However, it is both true and relevant that we have, in the past, seen major shifts in the economy in very short periods of times, and vastly underestimated the ability of a free economy to adapt.
Yeah, like that period just before your oft-used example of post-war troop integration -- the Great Depression. What a fantastically quick and painless recovery that was!
All economists agree that, as long as the logic of global capital is sustained in some way, any market meltdown will eventually recover by itself. It's just a matter of how much suffering you're willing to allow in the interim while you wait around and, well, do nothing (and it truly is do nothing, because we're talking about economic policy).
You claim the suffering will be either nonexistent or minimal to the point of being ignorable. I claim otherwise.
So, no, I can't prove that we definitely will. I can only show that people have a history of underestimating the speed of a free economy to absorb change. That is, after all, its strength.
No, you can't even show that. How do you isolate what effects are from the market and what effects rise from externalities, i.e. including the state?
Another big problem in presenting data is the direction of causation. You have two axes producing a certain relation. Which is the dependent variable and which is the independent or are both somehow conflated in a constant give and take? Since nothing is controlled in any raw economic data, I would be highly dubious of even a strong correlation. What we need is real theory.
In a very broad sense, sure, though there are a billion sub-sets of each category. If we cut government, which government. If we spend, what do we spend on, etc.
You're missing the point then. Selectively cutting some government and selectively spending some money is precisely what we have been doing for the last four years. The idea is to do something major in one direction or another. You cut some, you spend some, you ultimately end up with the same situation.
It also makes me curious as to which parts of the government you would want kept around? I have a funny feeling that they're precisely not the kind of programs that help lower-class people.