I’m watching all this off and on, thinking dark thoughts.

Last week I thought Albusteve was right - that we’d get /something/ to block the default. I still think it’s possible, it’s just what we’re going to get is so ugly it’s just short of being the default itself.

The general outlines are cutting between one and three Trillion from GDP (in the form of cutting government expenditures) over the next ten years. About a quarter of it is in this upcoming year.

$250B is about 2% of GDP. That gives us a further 1% increase in unemployment (okun’s observation). It also moves us negative given the previous six month’s growth has been less than 1.5% (annualized).

And that is just the direct impact. There are a number of states hanging on the edge; a Fed Expenditure cut will hit them as well. Depending on specifics, the states’ cuts would hit GDP for another 1 to 2%.

I’m not sure default would be worse at this point.