The Coming Empirical Test Of "Ricardian Equivalence"
When real disposable income falls, people have two choices: either they cut back on their spending or they reduce their saving. If people acted according to the Ricardian equivalence theory, income reductions due to higher taxes and/ or lower government spending, the result will simply be a reduction in the savings rate.
Based on previous experience it seems nearly certain that it will be a combination of the two choices: both the savings rate and consumer spending will fall. The exact proprtion to which savings will fall and consumption will fall is however a lot more uncertain. With the savings rate only about two percentage points above the lows of the housing bubble, it would however seem that there's not much room for big reductions in savings.