What Economists Think About a Possible Debt Default

As my colleague Jonathan Weisman wrote on the front page of Wednesday's editions, some Republican leaders are arguing that a debt default would not be so terrible. Economists do not agree.

The Initiative on Global Markets, established by the Booth School of Business at the University of Chicago, recently queried a panel of 36 economic experts on the subject, asking if they agreed or disagreed with the following statement: “If the United States fails to make scheduled interest or principal payments on government debt securities, even as an unintended consequence of political brinkmanship, U.S. families and businesses are likely to suffer severe economic harm.”

Here is the distribution of responses from the 31 people who answered:

Of those who responded, only one - Pinelopi Goldberg at Yale - disagreed with the statement. She submitted a comment with her response: “Unlikely, if they pay a week later.”

In other words, she's saying a default isn't a big deal to most Americans - assuming it's reversed almost immediately. That's different from saying a default isn't a big deal, period.

As I have noted before about the Initiative on Global Markets panel, these responses do not necessarily reflect the beliefs of all economists, the way a traditional poll might aim to; rather, the panelists are among the more elite members of their profession and were selected to represent some of the better-known conservative, liberal, young and old scholars, as well as scholars from different geographic areas. They include Nobel laureates, John Bates Clark Medal recipients, past presidents of both the American Economic Association and American Finance Association, past Democratic and Republican members of the President's Council of Economic Advisers, and editors of leading economic journals. A full list of the respondents and their comments can be found at the IGM Forum Web site.