House Republicans have already voiced dissent from Senate Republican plans, and have closed talks down with the White House.
With clear thinking, one should know that hitting the debt ceiling is bad, yet there are a growing chorus of Republicans voicing their doubts on this -- of course that also weakens their proposition of negotiations, if they don't believe they hold a trump card. But the basis of using the debt ceiling and the government shutdown as a bargaining chip is flawed logic to begin with, because Republicans are essentially demanding that Democrats bail them out of their manufactured crisis and bad tactical thinking.
So, absent an act of contrition -- since you know, Republicans keep harping on contrition as a sign of weakness -- we're headed for a default.
There has been much written on Treasury contingencies, with its separated disbursement system for bonds and t-bills, keeping the US from seeing a credit default in the markets, though surely t-bill rates will soar even while long-term bonds will sink (thus creating the inverted yield curve, see: Instability.)
That however means that the other system for disbursements will be clogged up and it'll be first-in / first-out for Social Security checks, Medicare payments, incomes for federal employees, etc. In that case, federal contractors will have to decide if they'll stop working until they get paid, or take an IOU on the bills they've submitted for payment.
The immediate slash in federal spending will send us into recession.
Normally US tax revenue plunges in a recession while automatic stabilizers (unemployment income, food stamps, etc.) jump. But because we have a fixed debt ceiling, now we have to slash spending even more, with fewer social security checks being mailed out. Hence, the austerity's downward spiral. But wait, it's worse than that. With government shut down, no one's able to track GDP, unemployment or other economic and labor figures -- government leaders will be flying blind.
Something to think about: There's been growing discontent a la Occupy with the treatment of the poor, sick and unemployed. Add in the Tea Party's perpetual crisis, and I think the debt ceiling could either be the linchpin or an inline domino for an American Spring.
Update:
Senate Republicans voted today to block consideration of a clean CR. Also, you might want to pay attention to the fact that House Republican leaders reneged on a deal from early September.
The Republican Party now owns the default, fair and square.
Update 2:
John Boehner thought he could rally support behind a unilateral plan in the House, that could serve as a counter-proposal to the bipartisan Senate plan that was in the works. It backfired.
The Heritage Foundation and others warned lawmakers to vote against Boehner's plans and anything short of a delay in the mandate. You can imagine what these conservative groups will say about the Senate's bipartisan plan ... assuming Ted Cruz will allow it to come up for a vote.
So, if we get through the week without actually hitting the default, this will only embolden Republicans in their belief that default fears were overblown. As they say, a frog in a pot of water that is slowly heated up, hasn't a clue that it is being cooked.
So I tell you again: THE US WILL DEFAULT AND WE WILL GO INTO RECESSION.
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