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If we had an honest debate over the real-world effects of not raising the limit, it’s hard to imagine anyone being in favor of letting the U.S. go into default.
According to the conventional wisdom, the stakes around a default* are so great that after a brief game of brinksmanship, lawmakers will eventually come to their senses and raise the debt ceiling as the deadline nears.
That view, based on past precedent, will likely prove correct. But this is an exceptional moment in our political history. At this point, neither Senate Majority Leader Mitch McConnell, R-Kentucky, nor Speaker John Boehner, R-Ohio, can truly claim to speak for their caucuses. Many within the Tea Party caucus refuse to vote for a debt ceiling increase under any circumstance, and Boehner needs a good number of Dems to pass it. But the Dems have offered most of what the GOP wants, only to see them walk away from the table, insisting that all tax loopholes are sacrosanct.
Obama wants a big, grand bargain – possibly to include cuts to Medicare and Social Security – while the Democratic rank-and-file wants to run on protecting those programs next fall. So, improbable as a protracted period of default might be, with all these political divides deepening it’s no longer out of the question.
Most Americans are unsure what a default actually means, and with good reason – it’s virtually (but not entirely) unprecedented. So what might happen if the worst-case scenario should come to pass? We run down some possibilities below.