Annie Lowrey imagines the consequences – a massive run on treasuries:
Within 72 hours, Congress has a deal on President Obama's desk, raising the ceiling to $16 trillion in exchange for balanced budgets to take effect in fiscal-year 2015 and some serious cuts now. Treasury starts issuing new bonds and making all payments on existing ones. But the market panic requires the Federal Reserve to reboot its emergency programs, disrupts the housing market, permanently raises the United States' borrowing costs, reshapes the world bond market, and shaves more than a percentage point off GDP growth—enough to throw the economy back into recession. Globally, investors no longer consider the dollar the reserve currency of choice.