The idea may be getting some scattered play among economists, but I am skeptical that those in power would just let the market play out without intervention. I think that people are not sick of stimulus per se, they are sick of stimulus that isn’t helping them individually. So I could see the approach changing but it’s hard to envision them just backing off entirely.

This goes double if we start to get another leg down. It’s one thing to talk about austerity when things look like they are recovering; it’s another to do it in the midst of a panic or big downleg. (Think of the TARP, all it took was a market decline to get that passed on the second go).

I do agree that if the people who are talking austerity get elected, they will have to do something to appear austere. But I don’t think it will last, especially if we get another serious downleg in the housing market or economy.