re: #264 Lidane

I keep seeing wingnuts — even people I know — parroting the lie that default was never a serious threat, and that it couldn’t happen unless Obama allowed it. Oh, and the liberal media was playing up the fake threat of default to scare people and make the GOP look bad.

WTF.

Krugman had a good answer for that, so I filed off the serial numbers paraphrased it and posted on FB - the ‘reallocation of expenditures’ means 4% of GDP instantly disappears, which is by definition a contraction of the economy, likely leading to a recession.

He puts the multiplier effect at about 2.5, so if we’d been stuck at the ceiling for an extended period, just in terms of the reduction in GDP alone, we’d have been in as bad a recession as the 2008-2009 collapse. That doesn’t factor in the effects on world trade, politics, etc.