Treasury Secretary Timothy Geithner dropped a bomb on congress yesterday evening, but there is a silver lining.
The United States will hit its borrowing limit on December 31st, according to a just-released letter from Treasury Secretary Timothy Geithner. As a result, Congress must vote to raise the debt ceiling in the next five days or “extraordinary measures” will have to be taken to avoid defaulting on our debt, but this would only buy two months. Geithner’s letter also notes that if the so-called “fiscal cliff” is not avoided, the resulting spending cuts and tax increases would add a bit more wiggle room before hitting the debt limit.
It's a good news, bad news situation.
If the sequestered cuts and tax hikes (the "fiscal cliff") come into effect, we won't hit the debt ceiling in five days. If congress punts on sequestration and delays it a few months or a year, we will hit the debt ceiling without further action.
Given the current state of negotiations, or a lack thereof, this probably increases the chance that we will go over the cliff. Because, you know, at least congress can avoid one manufactured catastrophe.