Debt Ceiling Is a Bigger Threat than Fiscal Cliff
The fiscal cliff — sudden and painful tax hikes and spending cuts — is widely recognized as a looming threat to the economy. The worst scenario, a so-called “hard landing,” is reportedly avoidable only if Congress and the president can agree and take action by January 2013.
However, the fiscal cliff is the lesser of two approaching crises; the other crisis is more potentially damaging and, ironically, more easily avoidable: a first-ever default by the U.S. government on its bill-paying obligations, should Congress fail to raise the federal debt limit in the next few months. The figure below shows how close the federal debt has come to the debt limit, as of November 13, 2012.