As for the sequester, the White House can direct the Pentagon and federal agencies to husband their resources for a while and hold off on some spending cuts while negotiations continue.
‘‘The more there’s an anticipation that there’s actually an agreement in the works, the less of an impact any of this should have,’’ said Chad Stone, chief economist for the liberal Center on Budget and Policy Priorities. He argues that it’s OK to miss the fiscal cliff deadline if necessary to achieve a well-designed agreement.
What might finally get procrastinators moving if nothing else has? Fear of the United States defaulting on its debts for the first time ever.
Unless Congress acts, the government is expected to hit its legal borrowing limit of $16.39 trillion by the end of December. Treasury Department maneuvers should hold off a default for a couple more months, until late February or early March, private economists say.
Congress could raise the debt limit anytime now, if lawmakers agreed, before resolving the fiscal cliff. But it’s being discussed as part of the bigger tax-and-spending package. The White House says raising the debt limit must be included in the deal; Boehner says the Republicans want any increase in the government’s borrowing to be matched by spending cuts.
Remember the last debt limit showdown? The government came within a whisker of default in August 2011 before a compromise was reached. The financial markets reeled. Standard & Poor’s downgraded the nation’s credit rating.
Again coming to the edge of default — an economic crisis that scares investors more than the fiscal cliff — would probably send markets plummeting and finally shake up lawmakers, too.
‘‘That’s a pretty scary thing to watch,’’ Zandi said. ‘‘For a policymaker that’s real motivation.’’
Follow Connie Cass on Twitter: http://www.twitter.com/ConnieCass