“America cannot afford another debate with this Congress about whether or not they should pay the bills they’ve already racked up,” said President Barack Obama at a press conference on Monday.
The President is, of course, talking about the debt ceiling. The United States hit its statutory debt limit of $16.4 trillion on December 31, and Washington’s fiscal wizards have used every incantation in the book to create about $200 billion in breathing room before Uncle Sam cracks his head on the ceiling.
By most estimates, that extra funding will last until the end of February or early March, right about the same time Congress has to act on the sequester. You’ll remember that the spending half of the fiscal cliff was delayed for two months so policymakers could catch their breath after a long fight over tax policy. The outcome was a compromise that nobody was very happy with, but seems to have prevented total economic calamity.
Well, delayed at least. The fiscal cliff became a symbol for the sum of America’s financial problems, but many experts and observers believe that the worst is not behind us. One of the few things scarier than across-the-board tax hikes is jeopardizing the faith and credit of the United States’ debt. One of the few things scarier than crippling austerity measures and ill-conceived spending cuts is the failure to pay troops or social security benefits.
Those are the risks of Uncle Sam hitting his head against the debt ceiling, and the resulting concussion would be more devastating for the U.S. economy than the fiscal cliff. Worst-case scenario for the cliff, we at least made progress against the deficit — awkward, inefficient progress, but progress nonetheless. Even the best-case scenario with the debt ceiling would probably add to America’s growing debt problem.