Lehman Brothers makes a great example of what happens when you reduce the leverage a company employs - it gets smaller.  Not only the assets, the income in the future gets smaller too!  The US economy must reduce the level of leverage employed by the Government, Businesses and most of all, Consumers.  When the American economy is done reducing its use of borrowed money, the economy will be smaller and producing less income, therefore less able to support the spending level.

The other point is about expectations and who are these talking heads that say $4 gas is not going to affect the consumer or their behavior?  I have cut back on fuel consumption, not that I use a lot in the first place.  Fuel costs are going to drive Americans into their homes and backyards where they will discover the neighbors and chores that have not been done because they had been too busy running around to the mall, soccer, baseball.  Of the money we do not spend on fuel we will spend on reducing our leverage (sell the second car, pay down creditcards) then on making home more comfortable and digitally interactive.