Let's see who will suffer the most
According to the wise thinking conservatives, Government's essential and ONLY duties are: Defense, Security, Highways, Dams, Canals and Diplomacy. That is it. Let me add "disaster relief" to this short list. Many of them will complain about that. But I will add it anyway.
No more SS, Medicare, Medicaid, EPA, OSHA, Energy, Education, Health, Housing, Labor and all that non-sense Programs, Agencies or Departments.
Currently the government (Federal and Local) costs us more than $4.2 Trillion according to table 15.2 in the historical data of US Government Expenditures for 2006.
Cutting all these programs is a great way to cut the huge inefficient government to its bare essentials and we wont be needing more than $0.8 T to take care of the essentials (50/50 Fed and State spending).
So we can cut the government spending by almost 80%.
Let's assume that this really happens and we cut the taxes to just provide for that much expenditure.
What happens if we do that?
Here is what I can foresee after enacting the above policy and their effect starts to show in the economy:
1- Massive layoffs from the Federal as well as the States’ Governments
2- Most retired people will be living near or below the poverty level
3-Most poor people will be relying solely on charity for food
4- Huge increase in property taxes to make up for the absence of State and Federal school money or schools close entirely since not many can afford the cost of paying the new school fees.
5-ALL colleges will be small institutions since very few will afford the cost of college education. and their expenditures will be cut drastically
6- medical institutions will follow colleges, since not many will afford the health care that these institutions provide now and their expenditures will be cut accordingly.
Once the effect of the above works its way down into the society, many businesses of all kinds, small and large will be closing since there will be no need for their services. Some will stay of course to provide the services on a small scale for whoever can afford it. Like Cars, Travel, Entertainment, Construction, Hi-tech, Fast Foods, Dept Stores... etc.
More layoffs will follow of course until the economy adjusts to the new reality.
The Churches, Synagogues, Mosques, Temples will be jammed of course. Religious leader will be soooo happy that people are coming to them, alas there will not be much they can offer to the people other than sermons and may be little food and clothing.
Now lets see what happened to the society:
Currently, about 20% of the population is rich/upper-middle class, 60 % middle class and 20% at or below the poverty level.
Since Government spending is almost 50% of the total Actual spending then it is fair to assume that the effect of cutting that by 80% will reduce the business portion by at least 50%. The size of the new economy will be 0.25 (Bus )+ 0.2 (Gov)=0.45 i.e. 45% of the current one.
What does that mean?
Roughly speaking, the 20% rich/upper middle class will be only around 9%, the middle class will be around 27% and about 64% of the population will be at or below the poverty level.
in other words half of the current Rich/upper-middle class will be middle class and 35% of the current middle class will be at or below the poverty level.
So who lost the most here?
We all lost. The rich, the upper-middle class lost the most but the middle class also lost. The same people who are complaining now will be the first to lose.
Of course, those top 36% will donate more % of their wealth than they do now, but their number is less than now and the poor population is tripled. If the contributions are just enough to feed and clothe those poor through charitable organizations, we will be lucky.
The top 36% in the new economy will be very privileged indeed and they will contribute more than they do now. But unless they give double what they pay now in taxes and contributions, the above scenario can not be avoided .
If they actually do that and maintain the current spending level, then what did they gain by eliminating these programs, they will be forced to almost create a private government on the side to do what the elected government is currently doing. However, what are the chances that they will actually pay that much? and what kind of controls will govern their actions? and what guarantees do we have that they will continue to do that?
Like I said, the good old days will be here again. Do we really prefer that?
P.S.: Comments should not just reject this scenario; it is a realistic and rough estimate of what I see happening. Tell us what your scenario look like. Just be realistic not idealistic. Talk about the majority of real people not ideal non-existing humans. People in general are not bad but they are not ideal. They try to be but the majority fall short most of the time.