For all the talk about the fiscal cliff, it is not the most worrisome economic issue facing the country. The real cliff is the debt ceiling, and if we go off that cliff, it will be catastrophic. Most people remember the debt crisis of August 2011 as hair-raising. This horror movie is about to be released again with even scarier features. Unless the debt ceiling is increased during the lame duck session of Congress, get ready for a terrifying show.
According to the Bipartisan Policy Center, the Treasury will meet the statutory limit on the debt in the last week of December. To prevent default, the Treasury can then employ certain "extraordinary measures" to free up cash to pay everything from interest on the debt to Social Security checks. Those measures are likely to be exhausted by February 2013, according to the Center. At that point, the government can no longer pay its bills. The costs of a temporary delay are estimated at about $20 billion over the next decade - a price tag similar to what it would cost to keep Medicare physician payments at current levels (the so-called "doc fix"). Taxpayers should be irate about having to fund these special measures just because Congress can't do its job.