It would drastically reduce consumer spending, and lead to a deep recession, one that, if a balanced budget was in place, could not be addressed by government spending. These austerity programs have been tried in a number of places, most notably the UK. Those programs absolutely hammered the most vulnerable populations, and had almost no impact on higher incomes.
Economic measures should not be implemented based on fairness. They should be implemented based on ROI. The first step that needs to be taken is to institute a wealth tax to rebalance the distribution of wealth, and it needs to be accompanied by a large increase on taxes for the wealthiest Americans. It is absurd that the long term capital gains tax is so low. It is absurd that we have a social security tax that is regressive. Our entire tax system needs a major overhaul. The wage/wealth gap is unsustainable and poses a far greater threat to our economy than does the debt.
Finally, we need to fix the healthcare system, which costs us more than twice the GDP of other developed countries, and has far worse outcomes. Austerity is not the answer.
