Avoiding the credit cliff

President Obama has asked Congress to raise the statutory debt ceiling, which sets a legal limit on federal borrowing. But this debt ceiling should not be confused with the bigger threat — a credit cliff, beyond which global confidence in the U.S. government would enter into a freefall.
The CBO’s warning on this point is clear: “Growing debt . . . would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.” We are rapidly approaching the cliff’s edge, and there are three main reasons that a course correction cannot be delayed.

The prospect of a debt crisis tomorrow is contributing to the jobs crisis today. … If we wait until it’s too late, the consequences would be devastating. … [And] each day Washington fails to act, policymakers increase the risk of a sudden crisis.