In Lost Decades, Jeffry Frieden and I argue that fiscal consolidation is a necessary prerequisite for long term recovery; however, fiscal consolidation too soon can derail the recovery, and plunge us further into debt. In contrast, some commentators have asserted that fiscal consolidation can be accomplished painlessly, or even with immediate benefits (e.g., JEC-Republicans, Rep. Paul Ryan/Heritage Foundation). Recent empirical work which carefully identifies the relevant episodes concludes that such instances of expansionary fiscal contraction are rare, and usually conducted near full employment. Ball, Leigh and Loungani review the effects of fiscal contraction in “Painful Medicine”.
…fiscal consolidations typically have the short-run effect of reducing incomes and raising unemployment. A fiscal consolidation of 1 percent of GDP reduces inflation-adjusted incomes by about 0.6 percent and raises the unemployment rate by almost 0.5 percentage point (see Chart 2) within two years, with some recovery thereafter. Spending by households and firms also declines, with little evidence of a handover from public to private sector demand.
Fiscal contractions raise both short-term and long-term unemployment, as shown in Chart 3, but the impact is much greater on the latter. Long-term unemployment refers to spells of unemployment lasting more than six months. Moreover, within three years the rise in short-term unemployment due to fiscal consolidation comes to an end, but long-term unemployment remains higher even after five years.
So, in addition to contracting the economy, fiscal contractions exacerbate the already daunting challenges facing the long term unemployed (keeing in mind long term unemployment is not necessarily the same as structural unemployment).  
What about how the burden of adjustment is allocated?
How does fiscal consolidation affect the distribution of income between wage-earners and others? The research shows the pain is not borne equally. Fiscal consolidation reduces the slice of the pie going to wage-earners. For every 1 percent of GDP of fiscal consolidation, inflation-adjusted wage income typically shrinks by 0.9 percent, while inflation-adjusted profit and rents fall by only 0.3 percent. Also, while the decline in wage income persists over time, the decline in profits and rents is short-lived (see Chart 4).
Chart 4 is reproduced below.
The foregoing suggests that the schedule of fiscal consolidation should be such that spending cuts and tax increases are implemented when the economy has recovered. The findings also imply that fiscal consolidation should be accompanied by measures to protect low wage earners and the long term unemployed.
Hence, our fiscal policy prescriptions in Lost Decades:
…with the economy growing only modestly as recovery began,
too rapid a retrenchment in spending and an increase in taxes could
very well be counterproductive, throwing the economy back into
recession and further accumulation of debt. However, the politics of
countercyclical fiscal policy can be perverse, as the Obama administration
found. Recessions hit hardest at poor and working-class
families, who would benefit most from stimulative fiscal policy. But
attempts to undertake these policies face opposition from upperincome
taxpayers who are less affected by the recession and more
concerned about the impact on their future taxes. This opposition
can impede an effective fiscal response to cyclical downturns.
Whatever the difficulty with devising appropriate short-term
fiscal policy, government finances over the next two decades need everyone’s focused attention. The big problems are Americans’
unwillingness to tax themselves, ever since the Bush tax cuts of
2001 and 2003, and the entitlement programs—Medicare, Medicaid,
and Social Security—which are going to consume ever greater
shares of the budget. …
Jeff Frieden and I will be online participating in the FireDogLake Book Salon this afternoon, 5-7PM Eastern, where we can answer some of your questions in near-real time. Mike Konczal of Rortybomb will be moderating.