Part of the background of the debt ceiling hostage fight is that raising the debt ceiling polls quite poorly. But as my colleagues Michael Ettlinger and Michael Linden note, the consequences of a random debt freeze would be quite dire even leaving the risk of a total financial system meltdown out of it:
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.
Sounds bad to me.
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