Debt Ceiling Deal Reduces Chances of a Default

Spending cuts are still scheduled to take place on March 1st: The agreement over taxes on January 1st, combined with the bi-partisan agreement announced last week to move the debt ceiling debate to May, has put greater emphasis on the sequestration (automatic spending cuts) that is set to take effect on March 1st. At this point, there does not seem to be a consensus forming around an alternative to the cuts, and a number of high-ranking Republicans have stated that they would be comfortable with spending cuts in defense and other areas in order to reduce the deficit. It's estimated that these cuts could reduce GDP as much as 0.7%, hurting the recovery just when it seems that the economy is improving. So, while the debt ceiling debate has been pushed off a few months, another debate, and one that could have an immediate impact on economic growth, is only a few weeks away.