Congressional leaders and President Obama are currently negotiating around the so-called “fiscal cliff,” the package of automatic spending cuts and tax increases that were scheduled during last year’s impasse over raising the debt ceiling. Sometime in the beginning months of 2013, though, the federal government will hit its debt limit again, necessitating another debt ceiling increase.
Democratic leaders have hinted that a debt ceiling increase should be a part of fiscal cliff negotiations. However they choose to do it, Congress would be wise to avoid repeating the mistakes it made last year, because Republican demands for broad spending cuts (and their accompanying intransigence on taxes) that nearly led to a credit default during debt ceiling negotiations actually cost taxpayers billions of dollars, the Washington Post reports:
The irony is that another political fight over the debt ceiling could cost the government even more money. The Bipartisan Policy Center has calculated that last year’s debt ceiling fight will ultimately cost taxpayers $18.9 billion over 10 years, due to elevated interest rates between January and August 2011.
The Bipartisan Policy Center study isn’t the only estimate showing that the debt ceiling impasse ultimately cost taxpayers. The U.S. Treasury estimated that it increased the nation’s borrowing costs by $1.3 billion last year, and Scott Lilly from the Center for American Progress estimated that it cost the economy at least a million jobs. Monthly job growth was cut in half during the three-month fight, and economists Justin Wolfers and Betsey Stevenson wrote that ” “employment is likely still below where it would otherwise have been” without the GOP’s brinksmanship.
Still, Republicans have indicated that they are willing to create another debacle over the debt ceiling this winter. Politico reported yesterday that when Obama demanded a debt limit increase before the end of the year, House Speaker John Boehner (R-OH) responded, “There is a price for everything.”