From the Article:
On a global scale, then, the volatility caused by furloughs and sequesters looks pretty small. But the relative impact of default will be much worse in the case of the U.S. than it is when it comes to smaller, poorer countries. A recent review of sovereign default in the Journal of Economic Literature concluded that over the past 20 years, defaulting countries had seen limited access to international capital markets and more expensive borrowing for the two years after default—but a small impact after that. And the impact on GDP growth was only around 1 percent.
The difference is that U.S. Treasury bonds are vital to the functioning of the global financial system. The government has $12 trillion in outstanding debt that is used (not least) to underpin short-term borrowing among banks and investment houses on Wall Street. A default could freeze that market and lead to widespread bank collapse, a debacle that would be sure to spread worldwide. Because a U.S. default would be such an unprecedented event, it’s hard to know how bad it could be—but Goldman Sachs (GS) suggests it could cost at least 4.2 percent of GDP over the year.
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