The partial government shutdown has Americans nearly as freaked out about the economy as the event that triggered the 2008 financial crisis, according to a new survey by Gallup.
U.S. economic confidence last week suffered its biggest one-week drop since Lehman Brothers collapsed on September 15, 2008, Gallup reported. The polling firm's Economic Confidence Index tumbled 12 points as Americans became more worried about congressional dysfunction, which could cause a catastrophic debt default by the U.S. government. Confidence fell by 15 points the week Lehman collapsed.
If lawmakers do not increase the country's borrowing limit by October 17, the government won’t have enough money to pay its bills and will be at risk of defaulting on some of its debt. Although it is difficult to predict what will happen if Congress does not come to an agreement by then, several experts have warned that a U.S. default would ignite an economic crisis much larger than the global disaster that followed the end of Lehman.
In the five months after Lehman filed for bankruptcy with $517 billion in debt, the U.S. stock market lost nearly half its value, Bloomberg New notes -- although the Lehman collapse was not the sole reason for that decline. Unemployment also hit a thirty-year high of 10 percent, as a recession that began before Lehman's collapse worsened sharply during the crisis. Five years later, the entire world has yet to fully recover. Joblessness is still a worldwide epidemic, and many families are too distrustful of the economy to take chances with their money.
The size of Lehman's debt had very little to do with the 2008 crisis, and the size of U.S. debt will probably have no influence on the financial turmoil that would follow a potential U.S. default. Still, Bloomberg recently pointed out the eye-popping statistic that the firm's debt at the time of its bankruptcy was 23 times less than the $12 trillion the government currently owes.
While Main Street may be shaken up by the possibility that lawmakers will not raise the debt ceiling, Wall Street appears to be playing this possibility fairly cool. The price of insuring against a U.S. debt default has changed little in the past week, a sign that investors are far from panicking about the possibility of hitting the debt ceiling. That said, some investors are worried that Wall Street's calm demeanor may encourage politicians to act too late against the dangers of default, The New York Times reports.
On Tuesday, nine days away from the looming debt ceiling deadline, there is no clear sign of lawmakers coming to an agreement on Capitol Hill. President Barack Obama told House Speaker John Boehner (R-Ohio) that he is still not willing to negotiate on reopening the government or on legislation that would prevent a U.S. default.
Infographic by Alissa Scheller
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Warren Buffett, Chairman And CEO Of Berkshire Hathaway
"The debt ceiling makes no sense anyway. If you're going to spend more than you take in, you're always going to have to be raising it," <a href="http://www.huffingtonpost.com/2013/10/07/buffett-debt-ceiling-bomb_n_4056861.html?utm_hp_ref=business" target="_blank">Warren Buffett told Fortune</a> in an interview in early October.
Tim Geithner, Former Treasury Secretary
"It would have been time a long time ago to eliminate it," <a href="http://www.huffingtonpost.com/2012/11/16/timothy-geithner-debt-ceiling_n_2147748.html" target="_blank">Tim Geithner told Bloomberg</a> TV in November. "The sooner the better."
Ben Bernanke, Federal Reserve Chairman
"I think it would be a good thing if we didn’t have [the debt ceiling],” <a href="http://washingtonexaminer.com/ben-bernanke-get-rid-of-the-debt-ceiling-it-has-no-practical-value/article/2518534" target="_blank">Ben Bernanke said</a> while speaking at the University of Michigan.
Larry Summers, Former Treasury Secretary
"I think that given that Congress has to approve all spending and all tax changes, there is not much logic to the debt ceiling," <a href="http://www.slate.com/articles/business/moneybox/2011/07/the_guys_who_sign_the_checks.html" target="_blank">Larry Summers</a> told Slate in an email.
Bruce Bartlett, Former Senior Policy Analyst And Treasury Official
"The debt limit must be abolished," Bruce Bartlett <a href="http://economix.blogs.nytimes.com/2011/08/01/doing-away-with-the-debt-ceiling/" target="_blank">wrote in the New York Times in 2011</a>. "While that is extremely unlikely at this time, it is nevertheless necessary. As the computer eventually learned in the movie 'War Games,' the only way to avoid disaster in this sort of game is not to play."
Ezra Klein, Washington Post's Wonkblog Editor, Bloomberg View Columnist And MSNBC Contributor
"We shouldn't suspend the debt ceiling for three months. We should suspend it forever, completely eliminating the threat that this hard, unpleasant, confusing vote could go wrong and unleash economic havoc," <a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/22/suspending-the-debt-ceiling-is-a-great-idea-lets-do-it-forever/" target="_blank">Klein wrote</a> in a January piece entitled, "Suspending the debt ceiling is a great idea. Let's do it forever!"
Alan Greenspan, Former Federal Reserve Chairman
"I have a more <a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/26/dont-just-raise-the-debt-ceiling-get-rid-of-it-forever/" target="_blank">fundamental question</a>. Why do we have a debt limit in the first place," <a href="http://www.nbcnews.com/video/meet-the-press/42632429#42632429" target="_blank">Greenspan</a> asked during a roundtable talk on Meet The Press back in April, 2011.
Richard Thaler, Economist And University Of Chicago Booth School Of Business Professor
"The debt ceiling is a dumb idea with no benefits and potentially catastrophic costs if ever used,” Richard Thaler <a href="http://articles.latimes.com/2013/jan/22/business/la-fi-no-debt-limit-20130123" target="_blank">wrote</a> in response to a poll, according to the Los Angeles Times.
Anil Kashyap, Economist And University Of Chicago Booth School Of Business Professor
“Deciding whether or not to pay the debts incurred to fund the previously approved tax and spending is nuts,” Anil Kashyap commented when asked by the <a href="http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_555sdN4BXmfNKCN" target="_blank">University of Chicago</a> about the necessity of a debt ceiling.
Robert Rubin, Former Treasury Secretary
"It's an anachronism," Robert Rubin said in reference to the debt ceiling <a href="http://www.washingtonpost.com/blogs/wonkblog/post/robert-rubin-the-risk-is-greater-today-than-it-was-in-1995/2011/05/09/AFlJqp5G_blog.html" target="_blank">during a 2011 interview with Ezra Klein</a>.
Paul O'Neill, Former Treasury Secretary
"It is hard to make a rational argument for the debt ceiling as it is now structured," Paul O'Neill said, <a href="http://www.slate.com/articles/business/moneybox/2011/07/the_guys_who_sign_the_checks.html" target="_blank">according to Slate</a>.