According to Tim Geithner, we won’t hit the debt ceiling until a few months into 2013. By that time, either the Bush tax cuts will have already expired and the automatic spending cuts will have already begun or the parties will have come to some big fiscal deal and the debt ceiling will have been raised along the way.
I laid out some of the possible scenarios along these lines yesterday. But one thing I didn’t mention as clearly as I should have: In the no-deal scenario, our deficit problem is pretty much solved by the time we hit the debt ceiling.
According to the Committee for a Responsible Federal Budget, if there’s no deal on anything in the new year, the scheduled tax increases and spending cuts “would reduce ten-year deficits by over $6.8 trillion relative to realistic current policy projections – enough to put the debt on a sharp downward path but in an extremely disruptive and unwise manner.”
The Congressional Budget Office agrees.
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