Saturday TV claims a total break down of negotiations between Obama and Speaker of the House John Bohner. Maneuvering to place the blame for a government shut down continues.
A failure to raise the debt limit will be confusing. Some people will not get paid, and it's Obama who chooses who to pay and who to stiff. Unless Obama is totally out of his mind he will make payments on the national debt, pay the troops, and pay social security. Remember even under Obama, 60% of federal spending still comes from taxes, so the feds can pay 60% of their bills.
The Wall St credit raters like Standard and Poor are going apeshit and threatening to reduce the credit rating of the US government. However this is a sideshow, after rating all those worthless mortgage backed securities AAA nobody takes them seriously any more.
Republicans need to find a way to shift the blame to Obama, the real issue is winning in 2012 as opposed to gaining some mostly worthless promises to reduce spending in the future. All spending bills have to pass the Republican house and they can cut and trim the pork as desired, and they have until 2013 to keep doing so. In fact they ought to retain control of the House past the 2012 elections, giving plenty of time to reduce spending the old fashioned way.