Skip to main content

View Diary: The Economy's Willing Executioners (32 comments)

Comment Preferences

  •  It's not per year (1+ / 0-)
    Recommended by:
    TexasTom

    I never said anything about GDP per year: deficit spending by the government constitutes about 10% of the economy over any given period of time in the near future.  Electrical analogy is power, not energy.

    If there is no debt ceiling increase in the short term then 10% (or more due to feedback effects) of the economy goes away.  Period.  If it goes on for more than a short time or the markets don't totally forgive the disruption then you're looking at Great Depression downturn.

    Should a prompt, clean debt ceiling bill be passed then the government spending will catch up, presuming that a clean bill is passed with no changes to the revenue/expenditure balance.  The multiplier effects will necessarily go on: if the government didn't send you your social security check this month, they might not send it in some future month, so you need to put something away rather than spending it in case the same thing happens again, now that it's been proved that it can happen.

    The FY1996 government shutdowns were for 5 days and 21 days respectively.  That year's deficit was 1.37% of GDP.  The government kept essential services running: social security checks were still mailed then.  The interruption was brief and major spending carried on, which would not happen if the present impasse is not resolved.

    Failure to raise the debt ceiling to pay for the appropriations that Congress made in April would mean failure to pay for those legally-binding appropriations.  Government contractors (with contracts) could not be paid.  Government employees (with contracts) could not be paid.  Giving them IOU's instead of the cash they are owed is a de facto default, whether or not bondholders get paid.

    If default happens, even if the ceiling is raised in short order afterwards, who's going to do business with the US government without an added premium for the risk of not getting paid?  Who's going to buy multi-year treasuries if the ceiling isn't going to get raised again in time to pay them when the bond matures?

    There's at least $1.8T in treasuries that will need to be recycled by the end of this calendar year.  Who's going to buy those new bonds at the current historically low yields if there's a chance they won't be honored due to future shenanigans?

Subscribe or Donate to support Daily Kos.

  • Recommended (127)
  • Community (60)
  • Media (32)
  • Elections (32)
  • Trans-Pacific Partnership (30)
  • 2016 (29)
  • Environment (28)
  • Law (28)
  • Civil Rights (26)
  • Culture (24)
  • Barack Obama (24)
  • Hillary Clinton (23)
  • Republicans (22)
  • Science (21)
  • Climate Change (21)
  • Economy (19)
  • Labor (19)
  • Josh Duggar (18)
  • Jeb Bush (18)
  • Marriage Equality (17)
  • Click here for the mobile view of the site