The right’s antics could cause a Depression: The terrifying default aftermath

[DonViejo]

Normally with a financial crisis, there’s at least agreement on the need for a response. Not with these lunatics

BY DAVID DAYEN

The biggest threat from the twin calamities of the government shutdown and the debt limit breach is not actually the real-world effect; it’s what happens the next day, and the day after that. In other words, the most frightening thing about default, which is much more problematic than the shutdown, is what happens afterward.

The day after the financial crisis, there was general agreement on the need for emergency measures — and we got TARP and the stimulus. (There may be reason to be disappointed in both, but emergency measures were taken.) The day after a default in 2013 — or at least the day when the consequences become clear — this Congress is likely to do nothing. No stimulus, no bank recapitalization – nothing — in Hoover Congress-like fashion. And that’s the real fear: not just the dire consequences of a debt default, but the expected lack of response. That way lies depression.

The truth is we don’t have a Congress willing to take the necessary steps to intervene and mitigate a crisis, self-created or not. The usual tools available to stave off a recession – like government stimulus – have been mocked and savaged, not just by House Republicans, but by a deficit-obsessed establishment. And the rising opposition to bailouts likely takes them off the table, at least in an overt way. Washington’s reaction to these disasters is precisely what makes avoiding them so critical.

Let’s survey the damage. Now that furloughed federal workers are likely to receive back pay for the time they’re missing on the job, the economic impact of the government shutdown has lessened to a degree. But the real problems with a protracted shutdown would hit the private sector.

full article
http://www.salon.com/2013/10/09/gop_antics_could_spur_a_post_default_depression/