How will the market react to downgrade?

[Cephalopod]

Well... we tried increasing the deficit during an economic downturn and employment went over 8%. So lets try the opposite now. I mean, the keynesians have had their turn, it didn't work. Let someone else have a shot.

Okay, having had my little fit over that retarded paper...

It's hard to claim increasing the deficit as a means of reversing the economic downturn has been "tried": the stimulus that was passed was so watered down and ineffectual, it's hard to say the Keynesians 'had their turn', since the amounts and distribution of spending that would have been required were not even close to reached. Since 1/3 of the original $900b stimulus bill was tax cuts, you've got $650b in actual stimulative monies. This is compared to the >$1T that economists indicated would be necessary. If we couldn't get to that level, the overall stimulus was a waste and not a valid test of Keynesian stimulus. For this reason, Obama and the Democratic leadership is fully to blame for the failure of the stimulus.

You certainly shouldn't be increasing spending while tax revenues are falling, right?

Why? Governments work at the macroeconomic level, not the micro.