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Debt ceiling: With debate on hold, where is US economy headed now?

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"If we went over the fiscal cliff, we would have gone into a recession that would have lasted no more than two quarters," he explains. "But we would have come out of it, and because of the combination of tax increases and spending cuts, we would have been on a path to stability."

With even a slight prospect of a default, "the markets could react very badly," says Mr. Meckstroth. "The last thing you want is a default on the interest on your securities," he warns. "Just the possibility is a dangerous situation."

The last time Congress pushed back on raising the debt ceiling was August 2011. The Dow fell more than 620 points the day after Standard & Poor's downgraded the US credit rating amid the partisan rancor. In its downgrade, S&P said it was pessimistic the two sides could reach a broader compromise that would stabilize the US fiscal situation.

But other economists say this time the parties will find a way to avoid that harmful scenario.

"I don't believe, despite all the huffing and puffing and all that bluster, that at the end of the day Congress will let us default on the debt," says Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.

No momentum from 2012

The US economy did not get its usual kick from holiday spending, in part because of the cliff debate. With some pundits proclaiming the United States would go into a recession if Congress did nothing, consumers became more cautious about pulling out their wallets.

"We're getting no momentum from holiday spending," says Silvia.

ShopperTrak, a retail research organization, estimates that holiday sales were up 2.5 percent over 2011, the slowest pace in three years.

It did not help that many portions of the Northeast were hammered by superstorm Sandy in late October or that the Midwest had a major snowstorm right before Christmas.

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