In terms of sheer white-knuckle panic, the debt ceiling exercise was far worse than the inaptly named Fiscal Cliff.
Back in 2011, we were actually risking the entire global financial system, by moving close to the edge of default.
Now we're risking austerity via spending cuts and tax hikes that can be reversed in 2013 if there's no deal by January 1.
That being said, the "base case" is probably worse with Fiscal Cliff than with the Debt Ceiling.
The Debt Ceiling caused a confidence shock, but the economic impact was never real, and there were no spending cuts. There was tail risk, which never came to pass.
In the case of the Fiscal Cliff, the tail risk is less (people aren't as worried about a default crisis, although that is a possibility, since the debt ceiling will need to be raised in early 2013), but the base case does call for tightening, and a drag on GDP.
When all is said and done, for example, Goldman sees a 1.4% drag on GDP. And that's assuming it all goes cleanly.
So the risk profile is different. There's less of a tail risk, but it's very hard to see a base case occurring without at least some drag.
SEE ALSO: The Ultimate Guide to the Fiscal Cliff >
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