The Real Danger to the Economy

December 14, 2012 at 12:21 pm

My latest post for U.S. News explains why the real danger to the economy isn’t the so-called “fiscal cliff” but rather the Republican threat — as outlined most recently in today’s Wall Street Journal — to again take the country to the brink of default on the national debt:

To be sure, financial markets won’t like it if policymakers go past the end of the year without a deal on the fiscal cliff.  But, policymakers can easily reverse the financial turmoil in early 2013 with limited economic damage by offering evidence of progress and then striking a quick deal.

A federal default, however, is another matter altogether.  Nothing can reverse the damage that the U.S. reputation would suffer.  Moreover, the economic damage would be serious and lasting.

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More About Chad Stone

Chad Stone

Chad Stone is Chief Economist at the Center on Budget and Policy Priorities, where he specializes in the economic analysis of budget and policy issues. You can follow him on Twitter @ChadCBPP.

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