Deregulation was a recipe for disaster. The supply-side bubble was a recipe for disaster. What's new?
Now, we have risk if we spend (spiraling debt), as well as if we don't (spiraling unemployment and capital in vapor-lock, potentially bringing the economy below hysteresis.)
Hey, it's not like the $10T in debt happened overnight. It doubled over the past eight years. What's another ten percent going to hurt?
It looks like the Republican strategy of borrowing (tax cuts for the rich) and spending (two endless wars) as a way of strangling government when the Democrats arrive won't work this time around. The Democrats have enough power to call Bush's bluff.
I think the plan will be to spend ourselves out of the ditch (hopefully), and in a year or two, reduce military spending, raise taxes on the wealthy, and close the wealth-tilted loopholes. The Wall Street speculation and Pentagon economies will slow, and the real economy, real jobs, and useful services will grow. The starved demand-side of the equation will be restored.
If you look at the deficit vs. GDP under Clinton, it grew during his first term. There was no jumping off the deficit horse while it was at a Reagan-Bush gallop. Over time, it slowed, and the deficit in Clinton's last year was near zero.
It's possible that we will see a similar thing in coming years. But this is a hell of a time for the hypocritical Republicans Congress-critters to become deficit hawks.
If you don't have the fortitude to build a surplus during good times, you can't expect to avoid debt during bad.