Sunday, June 5, 2011

About that debt limit

Nominal GDP Impact Of A Debt Freeze | ThinkProgress
: "To see just how much, imagine that this debt limit crisis happened last year. The budget deficit last August and September was $125 billion. If the government had been unable to finance that deficit it would have been forced to cut $125 billion from its spending during those two months—which if translated into a decline of that magnitude in economic activity would have resulted in GDP dropping by 2.3 percent, in nominal terms, from the previous quarter.

To put that kind of drop in perspective, consider that the biggest quarter-to-quarter drop in nominal GDP since 1947, when official statistics began, was 2 percent from the third to fourth quarter of 2008—the middle of the Great Recession, when we lost nearly 2 million jobs. In other words, had the government been unable to borrow last summer, it could have resulted in an economic contraction worse than we experienced during the depths of the Great Recession. "

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