Default Delay

Ten Senate Republicans have recently introduced legislation giving priority to debt service, salaries for troops, and Social Security. While the Treasury probably can prioritize payments in this fashion and thus avoid defaulting, this still creates very large payment delays. Given that the budget deficit is about $1.2 trillion/year, or $100 billion/month, this would be a negative shock of 0.4% of GDP/month, driving us very quickly into a self-inflicted recession.