Debt Ceiling: Be Afraid

When I wrote my column about the potentially economy-derailing debt ceiling standoff next year, there was some reader disquiet that I hadn’t really marshalled the evidence that the previous debt ceiling standoff had hurt the economy.

I was hoping to do a followup piece on that point, but Betsey Stevenson and Justin Wolfers did a great one for Bloomberg yesterday. The basic point is that we had three of the worst months for job growth of the entire recovery while the debate played out and consumer confidence took a sharp but temporary tumble. This was, in other words, just about the only time from the stress tests until the present when you seemed to see a real sense of panic and uncertainty afflicting the economy. The whole rest of the period has been pretty bad anyway, but the debt ceiling debate really dealt us a blow.