Nobody wants much to think about it yet, but it's well understood by everyone in Washington and on Wall Street, that a potentially massive fiscal problem is looming for the economy next year. The issue is divided into three parts:
Sometime in late 2012 or early 2013, Congress will have to approve another debt ceiling hike.
At the same time, all of the Bush tax cuts are set to expire -- not just the tax cuts for the rich.
Thanks to the last debt ceiling deal, some big time spending cuts are due to go into effect starting in 2013. In theory, these could be reversed by Congress, but in the context of everything else it will be challenging.
Trying to figure out how it will shake down is especially difficult since it's an election year. But in the worst case scenario we could have bracing austerity (tax hikes and spending cuts) coupled with another heart-stopping debt ceiling fight. Or we could have some kind of reversal of the spending cuts and a debt ceiling fight, and perhaps another downgrade from ratings agencies, another potential confidence blast.
Read more: http://www.businessinsider.com/nyt-on-who-killed-the-debt-deal-2012-3#ixzz1qrVU7Biw
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