Every time I see a banner headline predicting the US is about to hurl itself over a fiscal cliff, I am more certain in my conviction: China may soon be the world’s largest economy, but now is the time to buy America.

The power struggle about the deficit between Barack Obama and the Republican-controlled House of Representatives could well end badly. A deal requires Republicans to admit that their no-tax-rises-ever pledge cannot survive the latest electoral defeat. Mr Obama must accept that it will take more than squeezing the rich to repair the nation’s finances.

That said, the risks and consequences of failure have been overdone. Even if negotiations do collapse, sequestration does not mean that the economy will be crushed by $600bn of instant tax increases and spending cuts. The impact would be felt through 2013. The short-term blow to confidence might be severe but what is threatened resembles more a slope than a cliff. If deadlock were to persist, the Congressional Budget Office estimates the US economy could shrink by 0.5 per cent next year – scarcely good news but, by European standards anyway, well short of catastrophe.