in savings, or in hoards perhaps, lurking, seeking a reason to come out of hiding. Concentrations of cash held by people who have more than they need, while others have obviously less than they need to get by.

If this analysis is correct, then why does policy still encourage and reward saving? Why does it punish spending with "consumption taxes"? Why does it not encourage spending?

People still think credit use is good for growth. Even now, when debt is crushing the economy.