Quote:
Originally Posted by iron81
WaPo poll: Roughly two thirds of Republicans are aware that failing to raise the debt ceiling would lead to economic harm. By roughly the same margin, they favor defaulting on the debt over raising the debt ceiling.
iron81:
I'm no expert in the business of defaulting on your debt. In the world of everyday ordinary people, (as opposed to the world of sovereign nations), defaulting on your debt means declaring personal bankruptcy. So, if the United States defaulted on its debt, exactly what would happen? I know it wouldn't be like a nuclear war where we're all dead, but it also wouldn't be a mere "technical exercise" with no unpleasant consequences.
Before the sequester kicked in, there was much handwringing and predictions of imminent disaster. While the sequester hasn't been the optimum way of doing business, it also hasn't been the calamity that some were predicting. The sequester kicked in and our annual deficits (as a percentage of GDP) have been steadily declining. (I don't know the exact number, but I think the projected deficit for this fiscal year will be below a trillion dollars. We're not to a balanced budget yet, but under the sequester the annual deficits have been trending in the right direction.) So while the sequester was initially portrayed as a calamity that would lead to ruin, the reality has been that the sequester is actually having some beneficial effect. As for a default, the consensus seems to be that the economic effects will be more immediate and more draconian than the sequester.
What I'm wondering is what will be the immediate effects if the United States defaults on its debt? Would all Government spending be priortized (with interest on the debt having the highest priority) and bills being paid starting with the highest priority items first and working down until tax revenues have been exhausted? (Any remaining obligations after the tax revenues have been exhausted simply don't get paid?) If our Government is suddenly forced to live within its means, (with no ability to borrow), who decides whose ox gets gored?
We'll be in uncharted territory since the United States has never defaulted on its debt. I'm wondering whether a default that lasts more than a day, a week, or a month automatically equates to being back in the 1930's with a quarter of the population unemployed? Is it possible that the United States goes into default and it's still pretty much "business as usual" for most of us? Just how bad would things get in the event of a default?
Last edited by Alan C. Lawhon; 09-20-2013 at 05:28 AM.
Reason: Minor edit.