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Ben Chu: The fiscal cliff fun is only just beginning

Outlook It doesn't appear to have dawned on the financial markets yet, but the frantic negotiations over the tax rises in the fiscal cliff were only the start of it.

The United States has already passed its legal debt ceiling and within two months' time the Treasury is going to run out of money. And the Republicans in Congress have made it clear that they are going to demand welfare spending cuts as the price of voting for an increase in the ceiling. The view on Capitol Hill is that the Grand Old Party now has the whip hand. The Democrats and the President held the advantage on taxes because the Republicans had more to lose. No deal would have meant automatic hikes – bad for the Democrats, but worse for the Republicans. But on the debt ceiling the tables are turned. No deal means a default, which would destroy the Obama presidency.

If that analysis is right the fun is all still to come. Except, it's not really much fun at all seeing a gun held to the head of the world's largest economy, and by extension the livelihoods of the rest of us too, by a bunch of irresponsible Tea Party extremists.