Why are companies bulging with cash and should gov borrow more or less?

From Jason Thomas article in National Affairs.  There are 2 theories about why companies have amassed so much cash right now and are not spending it.  One is that there are no customers right now and so why build new plants and shops?  The other is a David Ricardo theory that when businesses see an increase in government debt, they start to save more because they know taxes will rise in the future.

Which is true?  If the second one is true then the almost $1 trillion stimulus program by the fed gov is bad because it will make things worse because gov had to borrow more to get the money for the stimulus.  So instead of stimulating, the stimulus will cause businesses to invest even less in new projects and save more. This is because the businesses will see that they will have to pay even higher taxes in future due to the higher gov debt.

Also, even more borrowing by US fed gov could finally exhaust the willingness of bond holders (like Chineese gov and others) and make them demand higher interest to keep buying US bonds.  Interest rates are very low right now (fall 2010).  If rates go up enough it will cause recession and crush US economy.

But others say that US gov should continue or even increase US gov debt level because to start to balance the Fed budget (by lowering gov spending) as was done between 1936 and 1938 will cause a massive slow down and drop in output that will cause an increase in unemployment.