IF you enjoyed the “fiscal cliff” political theater that consumed Washington over the last two months, you're going to love 2013. Yes, the White House and Congress did finally agree on a deal that prevented about $4 trillion of a scheduled $4.6 trillion tax hike. But that's only the beginning. The next few months will be characterized by still more crises — showdown after fiscal showdown.
In about six weeks, the Treasury Department will reach its legal borrowing limit. At that point, Treasury Secretary Tim Geithner will not be allowed to finance government spending by issuing new debt. The Constitution requires the government to pay its debt service, though, and so the Treasury will have to pick and choose which of the government's other spending obligations it will shirk. Everyone who receives payments from the federal government will be in danger of not getting paid. Since the federal government plays such a large role in economic affairs, this will create chaos in the U.S. economy until the issue is resolved.
Immediately after the debt limit question is settled, it's on to the next showdown: the “sequester.” This scheduled $1.2 trillion in automatic spending cuts, evenly divided between military and domestic spending, was passed into law the last time the debt limit was raised. The deal cut on Tuesday night put it off for two months.
A few weeks after the sequester is settled, Congress and the White House will have to agree on legislation to keep the government running. The majority-Democratic Senate has not passed a budget since Obamacare became law, and as a result, the federal government has been operating on a series of continuing resolutions since 2010. The last one, passed in September 2012, expires on March 27. If no agreement is made on federal spending before that date, the federal government will shut down.
The crisis just averted reached its apex with an intransigent Senate Majority Leader Harry Reid, D-Nev., trashing House Speaker John Boehner, R-Ohio, on the Senate floor, and Boehner responding by telling Reid to “go f--k yourself.” For his part, President Obama enraged Republicans by taunting them during an appearance at the White House on New Year's Eve. He was so aloof and detached from negotiations that Vice President Biden had to be called in to do the heavy lifting.
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