Next week's New Year's Eve countdown just got a lot less festive. Unless Congress acts, the United States could plunge over the fiscal cliff and hit the debt ceiling.
The U.S. government will max out the federal credit card on Dec. 31 when the country uses up all of its $16.4 trillion in authorized federal debt, Treasury Secretary Timothy Geithner said. Only by taking "extraordinary measures" can the nation continue borrowing, but that can't last beyond the first two months of 2013, Geithner wrote in a letter to congressional leaders.
It's impossible to know how much time the Treasury can forestall the date of default, until the details of the fiscal cliff are resolved, Geithner wrote.
If the government defaults on its debt, the effects would be harsh. The debt ceiling issue last came up in 2011, when a drawn out battle ended with only hours to spare before the government would have run out of money to pay its bills. Even though the crisis was averted, the contentious episode resulted in the first ever downgrade of the nation's credit rating and is expected to cost taxpayers $18.9 billion in additional interest costs over the next decade.
Geithner's announcement increases the pressure on lawmakers to address the debt ceiling as well as the fiscal cliff -- the $500 billion in spending and tax cuts that will kick in automatically on Jan. 1 in the absence of a deal. President Obama wanted to take the debt ceiling off the table, but Republicans want to use it as leverage to ask for more spending cuts, the Huffington Post reports.