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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsGOLDMAN: If The Debt Ceiling Isn't Raised And The Treasury Runs Out Of Cash, Then Say Goodbye To 9%
GOLDMAN: If The Debt Ceiling Isn't Raised And The Treasury Runs Out Of Cash, Then Say Goodbye To 9% Of GDPby Sam Ro at Business Insider
http://www.businessinsider.com/goldman-sachs-on-failure-to-raise-the-debt-ceiling-2013-10
"SNIP..........................
Failure to raise the debt limit would eventually lead to a sharp reduction in spending and could result in a rapid downturn in near-term economic activity. A very short delay past the October deadlinefor instance, a few dayscould delay the payment of some obligations already incurred and would create instability in the financial markets. As noted in prior research, this uncertainty alone could weigh on growth.
But a long delayfor example, several weekswould likely result in a government shutdown much broader than the one that started October 1. In the current shutdown, there is ample cash available to pay for government activities, but the administration has lost its authority to conduct "non-essential" discretionary programs which make up about 15% of the federal budget. By contrast, if the debt limit were not increased, after late October the administration would still have authority to make most of its scheduled payments, but would not have enough cash available to do so.
Using our cash flow projections as a guide, we estimate that the revenues the Treasury will receive in the month following the October 17 deadline would equal only about 65% of spending going out, implying a far greater fiscal pullback than will occur as a result of the ongoing shutdown. In essence, a prolonged delay would force the Treasury to rapidly eliminate the budget deficit to stay under the debt ceiling. (The deficit has significant seasonal fluctuations and CY Q4 is normally a higher-deficit period, offset by lower deficits or surpluses in other periods, particularly CY Q2.)
We estimate that the minimum pullback in spending that would be required to remain under the debt limit for one month without an increase would be equivalent to 1.7% of GDP (annualized). However, if the Treasury decided to set aside interest payments and make other payments in arrears, we estimate it would result in a pullback in primary (i.e., noninterest) outlays of 4.2% of GDP (annualized). In both cases, the effect on quarterly growth rates (rather than levels) could be even greater. If this were allowed to occur, it could lead to a rapid downturn in economic activity if not reversed very quickly.
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applegrove
(118,808 posts)was their worry when the labour & housing markets crashed?
FarCenter
(19,429 posts)applegrove
(118,808 posts)do say anything since they went before congress and refused to apologize for the sub prime mortgage crisis. That and trying to keep Elizabeth Warren out of power. Now they speak up.
In Canada we see economists for the big banks get on the tv and warn Canadians about upcoming economic problems. And yes they charge for every debit transaction so they are still in the business of making money. But you don't have the same type of banks that we have.
DJ13
(23,671 posts)Only problem is that the TP always talked about crippling the economy to further their aims, its too bad that the wealthy who supported them thought they were bullshitting.
Cha
(297,723 posts)Response to applegrove (Original post)
ffr This message was self-deleted by its author.
SheilaT
(23,156 posts)A lot of us could cut 9% from our spending and still manage. The real problem is that it will affect people very unevenly, just as the current government shut down has.
Personally, I'm not affected by the shutdown. I don't work for the government. I didn't have any near-term plans to visit any kind of national monument or park.
But those furloughed, those who work in jobs that depend on national park tourism, and all sorts of things I'm not even thinking about, they are all affected. Just because I live in my little bubble, doesn't mean that real people aren't affected.
Which is the crux of the problem. Those cheering this shutdown think it doesn't matter at all to them. They think that all government employees are simply a waste of oxygen. Because *they* don't have government job, *they* don't go to the memorials in Washington DC, and so on. No. They sit home, collect their social security, and when they need to see a doctor they have Medicare. So they aren't affected by this.
I just wish there were a better way to make them understand how this affects all of us.
AAO
(3,300 posts)Why do repugs have opaque bubbles, while Dems have transparent bubbles? I can see the world around me and see people suffering. Do 'baggers really have blinders on, or are they just trash citizens?
jeff47
(26,549 posts)The fact that 9% seems small doesn't actually make it small.
On the other hand, those people you're talking about are 0.013% of GDP so far.
ffr
(22,672 posts)They need to present their platter of crow personally to Boehner and Co. and spell it out to them in no uncertain terms; "eat it and like it. You can fight again another day."
Poor Photoshop, but you get the idea.
Rex
(65,616 posts)A VP at Goldman.
MindMover
(5,016 posts)Rex
(65,616 posts)It is like Wall Street wants to stay a Reagan Era institution or something.
cthulu2016
(10,960 posts)No fancy economic theory nessecary. More like, "Sally has annual growth of three apples. Take away four apples this year... etc."
Cali_Democrat
(30,439 posts)Tank the economy and point the finger at Obama.