I love DeLong's poker analogy!
This is what may well happen if the current crop of cut taxes-reduce regulation-limit government-reduce spending crowd gets into power.
A 9% hit to GDP? Holy shit! And you thought the 6% GDP decline that we (U.S.) took during the worst of the Great Recession was bad.
Another million net jobless? Are we really so angry that we will vote to cut off our nose to spite our face?
The British Conservatives Have No Theory - Grasping Reality with Both Hands: "- Sent using Google Toolbar"
Isn't this what happened during the Great Depression?
First, the markets went to hell in a hand basket, the real economy plummeted, leading to massive unemployment. All of which started under the Republican's watch, whose earlier laissez-faire free market policies arguably both led to the economic meltdown and exacerbated them. FDR gets elected as a savior and throws federal government spending into overdrive - based on Keynesian policy - to stand in the breach and attempt to kick start the economy back to life. Recovery begins, but is slow and exacerbated by drought, a inadequate monetary policy exercised by the independent Federal Reserve Bank system, and Smoot-Hawley tariff-induced collapse of international trade. Republicans & conservatives react with howling fury, forcing FDR in 1937 to cut taxes & reduce spending to balance the federal budget. The economy again falls like a rock.
Deja vu all over again?