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.