I certainly agree that no one should be rooting for this. This will be economically painful to all. That said, I think it would bring perpetual, recession and possibly depression, until November 2010 and then Democrats will get crushed. Then, there will have to be a reverse in policy and we’ll begin to get out of the recession.
There is NO WAY that Obama can fix the economy (unless he turns into a tax cutting supply sider overnight).
Take the medicine sooner rather than later.
The effects would be gruesome, we agree. SOME degree of systemic pain like that, IMO is entirely unavoidable. The open questions are: Does it take the form of a violent collapse, or can it be drawn out into a long but more “orderly”, yet undoubtedly very painful episode; and how those alternatives play into midterm and ultimately 2012 elections. I don’t know, I am not a good predictor of the distant future; as well being generally pessimistic.
But honestly, I have little faith that out of such a morass, “cooler heads” will prevail. I find that question unpredictable and that is a seriously terrifying gamble, at least as far as I’m concerned. We get a sustained U6 print much over 20% (we’re at 16.4% now) and a commodity collapse and we will have much of America’s urbania lining up at soup kitchens. With the current Congressional cabal and the 0bama regime in charge of things, there can be no doubt that more and more onerous regulation and centralization would occur, be applauded, and they and their followers would play it for all it’s worth. At some point, EVEN IF a dramatic electoral turnaround occurs, tremendous amounts of that administrations’ efforts will have to be devoted simply to erasing the obscene graffiti and structural vandalism this bunch of street punks has scribbled all over everything.
I also have little faith that the mere election of the other party in either house of Congress or even the Pres would magically flip things around. (and I know you weren’t suggesting anything so pat) The debt that is the legacy of this era knows no party, the implied interest would be a considerable load for even a healthy economy to shoulder.