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How a debt ceiling fight hurts the economy, in six charts

The Obama administration is out this morning with a new report listing all the horrors associated with a fight over the debt ceiling. Actually breaching the debt ceiling -- which is looking increasingly likely and the Treasury Department says could happen if Congress doesn't act by Oct. 17 -- would be catastrophic. But just a prolonged clash will do harm, according to the report.

Here's how it could impact the economy, in six charts.

The report found that from June through August 2011, consumer confidence fell 22 percent and business confidence fell 3 percent. Consumer confidence tends to have a large effect on consumer spending, which accounts for about 70 percent of economic activity.

The stock market – as measured by the Standard & Poor’s 500 index – fell 17 percent during this period, and also was far more volatile, as measured by the VIX index. Because of the stock market declines, household wealth fell $2.4 trillion over this period.

Interest rates on a wide range of loans also spiked, with the effects lingering for months. Higher interest rates tend to slow economic growth. Rates jumped by more than half a percentage point on corporate loans, compared to benchmark Treasury rates.

More critically, rates jumped by .7 percentage points on mortgages, which the Treasury estimated cost the average home buyer $100 per month in mortgage costs.

If you want to read the whole report for yourself, we've posted it here.

Potential Macroeconomic Impact of Debt Ceiling Brinkmanship



Zachary A. Goldfarb is policy editor at The Washington Post.
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