Vincent Reinhart, chief U.S. economist at Morgan Stanley (MS:US), said the U.S. slipping over the so- called fiscal cliff at the end of the year may be acceptable if it allows U.S. politicians a few extra weeks to come up with a budget deal.
“There is a drop-dead date -- the middle of February” when the U.S. hits the debt ceiling, Reinhart said in a television interview on “Bloomberg Surveillance” with Tom Keene and Sara Eisen in New York today. “One of the things they’ve got to get around to is raising the debt ceiling.”
He said there are two scenarios to the U.S. falling over the fiscal cliff of about $607 billion in automatic tax increases and spending cuts, which he described as “scary” and “optimistic.”
“If it is just buying two weeks’ time as the parties jockey for better position and we get a modified grand bargain sooner than everybody expects, resolving a lot of uncertainty with some market-friendly features -- that’s good,” Reinhart said. “Bad is if we find it stretching on and on.”
“Politicians always act at the last minute,” he said. “The last minute is the debt ceiling. It’s not Dec. 31, it’s the middle of February.”
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