Given the global economic situation today, is it practical to layoff high-paid employees & recruit low-paid applicants who can do the same job?

Yes it's practical because, I do believe in the law of supply and demand  if the supply gets low then your demand should be low. To this changing world we should be practical at all times.

Yep... which is why I never push for too high salary: I dont want to become too expensive.

This is a double edged sword and one that a lot of organisations are struggling with....  It is an easy solution given the times we're currently in but it's not always the best one....  Also need to look at the experience and industry knowledge the current incumbent has, the relationships they have with your customers etc.  These things are important and can be incredibly hard to put a monetary value on...

Only if the skill set, experience and value both candidates bring to the table is exactly the same is it an easy decision....