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1) There's no way Truman would have gone with the invasion if there was any other option. The head of the Department of War estimated that the invasion would cost 1.7 to 4 million American (400,000-800,000 fatalities) and 5-10 million Japanese fatalities. And that was an optimistic guess. So no, in a decision between this and an experimental superweapon, any sane person would go with the superweapon every time. The only option is for the atomic bomb to not be ready in the first place. If I had to give a schenario for this, the first thing off the top of my head is Einstein getting killed by a hit-and-run driver as a kid.

2) It would be even worse than anyone imagined. The Japanese strategy was to bank everything on guessing the probable Allied attack routes, and they did so correctly; the Japanese estimates matched the plans for Operation Downfall pretty much exactly, so the invasion would have run right smack into the teeth of the Japanese war machine. Modern estimates indicate that if we had gone with Downfall, the war would have been extended well into 1947.

3) The socioeconomic consequences would be horrific. The two largest economies in the modern world would have spent years destroying one another. Who knows if the baby boom would even have happened, with all those dead soldiers? It would be put off a couple years, at any rate. And, oh yeah, the plan would have left Japan a "nation without cities", thanks to the the airstrikes which were a part of Downfall.
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