us debt ceiling clock

With the fiscal cliff deal behind us at last, the next big battle in Washington will focus on the U.S. debt ceiling, and the stakes are high.

The United States officially hit the $16.394 trillion U.S. debt ceiling Dec. 31. The debt now stands at about 73% of U.S. gross domestic product and will continue to rise over the next decade without major spending reforms.

Now the U.S. Treasury Department has decided to employ what Treasury Secretary Timothy F. Geithner calls "extraordinary measures" in the next two months to avoid actually defaulting on debt. Those measures include temporarily stopping the reinvestment of federal employees' retirement account contributions into short-term government bonds as well as other steps to discontinue debt issuance.

The new deadline for resolving the debt ceiling issue looms at the end of February, giving Congress little time to regroup after partly resolving the fiscal cliff.

"Do not forget that the fiscal cliff is only one of three upcoming problems in our ongoing fiscal madness," Money Morning Chief Investment Strategist Keith Fitz-Gerald said. "There's still the debt ceiling, sequestration and the complete lack of a budget to contend with. In other words, it's on to the next crisis now."

The nation's attention has been captured by the bitter and so far unfruitful fiscal cliff negotiations between U.S. House Speaker John Boehner, R-OH, and U.S. President Barack Obama.

But this is a sideshow.

The real issue is Boehner's attempt to tie the U.S. debt ceiling to fiscal cliff deal making.

The United States is getting close to its borrowing limit. The U.S. debt ceiling must be increased if the United States government is to be able to borrow enough money to pay its bills.

As of Monday, Dec. 17, the U.S. government was about $63 billion shy of its borrowing limit, currently set at $16.394 trillion under the 2011 agreement that led to today's fiscal cliff negotiations. The government is likely to hit that limit by the end of this month.

Boehner has offered to extend the debt limit for a year in order to make a deal to avoid the fiscal cliff. But he wanted something huge in return.

"Any debt limit increase would require cuts and reforms of a greater amount," said Boehner spokesman Brendan Buck.

President Obama counter-offered asking for a deal that would raise the debt limit high enough so it would not be revisited until after the 2014 midterm elections. The GOP has yet to deliver a response.