EDWARD KLEINBARD, professor of law, USC’s Gould School of Law.
This op-ed originally appeared in the New York Times on Jan. 10.
The fiscal cliff may have been avoided, but an even higher-stakes political standoff — this time, over the federal debt ceiling — is just around the bend.
Congressional Republicans have said they will demand immense cuts to popular government programs in exchange for agreeing to raise the nation’s authorized borrowing limit of $16.4 trillion. The Treasury Department briefly nudged against that ceiling on Dec. 31, but used “extraordinary” financial measures to buy more time. If nothing is done, the government will soon be unable to pay all of its bills in a timely manner. This unprecedented event would profoundly damage the government’s credit rating and send the financial system into a tailspin.