Lack Of Borrowing Authority Will Lead To Largest-Ever Decline In Nominal Gross Domestic Product

Setting aside all the possible credit-related issues, what happens to the economy if the federal government suddenly needs to slash spending because it can’t borrow any money? Well, as Michael Ettlinger and Michael Linden note, it would be the biggest shock to overall national spending ever:

This would, if at all sustained, clearly tip us back into recession.