Budgets cuts are inevitable as people continue to depend on unemployment benefits.
The state can only subsidize the economy for so long before the systems starts to crack.
1) how long? And how does this compare to the expected length of time the economy is being put on ice?
That depends on how long the economy is put on ice and if there's a repeat event. Spending seems to go ahead now because this is seen as a once in a lifetime apocalyptic event.
Cuomo today talked about a 2nd and 3rd wave which would be devastating if it plays out the same way.
2) Why are the budget cuts inevitable? Why can't the government just issue more debt like it did during the recession?
Because they were already on the table before this hit. Corona-chan merely delayed them. Plus opposition parties use calling for budget cuts as an effective tool against the sitting government.
3) Most of what the government spends on isn't all that affected by the crisis. Entitlements go primarily to groceries, heating, rent (we should freeze this but whatever), and education. Clearly healthcare workers are still working so healthcare spending doesn't need to go down. And all the excess income that can't be spent on stuff will pay down debt long before inflation can hit. So why does the government need to stop spending at all?
Because the case is already being made that if people get free money they might not look for a new job at all.
So cuts will happen to:
- Sabotage the sitting government (especially if the Dems take-over)
- Make up for ridiculous corona spending
- Entice people to go 'back to work'
It's mostly a symbolic thing though. Just think about how Greece feels right now, they pretty much sold half their country and ruined their public services because they had a little debt.
I like Larry and I think we need optimism to keep this train running but you can't expect the economy to 'bounce back' when entire sectors of the world economy like hotels, airlines and restaurants remain closed and/or regulated for the foreseeable future.
There will be short term relief boom in Q3/Q4 but once the reality sets in of what this is doing with the real estate market, travel industries and other sectors a sensible government will try to reduce spending where possible.
Which is why Trump needs to stay in charge, only his fuckery will distract from reality and give investors the confidence to keep dumping their money in a boiling pit of hellfire and because the US has pretty much erased the concept of 'savings' the only possible way out is to spend more and hope the stonks go back up.