As we seek answers to this long list of questions, the basic tenet that must guide our thinking is that it is the real sector that must drive the financial sector, not the other way round. Question 2: Financial sector regulation, yes, but at what cost?
(Of course, in reality the fiscal adjustment would likely not occur in one year, but this hypothetical example is useful for showing the magnitude of the problem.) This fiscal adjustment would involve a cut in discretionary spending (including defense) of nearly 80 percent (relative to its baseline level) and a rise in non-payroll taxes of more than 35 percent.