Tue Sep 20th, 2011 at 12:26:50 PM EST
As clear as I can make it.
The world is in a classic Positive Feedback Loop in the Negative Direction causing cascade failure across the global economy. Increasing a causal factor comprising the Feedback Loop will only drive the economy further in the Negative Direction.
So says Theory.
In practice, micro-economic activity (aka. The Real Economy) is contracting so removing government activity (21%, give or take in the US) from the economy can only further contract micro-economic activity.
Putting it simply: if you are in a hole, continuing to dig ain't gonna get you out of the hole and, in fact, will only make the hole deeper.
For those suffering from Neo-Classical Economic brain rot, which includes most economic policy advisers ...
The fantasy "new businesses will emerge from the capital pried from Federal, state, and local governments" ignores the reduction in spending will be affective in months causing further cascade failures of marginal businesses directly or indirectly based on government spending, throwing those people employed by those businesses out of work. This increase in unemployment - and the resulting non-buying of goods and services cuz they ain't got no money - will occur at the same time as the people directly employed by governments are thrown out of work, lowering their purchases of goods and services cuz they ain't got no money.
So, any new businesses¹ will have a reduced total potential customer base relative to the pre-Austerity number, increasing the risk of those businesses, increasing the percentage of new businesses going belly-up, meaning the affect of new businesses in reducing unemployment will be swamped by the increase of unemployment by the imposition of Austerity.
¹ tho' I note the pesky details of what new businesses, founded with what money, in what markets, selling what products or services, and to whom, exactly, are grandly ignored by Neo-Classical Economists.