Uncertainty remains one of the chief causes of the current economic turmoil in the U.S. Americans just don't feel like they know what the world will look like six months or one year from now. As a result, consumers and business remain cautious, so the recovery can't seem to take flight. Some temporary measures have been suggested to stimulate the economy, either by the federal government or the Federal Reserve. Yet, critics worry that temporary changes will just increase uncertainty further. This isn't really true.
Let's take the Bush tax cut extension, for example. Right now, there's tremendous uncertainty around whether or not they'll be extended, and if so, for whom. One proposal out there is to extend all of the cuts temporarily, for a year or two, until a more stable economic recovery has taken hold. Critics say a temporary extension is almost as useless as allowing it to lapse: Americans will just know that it's temporary, continue to restrain their spending, and remain unsure what their future tax obligation will be.
This could be true, but it also could be false. It's possible that some people might save more money if there's a known end to their lower tax rate. But it's also possible that they'll spend more. After all, they would be better off spending more now and saving more later. When taxes are higher they can contribute more to a 401k and other forms of savings that allow pre-tax contributions. So logically, spending could also increase even more than savings.