A sudden, forced 45% reduction in federal spending in one fell swoop would have caused the Dow to plummet, unemployment to increase to 11 - 14% (federal and contractor layoffs), etc., etc.
Now, some Cloward-Piven types say “let it crash, it has to...” but let me ask you a question...
If all the above happened, what would happen in November 2012? The GOP House would be squarely blamed for the chaos, and thrown out of office, along with Obama’s re-election.
Then, the new Dem Congress just raises the debt ceiling anyway, but this time, the revenues are even lower due to higher unemployment and lower GDP than we have now.
45% reduction would cause the Dow to plumment?
Really?
Where’s your reasoning?
The almighty DOW dropped 266 today, trending downwards, on this latest “clueless action” by the Fed representatives.
I believe the correction would “rock the world” — but in a ‘stings a little, but now I am innoculated’ kinda way ....
Actually, a 45% reduction in federal spending equates to a 45% reduction on the burden imposed on the private sector and financial markets. A balanced budget would necessarily force a lot of regulatory and enforcement agencies to close.
The effect of this upon the markets and private sector would be staggering. No longer would industry be hampered by endless, conflicting, heavy-handed bureaucratic oversight and confiscation of profits. The financial markets would be assured of the stability of the USD and viability of US Treasury bills.
When a TEA party congress and president implements a balanced budget and shuts down a large sector of the bureaucracy the economy will take off. Until then the affliction is inescapable.