Annie Lowrey says we won’t default:
“Payments prioritization” is probably the best term, if a dry one, since it conveys the real sticky heart of the matter. Treasury is going to need to decide who gets paid and who doesn’t—making temple-rubbing, flinty-faced, increasingly bedraggled Timothy Geithner the most economically powerful person in the country until Congress resolves this.
Felix Salmon doesn’t expect prioritization to happen:
If push comes to shove and the debt ceiling isn’t raised, then, my base-case scenario is that the government will continue to pay all of its debts. Either the president will invoke the 14th Amendment, or else the Fed will discover some way of extending an overdraft facility to the government in a form which doesn’t constitute outright debt, or else the executive branch will find some other way of ensuring that the government meets all its obligations — not just Treasury bonds, but everything else as well. After all, Treasury has repeatedly said that any kind of failure to pay an obligation constitutes an event of default — it’s not just bond coupons which matter.
McArdle’s perspective:
Convulsions in the market, lives disrupted by, say, an inability to actually close on the house you need to sell in order to move cross country and start your new job, higher interest rates, an even more poisonous partisanship . . . these are bad things. Of course, some bad things will happen to people as we struggle to get this country back on sound fiscal footing, which is what the tea partiers keep telling me when I point this out. The problem is, this doesn’t put the country back on a sound fiscal footing. There’s nothing on the positive side of the ledger.
The Dish 