Carrying the negotiations into the new year also puts an imperative on raising the debt ceiling, an issue that was underscored in Treasury Secretary Timothy Geithner’s letter this week to Senate Majority Leader Harry Reid. Geithner warned that the nation will hit the debt limit on Dec. 31, although with extraordinary steps, Treasury could manage the country’s payments for about two more months before risking default. Practically speaking, this means that if no solution is reached for the cliff—and the debt limit—by late January or early February, the risks could increase for another credit downgrade, an ominous sign for the economy.

Cliff-jumping also would mean that instead of spending the early weeks of January laying out big plans for a second-term agenda, Obama and his staff will be bogged down with negotiations over the myriad issues wrapped up in the cliff, including everything from the tax cuts and across-the-board spending cuts to the alternative minimum tax and the “doc fix,” the formula under which physicians receive reimbursement for treating Medicare patients. In the White House’s preferred scenario, a deal addressing key elements of the fiscal cliff would have been clinched by the end of this year and that could have been used to tee up negotiations in 2013 over a grand bargain on the budget. Obama has set a goal of reaching a long-term budget deal by the first half of next year and hopes to notch up an agreement as part of his legacy.

Not only will the grand-bargain discussions need to await an eventual resolution of the fiscal cliff, but other items on Obama’s second-term agenda risk getting pushed to the back burner, too, including gun control and immigration. The fiscal-cliff saga could slow Obama’s efforts to fill out his Cabinet and limit his political bandwidth for fighting for controversial nominees.