If the Fed were to stop paying interest on its reserves, we'd probably have a big inflation problem. The monetary base was about $150 billion before the Fed stepped in in 2008. Currency plus required reserves are still in that neighborhood, but the Fed is holding $2.5 trillion -- trillion! -- worth of debt financed almost entirely by excess reserves. The price level could expand by the ratio of those two numbers, and that translates into hyperinflation. Economies typically do not function well in hyperinflation. The real value of the government debt might disappear, but the economy is likely to disappear with it.--Eugene Fama
If you put "Excess Reserves of Depository Institutions Chart" into you browser you can see the real fiscal cliff and remember the Fed has little it can do to keep banks that are financing the so-called balance sheet of the Fed through the excess reserves from turning their "investments" into cash. Bennie boy got no real control, but we just haven't figured it out yet :).