No really. It's a myth, a concoction of party flacks and lazy journalists looking for a good scare story. The "debt ceiling" that everyone loses their shit over every couple months is technically real but it's an arbitrary bit of bureaucratic fluff. Something with no real affect on the economy - or even the federal budget - beyond the noise it creates.
For the country to go over this imaginary fiscal cliff, one of two things would need to happen. Either we suddenly call for all I.O.U.s issued to ourselves by ourselves paid in full to ourselves... Let that sink in... Or currency suddenly acquires some particular and intrinsic value that prevents new currency from being printed and moved into circulation. Also, electronic transactions would cease to exist.
|Bitcoins would still exist. Because they're worthless.|
People are still scared of this happening though because the political discourse does not recognize a simple fact of all economics ever - that money is a social construction of subjective value. Yes, even if it's gold.
And also - perhaps more important than that fundamental principle - no one realizes the budget of a government with currency sovereignty is completely different from the budget of some middle-class suburban family. That's always how the issue is framed and it's always wrong.
Getting back to how we've been issuing credit to ourselves form ourselves and ourselves ourselves ourselves... The very nature of currency sovereignty allows two non-hysterical approaches to all this debt malarkey. The simplest is to print more money, like that trillion dollar coin Obama refused to mint last week. The dumbass. You may want to shout "Inflation!" over printing money and you'd be correct, but it's a matter of degrees. We wouldn't see anything on the scale of the Weimar Republic, for example, unless we were stupid enough to bring back the gold standard.
Which leads into the second method of debt reduction - Keynes. Libertarians and other screwheads hate Keynes because he was just plain right - pick up spending during recessions, deficits be damned, and cut spending once the private sector pulls its head out of its ass. It's what beat the Great Depression, whether through the New Deal or World War II or both.
Greece can't do it, neither can any Eurozone country except maybe Germany because they're dirty cheaters, but America can deficit spend like a boss! That's what currency sovereignty means, kids. We issue it, we control it, we pay our debts to ourselves with it.
But that's not on the table because Obama is every bit as much of a neoliberal dildo as Mitch and Boner. These guys all want austerity - for you of course, not for themselves - because they've absorbed every stupidly wrong monetary and fiscal idea of the past century. And they're gonna get away with it because none of you fools understand how your own economy functions.